Larry Ellison explains why he's cautiously optimistic that Oracle's new cloud database will succeed, even though it doesn't have many customers yet (ORCL)
- Oracle has been going through a major transition, including layoffs and internal politics, as it revamps itself into a cloud computing contender.
- But Larry Ellison, Oracle's founder and chairman shared some cautious enthusiasm that Oracle's most important new cloud service, its autonomous database, may be a hit with customers — even though it doesn't have many, just yet.
- He discussed how he's seen usage grow over time, even on projects that start small. 'To me, that's just wonderfully encouraging.'
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Oracle has been going through a major transistion as it revamps itself into a cloud computing player.
On Wednesday, the company reported its Q4 earnings, and its highest executives — CEOs Safra Catz and Mark Hurd, and foudner/chairman/CTO Larry Ellison — were all smiles, happily reporting that cloud growth is going well.
Hurd, the CEO that runs sales, reported that Oracle's two most popular cloud software businesses, apps for enterprise resource planning (ERP, basically for financial analysis) and human capital management (HCM, basically for the human resources field), were on track to have annual revenue of $2.9 billion, with various of its wider selection of individual cloud apps growing between 25% and 44%.
That puts Oracle's cloud apps business roughly on equal footing with one of its biggest competitors, Workday, which reported annual revenue of $2.82 billion in February and is growing at 33% as of its most recent quarter. There are some differences: Workday is unprofitable while Oracle is highly profitable, although Oracle doesn't report its cloud business in enough detail to see if these units are, by themselves, profitable.
Ellison offered some promising background on Oracle's new database, running on its Generation 2 cloud, too. He said that there were 5,000 new test databases that launched on that cloud last quarter alone.
Oracle calls this new database an autonomous database, or self-driving database, because it can automatically perform tasks that used to have to be done manually by a human administator. This includes applying security updates or grabbing more computing power as it needs it.
Companies are not yet paying for all of those database trials — both Ellison and Hurd admitted that paying customers for the new cloud database are still really low.
However, Ellison says that once an Oracle customer gives the new database a try, the project often grows from there.
"Within 60, 90, 120 days, that becomes a $120,000 projects and within another few months that becomes a half a billion [dollar] project. So we're really optimistic about this business."
He added: "The thing that I find fascinating are the consumption data curves, which shows our consumption rate growing much faster than the fields currently anticipating. To me, that's just wonderfully encouraging. And hopefully this is the beginning of the trend. We'll find out soon."
The potential
And this is where Oracle's potential really shines, should it be able to convince its customers to use its new database cloud.
That's because only a small percentage of Oracle's database customers have selected a cloud provider for their Oracle databases, according to exclusive data shared with Business Insider from enterprise software review site G2 Crowd. Only 17% of over 500 Oracle database customers who have left reviews on G2 Crowd have moved their database to the cloud.
This, even so it is possible for companies to put their Oracle database on Amazon's or Microsoft's clouds. There's an entire ecosystem of consulting companies dedicated to helping people do just that.
Better still for Oracle, its sales teams managed to convince its app cloud customers to sign up for longer-than-typical cloud contracts of 30 months, G2 Crowd also finds. While those long contracts pertain to its apps cloud business, the same might be true for database clouds.
The process of Oracle convincing its customers to use try its cloud, as we've previously reported, isn't always so friendly. Oracle sales has been known to use all kinds of tactics to convince customers to add cloud to their contracts, wanted or not.
So, like Ellison said, the most important statistic is usage numbers. If Oracle begins to share them and is excited by them, then it really may have turned a corner.
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