Why is Oracle banking on the cloud?
Shift in consumer sentiment and behaviour, and the changing business models of companies are driving cloud adoption
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Mumbai: Until about seven years ago, Larry Ellison, now executive chairman and chief technology officer of Oracle Corp., was unwilling to accept the term cloud computing or acknowledge reports that underscored it as a new trend.
The same company now is banking on cloud computing for growth and aiming for a global leadership position in the segment.
“Our aspiration is to be the most complete end-to-end cloud solutions provider,” said Shawn Price, a senior vice-president at Oracle Corp. who reports directly to co-CEO Mark Hurd, in an interview on Tuesday. He was in Mumbai to deliver the keynote speech at Oracle CloudWorld 2015 in the city.
Cloud is a metaphor for services delivered on a network such as the Internet. It comprises three broad segments—Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).
It is delivered as a private or on-premise cloud, which means that the applications are hosted on the premises of a company; as a public cloud using the Internet; or as a mix of both models with some applications on-premise and others on the cloud,which is why it is called a hybrid cloud.
SaaS is paid for on a subscription or pay-per-use, basis. A PaaS solution, typically shown as sandwiched between a SaaS layer on top and IaaS layer below it, includes an operating system, programming language execution environment, database, and web server. In an IaaS model, a third-party provider allows users to host their hardware, software, servers, storage and other infrastructure components.
Oracle, currently the world’s second-largest SaaS company after Salesforce Inc., believes it has the “breadth and depth” to succeed since it has all the elements of a cloud computing strategy such as a database, applications, servers, an operating system (Solaris) and a programming language called Java that it acquired when it bought Sun Microsystems Inc. in April 2009 for $7.4 billion.
Price rejects the argument that Oracle is resorting to cloudwashing—tweaking existing offerings and rebranding them as ‘cloud’ services. “If you look at our ERP (enterprise resource planning) as an example, that was a completely new UI (user interface) that was started seven years ago,” said Price.
Oracle, he added, has more than 600 SaaS applications, about 70 million subscribers and 21 data centres in over 200 countries.
Revenue from cloud computing—SaaS, PaaS, and IaaS—totalled more than $1 billion in half-a-year, “with a run rate of more than $2 billion per year”, according to the company’s fiscal 2015 earnings report. The figure would still amount to a little over 5% of the company’s total revenue at around $38 billion, but Oracle’s cloud solutions are growing at over 25%, which makes it bullish.
“India is an excellent representation of the potential (of the cloud). Two things are driving cloud adoption—one is the shift in consumer sentiment and behaviour. The second is the changing business models of companies. India has millions of mobile subscribers; the e-commerce environment has never been more robust—14% of all Indians did commerce last month online—and you have companies that are transforming digital operations both within India and externally.
“Our strategy is to create a portfolio of applications in SaaS that resolve ERP, human capital management, CRM (customer relationship management), etc. SaaS fundamentally future proofs companies’ investments,” said Price.
Oracle has accordingly been ramping up its sales force in the Asia-Pacific region. On 26 March, the company said it would add 1,000 new sales people across Asia-Pacific, of which nearly 300 would be recruited in India.
Companies like Apollo Hospitals Ltd, HDFC Bank Ltd, Maruti Suzuki India Ltd and Hero MotoCorp Ltd deploy various Oracle Cloud solutions. Online entertainment and travel websites like bookmyshow.com and makemytrip.com besides online marketplaces like flipkart.com and jabong.com, also use Oracle Cloud solutions to manage their workforce and integrate marketing, sales, customer service, back-end processes, and customer feedback.
According to A.V. Sreenath, vice-president and global head of Oracle Practice at India’s third-largest software services exporter Wipro Ltd, Oracle’s HR solutions are not only helping his company “to attract the right talent...but also helps to deploy, using analytics, the right talent to execute specific projects for our clients around the world.”
Oracle has a total of about 32,000 employees in India. The company does not break up its country revenue but Dataquest, a CyberMedia publication, estimated Oracle India’s total revenue at Rs.11,437 crore for financial year 2013-14.
In comparison, Hewlett-Packard Co.’s India revenue was pegged at Rs.36,697 crore while that of IBM in the country was estimated to touch Rs.18,754 crore and Microsoft India at Rs.7,224 crore for the same period. Globally, though, the world’s largest sofware company is Microsoft, followed by Oracle and IBM.
According to a 4 September report by market research and advisory firm Current Analysis, 68% of enterprises in India, with 100-plus employees, are using cloud-based services, while the remaining 32% plan to do so over the next 24 months.
In a 19 January report, research firm Gartner Inc forecast public cloud services revenue in India to reach $838 million by the end of 2015, an increase of almost 33% over 2014 revenue. It forecast spending on IaaS to total $104.8 million in 2015, an increase of 38% over last year, and spending on cloud management/security and PaaS to both grow 35.4% to $56.7 and $84.6 million, respectively, during the same period.
Gartner predicts high rates of spending on cloud services in India to continue through 2018, when the market is expected to reach $1.9 billion.
Other than Oracle, companies like Microsoft Corp with its Azure cloud solution, International Business Machines Corp that has IBM SoftLayer, Hewlett-Packard, Amazon Web Services Inc., Google Inc., Salesforce Inc, and Red Hat Inc also offer cloud computing services that span SaaS, PaaS and IaaS.
On 18 March, Microsoft launched a “special cloud accelerator program” with CEO Satya Nadella pushing the cloud envelope.
“The Cloud Accelerator Program is designed to help India move to the cloud, and in turn, help ‘Make in India’ a reality. This will open up new possibilities in e-governance, financial inclusion, healthcare, and education to positively impact the lives of a billion people,” Bhaskar Pramanik, chairman, Microsoft India, had then said.
There are only three companies that can deliver the whole stack—Microsoft (which also has a partnership with Oracle in some cloud deals), Oracle and IBM, according to Ray Wang, founder and principal analyst at research firm Constellation Inc., who is “seeing Oracle back in the (cloud) deals over the last two years”.
Wang believes that Oracle is a leader by “growth momentum” and is close to getting to a leadership position by revenue too.
According to a 25 November report by Gartner, the decision to deploy SaaS-based applications within a company “depends on the business-criticality of the solution, as well as the organization’s geography, business agility, usage scenario and IT architecture”, according to Gartner.
“Therefore, few organizations will completely migrate to SaaS and will live with a mix of SaaS and traditional on-premises application deployment models, with a focus on integration and migration between different deployment models,” the report said.
It added that security, privacy and fear of government snooping remain leading concerns for respondents, especially outside of the US, who do not consider public cloud-based models.