February 10, 2016
Oracle's co-CEOs Safra Catz and Mark Hurd had very positive remarks regarding Oracle's Q2 performance: total revenues of $9 billion exceeded guidance, SaaS and PaaS bookings growth of 75% with revenue of $487 million up 38%. Meanwhile on-premise software revenues (software license, updates, and support) were flat at $6.4 billion.
Currently Oracle's sales professionals are working feverishly in the final weeks of closing Q3 on February 29 to keep this momentum moving in the right revenue direction to meet Q3 and Q4 guidance expectations. Then comes the fourth quarter and EOY revenue execution where we expect 40% of Oracle's full year revenue to be booked. Here's what we're seeing in the marketplace and from our client interactions and consulting projects.
- Cloud Fusion momentum fueled by spirited sales. We are absolutely seeing the SaaS, PaaS, and IaaS revenue and client momentum being reported in Oracle's Q2 earnings release. We are also experiencing the sales tactics being employed to drive this aggressive growth – based on lucrative sales commission incentives and selling cloud products “credits” to reduce on-premise cost and support fees. We're seeing the same highly competitive sales game from Salesforce and Workday, among others.
- Play Oracle's sales game — or don't. Oracle's account teams are infamous for their siloed divide-and-conquer approach to selling applications, database, and hardware. We advise our clients to effectively manage Oracle's sales teams by executive escalation and staying focused on business issues to receive the value they are paying for.
- On-premise software revenues were flat. We recommend clients conduct a detailed business-as-usual (BAU) business case ROI evaluation to create negotiation leverage to either continue on-premise license investment or consider moving to Oracle's cloud Fusion solution or a best-of-breed third-party solution (Salesforce or Workday, for example), all of which impact on-premise software revenues.
- Oracle audits effectively drive revenue and meet financial expectations. If a customer is not proactively acquiring additional software licenses then Oracle sales can prompt Oracle's ‘independent’ License Management Services (LMS) to issue a license audit. Often an audit is just another sales tactic to drive incremental revenue growth. We work with clients to address the findings of a license audit and avoid the serious financial consequences it represents.
- Oracle ULA drives significant up-front investment in software licenses. Truly a double-edged sword, the ULA can create a financial incentive for customers If managed properly, but seriously negative financial consequences if all the contractual terms and conditions are not understood. Our ULA template creates a financial benefit for our clients by ensuring an optimal business case analysis and effective ongoing management.
- Expensive support contracts create competition in maintenance market. 22% support fees are often the straw that broke the camel’s back and created the market opportunity for third-party maintenance companies. We have advised many of our clients in the financial justification of this decision while balancing important business requirements and risk factors. Our methodology offers a balanced approach to the pros and cons involved in this decision.
If you'd like more in-depth negotiation ideas and tactics relating to Oracle, please register for our upcoming free webinar Placing Your Bets On Oracle's Cloud Solutions on February 23. I'll be joined by my consulting colleague Mark Bartrick and Forrester Vice President and Principal Analyst Duncan Jones.