Oracle’s Aim for the Top of the Market in Enterprise Cloud Solutions

Successful Q4 Earnings

In June, software giant Oracle announced its Q4 and annual earnings, reporting revenue of $11.24B for the quarter and $40.48B for their fiscal year. Oracle saw a 4% year-over-year increase in revenue generated mainly from their Back-Office Application space, with their fast-growing Fusion and NetSuite ERP solutions. In their most recent earnings call, they announced their high projections for their Back-Office Application products and goals for migration to the Oracle cloud. Over the past several months, we have begun to see the effects of these projections and strategies through Oracle’s continued aggressive sales tactics with its ERP products. We discuss how companies can take these changes into account when engaging with Oracle and strategizing future deals.

Aim for the Top: Largest Provider of Cloud ERP Systems

In their Q4 earnings call with financial analysts, Co-Founder, Executive Chairman, and CTO Larry Ellison reiterated that Oracle’s long-term goal is dependent on the company becoming the world’s largest provider of cloud ERP systems. Ellison also projected that Oracle ERP revenue (combined with NetSuite ERP revenue) could eventually reach $30B. He stated, “Fusion ERP, it is certainly much bigger than 10 billion, and NetSuite is probably bigger than 20 billion.” Going forward, Oracle sales reps will be highly incentivized to push these products so they can continue to take over this market space and add their services to as many companies’ IT arsenal as possible.

Migration from Other Services

Ellison went on to advocate that a cloud ERP system foundation could eventually lead companies to purchase and implement additional Oracle applications, such as manufacturing or CRM systems. He stated, “building upon that strong ERP foundation, we are going to expand as a manufacturing CRM and industry-specific application.” Ellison also stated that Oracle’s new Fusion ERP customers are about 60/40 new customers v. migrations from on-premise ERP, with many of the new customers migrating from SAP. Ellison claimed, “We almost never lose a competitive ERP deal in the cloud. Virtually never.”

In our own case data, we have observed dozens of Oracle cloud deals over the most recent quarter, and almost all of the SaaS-specific deals involved an Oracle on-premise legacy customer migrating to their cloud application equivalent. According to our data, this type of purchase is much more common than the current 60:40 trend Larry Ellison cited above.

Strategizing for Q1 2022

Based on Larry Ellison’s statements regarding the push for greater market share within the cloud ERP space, Oracle customers – especially on-premise legacy ones - should expect continued aggressive sales pitches from Oracle to migrate them to the cloud. Customers who have historically relied on SAP for their ERP needs are the prime targets for Oracle sales teams as well, considering Ellison’s statement that these are the most successful sales references.

That being said, Oracle’s Q1 is typically their slowest for net new business and could present a unique opportunity for customers to achieve favorable deal terms and pricing, should they decide to engage with Oracle on potential cloud offers. If Oracle approaches you about migrating to their cloud ERP, here are some ‘Gotchas’ to keep in mind.

- Joe Malarney is a Senior Analyst at ClearEdge.