Corporate: On Top Of Cloud

As oracle programmers rewrite fresh codes for its cloud services, the company is scripting a new history. It is transforming itself into a cloud-first company. Some industry watchers might argue that it is a tad late in entering the realm of cloud, but Oracle will tell you it doesn’t matter; it is scaling up faster than all others.

With 70 million users running 34 billion transactions a day across 21 data centres around the globe, Oracle Cloud has gained strong adoption. Globally, the company has invested $5.2 billion in R&D and a significant portion of that is for cloud. In its Q3 (Dec-Feb) earnings, it reported total revenues of $9 billion, down 3 per cent in US dollars and up 1 per cent in constant currency. However, its total cloud revenues grew a whopping 40 per cent in US dollars and 44 per cent in constant currency to $735 million. In stark contrast, its total on-premise software revenues declined 4 per cent in US dollars to $6.3 billion, while total hardware revenues fell 13 per cent in US dollars and 8 per cent in constant currency to $1.1 billion.

“Our cloud business is now in a hyper-growth phase,” says Oracle CEO Safra Catz. Oracle claims to be leading from the front compared to competitors such as Salesforce and Workday which had entered the cloud game much early on. “Our SaaS and PaaS gross deferred revenue grew 96 per cent in Q3 — twice as fast as Workday and three times faster than Salesforce.com reported in their most recent quarters,” Oracle co-CEO Mark Hurd said during the company’s Q3 earnings. Oracle follows a June-May fiscal year.

“In absolute dollar terms, Oracle is already selling more enterprise SaaS and PaaS as new cloud revenue than any other company in the world — including Salesforce.com,” says Larry Ellison, Oracle chairman and chief technical officer. “We are growing much faster than Salesforce.com. We also have many more SaaS products than it. In some of our important SaaS markets, such as enterprise resource planning, human capital management, supply chain and manufacturing, Salesforce.com does not participate at all. By successfully competing in all of these markets, Oracle has the ability to sustain its high growth over a long period of time. That should make it easy to surpass Salesforce and become the largest SaaS and PaaS cloud company in the world.”

While the claims are tall, analysts say one must read between the lines. “Oracle’s comparison with Salesforce or Workday is unfair and it’s not an apples-to-apples comparison. Unlike Oracle, Workday and Salesforce are not end-to-end suites but specialist suites,” says Sanchit Vir Gogia, chief analyst and CEO, Greyhound Research.

While the company’s focus and direction is clear by now, Oracle’s chief information officer Mark Sunday believes the reason customers move to the cloud goes far beyond scale, or moving capex (capital expenditure) to opex (operating expenditure). “Fundamentally, it’s a shift designed to really enable digital disruption,” he said at a recent meeting with Oracle user group members. According to him, many companies are not interested in incremental improvement — instead they want complete integration across the entire enterprise to transform their business.

India Cloud Story
With several digital initiatives led by Prime Minister Narendra Modi, India seems to be in a sweet spot for large-scale adoption of cloud and Oracle has already seen immense momentum in the region. Oracle’s cloud business in India is growing at 100 per cent quarter on quarter compared to the industry average of 20 per cent making India one of the fastest growing geographies globally.

“India has an unparalleled opportunity to be the number one cloud market in the world. With macro initiatives such as Digital India, Skill India, and Make in India, the 1 billion-plus millennials who are connected to the mobile; and the 24 per cent Indian population that transacts via e-commerce platforms make India a perfect haven for the cloud,” says Shawn Price, senior vice-president of Cloud at Oracle. “People move to cloud because of changing consumer expectations and changing digital models. So you have got the perfect storm,” he adds.

With 15,000 customers today, the Indian market is growing rapidly with Oracle selling 2-3 solutions per day, says Shailender Kumar, vice-president and regional managing director, Oracle India. Some of its customers in India include Airtel Learning, Genpact, L&T Finance, PVR Cinemas, SafeExpress, Indiabulls, and Apollo Hospitals.

To simplify cloud adoption in India and address the requirements of highly-regulated sectors like banking, financial services & insurance and healthcare, the company has launched Oracle Cloud At Customer (also known as Oracle Cloud Machine), which is a cloud offering that helps in bringing the Oracle Cloud to customers’ data centre. “It provides a stepping-stone in the journey to cloud, as it allows you to get the advantages of cloud faster, easier and with less disruption, says Kumar.

According to the company, as an on-premises implementation of Oracle Cloud, Oracle Cloud Machine lets you run your applications seamlessly wherever you want, as workloads are completely portable between the public cloud and your data centre. “You can now leverage the latest innovations for rapid development that cloud provides, while meeting any data sovereignty and residence requirements. It also provides subscription-based pricing in your data centre, with single vendor accountability,” says Oracle.

Recently in April, Oracle also announced the launch of its first startup incubation centre in India. This centre in Bengaluru, known as ‘Oracle Startup Cloud Accelerator’, aims to speed up a startup’s development through a combination of technical and business mentoring. The initiative targets midsize firms, including MSMEs (micro, small, medium sized enterprises) and startups, which contribute more than 37 per cent to India’s GDP.

The incubation centre is part of the $400 million investment committed by CEO Catz at a recent meeting with PM Modi. The investment is for setting up the largest Oracle campus outside of the US in Bengaluru and nine regional incubation centres across states.

So, will Oracle break through the cloud faster in India? It can, with the right strategy in place. “India is a cost-conscious market. Therefore, in order to get it right, first, Oracle needs to go soft on its pricing and second, spell out a clear process of migration to the cloud so the existing on-premise customers don’t incur any contractual wastages,” says Gogia of Greyhound Research.

ayushman@businessworld.in; @ayushmanb