Oracle Corporation, the second-largest enterprise software company in the world had revenues of $38.27 billion and net income of $10.95 billion in 2014. Today, the company gets just about 5 per cent of its revenues from cloud. But Oracle asserts that it will be the largest cloud company in the world, ahead of Salesforce, by the end of this year with a revenue run rate of $2.5 billion. Oracle has been investing heavily in the cloud business hiring senior talent including Shawn Price as a Senior VP. Price was with SAP till six months back. In India recently, he spoke with Business Today's Venkatesha Babu. Edited excerpts:
Q. Has Oracle been late to the cloud business? Are you, therefore, trying to play catch-up?
A. I think actually the contrary. I think it's redefining what is required to solve modern cloud problems and right now we've changed the game in its entirety. You know most companies compete at either the SaaS (Software as a Service) layer where they are automating a specific function like human capital management or ERP (enterprise resource planning). Some companies play at the platform as a service, the Amazons, the (Microsoft) Azures of the world, and some play it as infrastructure. But really what nobody is doing is taking 400,000 customers of on-premise work, upgrading them as a unit of work to the cloud for SaaS and extending them with platform as a service and quite candidly some stuff there is no shortcut for.
If you look at ERP and you contrast that with our competitors, that product has been in development for seven years. It's completely written for the cloud, every line of code and yet what the rest of the market, most of the market other than maybe an SMB (small and medium-sized business) provider has done is really take an on-premise app, collapse its functionality, re-veneer it with a new user interface and run it in some cases as a managed service. That's a vastly different approach.
Q. While Oracle has been talking for years of how your offerings have been cloud ready, why did it take you so long to actually push it in the marketplace. Larry (Ellison, co-founder of Oracle) himself was initially very skeptical of the impact of cloud. Has Oracle taken a 180-degree turn on the entire cloud thing, which is why we see this emphasis? Also even now with all this push cloud is just 5-6 per cent of your overall top line revenues. Will we see that ratcheting up significantly in the near future?
A. Yeah, well, two things, I think that first and foremost it is undeniable and without a doubt that cloud is here in every single market. It's actually, I think it's a maturation of the market, totally and globally and you see that reflected today in 70 million subscribers and 29 billion transactions we manage every single day. So it's here and I don't think it's so much of a push as it is of market readiness. And we are seeing that. I also if you look at you know the importance of cloud, it's not an either/or. When you transform a company it has to transform in many ways.
Think about the notion of an on-premise release of innovation and a cloud release. In the on-premise we release the product every six months, every eight months, every year and because our customers have so highly customized it, it takes time to consume whereas in the cloud we are learning instantaneously what customers like, don't like, what they've used, what they haven't used and because everyone is receiving the same code there's no delay. They receive 500 feature upgrades every 90 days, and so the rate of innovation, the rate of consumption is driving that. So don't know that it was so much of a you know Oracle moving slowly or otherwise. It was really market led and ready for prime time. That being said in all candour you know we are transforming.
In the cloud the most important thing is that customers go live on your technologies, that they can actually be valued to this innovation cycle I have described because the economic model is dependent on a renewal or replenishment and so is upsell. Now, if we do all that right we get advocacy, that's a different motion than selling you an on-premise license with support. We are going to preserve your investment on-premise with the applications that you have and the investments you've made and we are going to give you options to move units of work to the cloud, either on an individual basis or a cloud to cloud.
Q. Globally Larry has been talking of how Oracle is likely to become the largest cloud player even ahead of Salesforce.
A. Yeah, you know if you look at what Larry said he was predicting on the last quarterly conference call that our fiscal year 2016 we saw more SaaS and PaaS (platform as a service) revenues than Salesforce and then he said you know our business is growing a lot faster than we expected. Our cloud bookings are now growing at over 100 per cent a year and so we've revised our prediction, Larry revised the prediction in the Q3 earnings call to reflect that we will now sell more SaaS and PaaS than Salesforce in this current calendar year 2015. It's going to be close but we are going to sell more and it might come as a big surprise to a lot of people out there but you won't have to wait very long to find out who is going to win.
Q. How is Oracle's strategy different from SAP or Workday?
A. I think Oracle's strategy is different than everybody's strategy and in many ways stems from a culture of innovation, the Silicon Valley culture, led by our founder Larry, a $5.2 billion expenditure. When I joined the company there were two things I asked: are we really willing to disrupt ourselves to address market demand and that was a resounding yes across Mark and Larry.
The second was: are the skill sets of the company transferable to the new world. As the world evolves from sort of a slice of SaaS to mission critical enterprise like ERP or human capital management in the cloud, those skill sets become important. And then if you look at the investment we sit today with 600 apps in SaaS, our PaaS business grew.
I just want to make sure I don't make a mistake there. But in our PaaS business we announced that business in October and it was growing at you know more than 350 million in revenue and that's from October and you know 530 customers expanded their services within the quarter and more than 400 new customers for PaaS in the quarter. So we are fundamentally different in all regards. Most companies either solve a application problem, a platform problem or an infrastructure but no one's contemplate it end to end in the way that we have.
Q. Is the company ready because a part of this drive would also mean that you cannibalize your existing model of sales to a great extent and maybe the revenues will trickle in over a period of time?
A. I don't think it's something that we control. It's market led and the market's raising its hand. And you know our on-premise business is growing in single digit, our maintenance revenue on premise is growing single digit and there are many, many used cases where it makes sense to keep mission critical enterprise apps on prem. But then here the end customers want to modernise that infrastructure, customers want to respond to operator model shifts or disrupters in their market space or if you look at the Indian market in the last year, it did almost 600 billion in acquisitions, 13 per cent more than 2013 and almost 19,000 of those acquisitions were multi-country.
How do you ever reconcile one system of record, how do you get to a picture of what employees you have, how do you deliver on the joint selling of company A and B combined and bundled through multiple channels. For many companies the cloud is the way forward. Does that mean they get rid of their on-premise apps? No. So we don't look at it as cannibalization, we look at it as a massive market shift that we've anticipated and we are covering both dimensions uniquely.
Q. In terms of the domestic Indian market, what kind of potential do you see Shawn?
A. I think there are two components. One, as it relates to Asia-Pac. I believe that India can and should be number one in Asia-Pac but more importantly I think it's uniquely positioned to be number one in the world and that's a bold statement and I'll tell you why. If you look at your mobile adoption rates of more than 200 million connected mobile users, and a 100 million on social media, it's one of the foundational building blocks and the shift to cloud because using that mobile device really changes consumer sentiment. Number two, is the e-commerce willingness in this market.
So if you look at Flipkart, at $11 billion valuation, if you look at 14 per cent of Indian, not Indian subscribers on the web, they transacted e-commerce last quarter, you've got a huge building block in there already transacting. And then you look at the influence of the largest IT service business in the world across SIs (systems integrators) and how they are now looking at adjacent revenue streams to take cost out. You have the potential not just to address GDP and growth in the Indian market, you have an opportunity to influence the globe because of the reach of the SIs and they are sitting with hundreds of thousands of Oracle's certified consultants on java, database, middleware, applications that are all portable to the cloud today. So I think India holds enormous opportunity.
Q. Are you are working within the SIs, whether it's TCS, Infosys or Wipro, to enable their customers, just like they used to do package implementation on Oracle's offerings. Are they doing a similar thing for the Oracle cloud too.
A. In a huge way. This is really an important distinction that I want to make sure that I'm clear on. It's not just our SaaS applications, the 600 apps that they are doing for sure. But what's happened to their business is that there are just aren't enough large ERP, Siebel, JD Edwards, PeopleSoft implementations and so what do they do with all of the skill sets that they've built in the past. They are using our platform as a service to move database to the cloud. When you have an on-premise and cloud interaction or a hybrid, now I drag platform as a service for middleware, integration, security, identity management, business intelligence, mobile app creation to build a whole new class of applications and to put to work all of the skill sets that have already been trained because they are the same. That's very different.
Q. I know the Oracle India's team's mandate is to make the India domestic market becoming the leader in at least the APAC initially. But is the growth being driven by newgen e-commerce kind of companies or large traditional companies?
A. First it's undeniable and irrefutable that cloud is in every market and every segment both in India and the world. We are seeing demand across three segments, large transformational where the companies are going end to end replacing human capital management, ERP, customer experience led by marketing cloud, service cloud, etc. and then extending through PaaS and infrastructure. Some of those companies are companies like BirlaSoft, Airtel Bharti, Apollo Hospital, Jabong, Flipkart. So every segment is represented. It's a matter of how broad and deep is the transformation. Also interestingly we are not presupposing or preselecting and saying you need to transform end to end. If you want to start with a single application, if you want to automate the HR function or the marketing function but you know in Q2 30 per cent of all customers bought multi-cloud. What does that mean? They may have bought marketing cloud but immediately they added our sales force automation.
Q. So all of this happens, plug and play, seamless depending upon the kind of capex available with the companies to spend on an ongoing basis.
A. I think we provide a roadmap both for the initial acquisition but also we are suggesting, you know, if you are going to start with a problem let me give you an example. In many markets you have people who are turning 65 and will do so for the next 20 years, everyday 20,000 people, so you've got an experienced gap leaving the market. On the front end you don't have enough millennials. So it's forcing companies to rethink the infrastructure that they own which was really designed about applicant tracking. So our customers might start that journey and say my problem isn't recruiting, my problem is work force planning and analytics, deciding who I have, where I have them. Then it's recruiting marketing, then its applicant tracking, onboarding, etc. But whether they start with work force planning, whether they automate the end-to-end recruiting, what they are ultimately building to is to solve recruit to retire for human capital management and we are seeing each of our applications work in that regard, you can start marketing in that way. You can look at data sources and personalisation and personas and the right offer and the right place at the right time and the right channel and because it's no longer just B2B it's actually B2 any where I could have know an ecommerce front end giving me a top up for my mobile cricket app or may have a corporate relationship. It's B2 any.
Q. Beyond selling into the India market what kind of role does Oracle India play in getting the apps ready for cloud or the support. Is it being done out of India?
A. Yeah, India has been an incredibly important and significant market for us in both our employees and also the end market opportunities I've described. Today we sit with 31,000 employees in the Indian market. We have over 6,000 customers. They range across every function that Oracle does as a company from development, support, in-country sales, marketing, consulting services, financial, many of our back office and front office operations. So everything that Oracle does in a microcosm. Additionally, we've announced that we are adding in 1000 new headcount this year in APAC of which India will receive approximately 400 predominantly in cloud in the Indian market.
Q. And are you investing in any kind of startups in this space in India?
A. Yeah, you know I think we've been really clear about our strategy which is we are opportunistic and acquire the right technologies with the right company and cultural fit and I don't think it's related to geography as much as it is related to capability and how that fits against our own development initiatives and things that we might see as market leaders.
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