- Fortune covered the topic of Oracle being really just about its database.
- We analyze the accuracy of this article.
On Mar 15, 2016 Fortune published an article titled For Oracle It Still Boils Down to the Database.
In this article, we will evaluate the accuracy of this Fortune article.
“For Oracle, another earnings call has come and gone, and to a large degree it’s the same old story. As the company continues its cloud computing push against software competitors like Salesforce (CRM, +1.09%) and infrastructure giants like Amazon (AMZN, +0.22%) Web Services, it’s still the database that matters most.
With a healthy customer base using its accounting software (known as enterprise resource planning or ERP in industry-speak) and human resources tools, Oracle (ORCL, +0.25%) still milks its cash-cow, a relational database that most of the Fortune 500 have used to run their vital operations over the past couple of decades.”
True. Oracle receives 55% of its profits from its database business.
Oracle Is the Gold Standard?
“People say a lot of stuff about Oracle, but its database remains the gold standard,” said Gartner (IT, -1.09%) managing vice president Charles Eschinger. As a result, the shift of that business from Oracle databases running on customer servers to operating on Oracle’s cloud is a critical transition for the company.”
True, however, Oracle’s database business is being eroded by open source databases. This is shown in the following graphic.
Oracle Customers All Moving to Oracle Cloud?
“In the public cloud model, one company, in this case Oracle, aggregates server power, storage, and networking, which it uses to run many customers’ applications. That way the customers don’t need to build more of their own data centers.
But, if those customers decide that, while they’re moving, they might as well try out someone else’s cloud, database, or both, then Oracle would be in a heap of trouble. This is not just a theoretical: You can run Oracle’s database on AWS or on Microsoft (MSFT, +2.49%) Azure clouds, if you desire.”
True. Something that is undiscussed and missed by Wall Street is that moving to the cloud increases competition. AWS offers the ability to test various databases, which means that in the future sales will have less of an impact on the databases selected.
“On Oracle’s third quarter earnings call Tuesday, co-chief executive Mark Hurd said more than 350,000 customers run Oracle database in their own data centers, and all of them may migrate some or all of their workloads to Oracle’s cloud at some point. You can quibble over customer count, but no one disputes that Oracle has a boat load of database customers which is why every other tech company is trying to pick them off.”
That is a mighty big assumption. Mark Hurd should probably differentiate between what he would like to happen to what will happen. Some of those customers will actually switch from Oracle.
How the Cloud Increases Competition
“The database, as mentioned, is the lifeblood of enterprise applications of all types. Swapping out one database for another, has never been easy, which probably accounts for Oracle’s longevity in big accounts—even after years of attacks from Microsoft SQL Server, IBM (IBM, +0.09%) DB2, and now Amazon’s Relational Database Service (RDS) which runs different flavors of databases.”
This is a major reason for Oracle’s longevity on big accounts. But the growth in databases is more in No-SQL and companies are in fact moving to open sourced databases in large numbers. This is a trend that is larger than Oracle.
Oracle Exec Says Amazon’s Cloud Is Not Enterprise Ready
“In fact, Oracle’s staying power is probably one reason Microsoft recently announced plans to put SQL Server (or at least core bits of it) on Linux. Oracle’s databases have long run on Linux, the popular open-source operating system which competes with Microsoft SQL Server.
It may also be why Amazon announced Tuesday, in an expedient bit of timing, that the database migration tool it previewed last October has been used by 1,000 customers to move their databases to AWS. At least one of those customers, Thomas Publishing, was apparently an Oracle shop. Microsoft unveiled its own aggressive Oracle-to-SQL Server exchange program last week.
As for Oracle’s third quarter, sales of new software licenses for products that run on-premises fell 11% year over year. That on-premises category makes up 70% of Oracle’s overall revenue, so there’s reason for concern there.
On the plus side, the company said sales of cloud products falling under the “platform as a service” and “software as a service” categories were up a healthy 61%. But that’s still a much smaller business.
Oracle co-founder and chief technology officer Larry Ellison said the company is prepared for the battle. “A lot of people have come after us in databases,” he said. “We’re very comfortable defending our leading position in the database market.”
Perhaps. But that is not what the numbers show. The numbers show that Oracle will fall off of its long-held perch as the top database in the next year. This is covered in the article Is Oracle in Trouble?
“Ellison also cast shade on claims that database migrations can be easy. “If you want to go to Amazon database, you have to rewrite your app,” he said. Amazon says its tool can sweat much of the angst out of these moves. The truth probably lies somewhere in the middle.”
Why is that true? Seems like FUD on the part of Larry. Larry would like this to be true as he wants to keep his customers locked in. There are adjustments to move to say PostgreSQL, but it is nothing like rewriting the app.
Oracle Wants Customer to Migrate to the Cloud?
“On the call, Oracle co-chief executive Safra Catz expressed confidence that databases—and database customers—will stick with Oracle regardless of their cloud plans. “We’d be thrilled if every one of our database customers came to our cloud instead of running on premise,” she said. “That would be fabulous.” But she added that some will likely put new applications and the test and development of new applications in the cloud, while keeping older apps running internally.”
Nothing new in that comment, but we disagree with Safra on this point. Companies that move to the cloud are far more likely to move away from Oracle. This is the problem in the direction that Wall Street is pushing Oracle and other vendors. It subjects them to more competition and more price comparison and feature comparisons. Wall Street prefers monopoly and lock-in because that maximizes profits.
“If those customers do go to Oracle’s cloud, the company will handle the hardware, support, upgrades, and labor. That means they’ll pay more in support fees but will still end up paying less in total because of the “massive economies of scale we have,” Catz noted. “Some will stay on prem indefinitely and that’s fine,” she added, using the slang term for “on premises.”That sounds like a nice story, but in the end, it may be one that some database shops find hard to swallow.”
Maybe. But Oracle is not as effective in the cloud is it is on premises. I would not expect the on-premises vendors to transition their dominance to the cloud so easily. This creates new opportunities for up and coming database companies. I just recently was exposed to a fantastic database in Airtable and am transitioning my databases to it. Airtable is obviously not Oracle, but the point is that the cloud is opening up the database market to more choice and more competition than it has ever seen.
Fortune receives a Brightwork score of 5.5 out of 10 on the article. The areas that are off are how Oracle’s statements are presented as if they are always true. Therefore, the article serves as in essence an endorsement for the statements of Oracle executives rather than analyzing the statements.
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This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.
The Real Story on ERP Book
How This Book is Structured
This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.
ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.
Break the Bank for ERP?
Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.
By reading this book you will:
- Examine the high failure rates of ERP implementations.
- Demystify the convincing arguments ERP vendors use to sell ERP.
- See how ERP vendors take control of client accounts with ERP.
- Understand why single-instance ERP is not typically feasible.
- Calculate the total cost of ownership and return on investment for your ERP implementation.
- Understand the alternatives to ERP.
- Chapter 1: Introduction to ERP Software
- Chapter 2: The History of ERP
- Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
- Chapter 4: The Best Practice Logic for ERP
- Chapter 5: The Integration Benefits Logic for ERP
- Chapter 6: Analyzing The Logic Used to Sell ERP
- Chapter 7: The High TCO and Low ROI of ERP
- Chapter 8: ERP and the Problem with Institutional Decision Making
- Chapter 9: How ERP Creates Redundant Systems
- Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
- Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
- Chapter 12: Conclusion