Why Oracle needs to push digital hard
US-based Oracle Corp. is sharpening focus on its own digital transformation as well as that of its customers to stay competitive in a world where companies are increasingly grappling with newer business models, and demanding solutions that require expertise in the Internet of Things (IoT) and Artificial Intelligence (AI), besides cloud computing and big data analytics.
Consider cloud computing—a concept that Larry Ellison, now executive chairman and chief technology officer of Oracle, had scoffed at nearly a decade back. At the September 2016 Open World event in San Francisco, however, Ellison insisted, “We are in the middle of a generational change as computing moves from on-premise and lots and lots of data centres and lots of companies in the world to a smaller number of super data centres called clouds.”
Similarly, in her keynote address at the Oracle Open World event held last month in Delhi, co-CEO Safra Catz emphasized that the company’s Fusion Middleware software can help organizations seamlessly transition their databases and other business applications to the cloud.
Other than its aim of becoming a dominant force in cloud computing, Oracle is working on other important components of the digital transformation push—mobility, bots and IoT.
Oracle has done three key things to transform itself digitally, according to Shailender Kumar, managing director of Oracle India Pvt. Ltd.
“First, we have rewritten all our products. Second is the way we have hired people who are focusing only on cloud sales. And third is that we have even changed our internal processes,” he said.
Kumar cited the example of speeding up the contracting processes at Oracle. “I remember that in 2008-09, when we were doing big banking or telecom deals, the contracting itself used to take many months; today, everything is done in a few hours. We call this ABE or the accelerated buying experience,” he said.
In mobility, Oracle built a platform in August 2015 called the Mobile Cloud Services. “It is one of the fastest growing platforms at Oracle—with over 450 customers signing up in less than 18 months of launch,” said Suhas Uliyar, vice president of mobile strategy product management at Oracle.
One of the transformative things Oracle did, according to Uliyar, was to stop looking at mobility from an inside-out perspective. “Mobile is not about a front-end to a back-end; it’s about an experience from an outside-in approach when you put the end-user in the centre of the universe,” he said. He added that today, the user needs data from multiple sources and some of those data sources may not even belong to the enterprise—for example, location services data or adding social media data to the mobile app.
Finger in almost every pie
For a company that sold its first product to the Central Intelligence Agency (CIA) (bit.ly/2snhg9g), Oracle now sells almost everything in software and systems needed to run a modern business—from enterprise resource planning (ERP) and analytics software to computer servers and subscription-based cloud applications.
The company, which still derives about half of its revenue from database sales, does have all the elements of a cloud computing strategy comprising 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.
Oracle’s other big acquisitions include the $9.3 billion buyout of NetSuite Inc., a US-based provider of business applications in the cloud; Siebel Systems Inc. ($5.8 billion, 2005); and PeopleSoft Inc. ($10.3 billion, 2004) besides the more than 100 smaller acquisitions over the last four decades of its existence.
Most of Oracle’s acquisitions, however, belonged to an era when business applications, procured at high upfront licensing costs, were primarily run in company-owned data centres.
And while on-premise software still dominates the world of tech, the shift to the cloud is gathering pace and scale. According to research firm Gartner Inc., “The aggregate amount of cloud shift in 2016 is estimated to reach $111 billion, increasing to $216 billion in 2020.”
The challenges ahead
“We compete with everyone but we don’t compete with anyone on everything... In terms of breadth, depth and deployment choice, if you ask me: ‘Who has what we have? The answer is ‘Nobody’,” Catz insisted in her Delhi event keynote speech.
Cloud computing is a space where companies such as Amazon Web Services, Inc., Microsoft Corp., International Business Machines Corp., Alphabet Inc.’s Google, Hewlett Packard Enterprise Development LP, Dell Inc., and VMware Inc., too, are pulling out all the stops to win customers globally and in India.
Besides, clients do not like to lock themselves with any single vendor when it comes to implementing digital transformation.
Consider the case of HDFC Bank Ltd., one of Oracle’s key customers in India for digital transformation initiatives. “Strategic partners such as Oracle help us with their robust engineered systems and a scalable architecture,” said Munish Mittal, the bank’s chief information officer (CIO).
However, as the bank experiments with new-age digital technologies such as advanced analytics, bots, artificial intelligence, machine learning and others, it is evaluating as well as challenging Oracle to meet its current and future needs. One of the challenges for Oracle, according to Mittal, is whether the company is able to maintain the pace of changes happening in artificial intelligence (AI) and its associated technologies. “I think they (Oracle) are a little slow in the chatbot space; I won’t wait for them and they know that,” he said. However, he added that it has been “a mutually rewarding relationship” with the company and he is considering Oracle Stream Analytics (which helps real-time event analysis of data from multiple sources) as part of his future analytics stack.
HDFC Bank also uses analytics software from one of Oracle’s competitors in analytics, SAS Institute Inc., besides “a suite of technologies,” said Mittal. Like some of his other CIO counterparts, Mittal takes a “best-of-breed” approach in picking up tech solutions from more than a single provider.
Perhaps the biggest challenge for Oracle is whether it can migrate the customers for its on-premise software quickly enough to a cloud subscription model—especially in the commercial database market where it has a dominant position (45.6% global share, according to Gartner Inc. figures for 2016).
Analysts from Samadhi Partners, an equity research firm in the US, noted in an article (bit.ly/2rmVp1h) on SeekingAlpha.com, “We see the $29.6 billion commercial database market contracting 20-30% by 2021, and do not believe Oracle can transition its revenue streams (from legacy commercial database to cloud-based subscription offerings) fast enough to offset the decline of this market, which represents a major legacy core of its revenue.”
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