Original Post From Michael Hickins
Oracle ’s earnings for the second fiscal quarter ended Nov. 30 were 64 cents per share, besting analyst expectations by 3 cents. Sales were $9.09 billion, beating the consensus estimate of $9.02 billion. The overall strength of the results may well validate aspects of the company’s strategy, including its embrace of cloud technology and its acquisition of hardware maker Sun Microsystems. But below the headline numbers, the details also show that CIOs are increasingly focused on eliminating complexity, and are more willing to embrace applications delivered through the cloud in order to reduce their expenses and get faster time to value.
New software licenses and cloud software subscription revenues were up 17% to $2.4 billion, Oracle said in its announcement. Software license updates and product support revenues were up 7% to $4.3 billion. Rebecca Wettemann, principal analyst with Nucleus Research, said the results reflect the investment choices companies are making in light of uncertainty over taxes and global economic growth.
CIOs are embracing cloud software because of lower initial costs and other benefits, such as the ability to increase their usage of software, upgrade applications without the disruptions that come with traditional on-premise applications, and the positive financial impact of being able to take cloud services as an expense rather than having to capitalize software and hardware purchases.
CIOs are also showing more of a preference for holistic, packaged systems that include hardware and application suites over acquiring software specialized in limited areas such as sales contact management. CIOs are also becoming more comfortable with standardized applications that, while not providing as many options for customization, reduce the expense and complexity associated with traditional software implementations. CIOs “have more confidence with engineered systems and what Oracle has done around business accelerators, and that allows customers to predict what it’s going to cost them and how long it will take to get it up and running,” Wettemann told CIO Journal. “They want applications that are designed to be more out of the box and that require less consulting and customization,” Wettemann said.
Business accelerators are prepackaged templates and wizards sold with Oracle systems that allow customers to shape the software for their particular needs.
According to Wettmann, Oracle isn’t the only game in town when it comes to engineered systems; IBM ’s Pure System package, introduced earlier this year, is another example, and could allow customers to play one vendor off against the other. IBM hadn’t been selling business applications aggressively, but “we’re seeing that change,” Wettemann said.
CIOs are also attracted to cloud applications sold by Oracle because they promise a better return than software run in-house, Wettemann said. “Cloud offers 1.7 times the ROI of traditional on-premise software,” she said, citing case studies done by the research firm over the past 18 months.
It’s probably not lost on most CIOs that Oracle has also derived a lot of benefit from offering the very cloud technology once derided by its CEO, Larry Ellison, as “complete gibberish.”
Overall, Oracle’s earnings show that corporate IT buyers are no longer keeping their cash on the sidelines, as they did in the wake of the financial crisis, and then again during the debt ceiling crisis. Instead, Wettemann said, companies “are investing in technology rather than in employees. That’s not good news for people who are unemployed, but it’s good news for employees who are getting technology in their hands that can make them more productive.”
AltaFlux understands what you and your organization need to excel, and can deliver rapid innovation to unleash your full workforce potential. Together, we can empower your business by streamlining, transforming, and optimizing your key HCM and talent processes with industry-leading SAP SuccessFactors technology—enabling you to adapt at the speed of change.
AltaFlux Corporation is a global HCM cloud consulting partner based in Troy, Michigan. We empower organizations by streamlining, transforming, and optimizing key human capital management (HCM) processes with industry-leading HCM cloud solutions like SAP SuccessFactors, Benefitfocus, WorkForce Software and Dell Boomi.