In an industry where transparency is important, and everyone is committed to improving it’s natural that some review of any outcome is expected. So, after some good quarterly and annual financial reports, there are inevitably Monday morning quarterbacks who will find nits to pick. These are distinctly different from the people forecasting doom and gloom for widows and orphans silly enough to tie their fortunes to a company’s stock prior to earnings announcements.
Recently we saw the latter variety who advised selling Oracle stock in advance of the quarterly earnings announcement which turned out to be more than okay. I pity anyone who sold stock in advance of the announcement. Imagine hanging in there with a stock all quarter long only to lose nerve and jump ship at the last minute and to be wrong.
With the earnings posted, a Seeking Alphacontributor has analyzed them and advised us that good numbers are fine but Oracle isn’t so much a tech company as it is a marketing company and there’s something amiss about that in my mind.
For the record, in 2017 Oracle spent north of $6 billion on research and development for the first timeand it has been spending north of two billion in R&D each year since 2007. Lots of billions for a company with revenues in the mid-to-high $30 billion range over the same period. Roughly between 1 in 6 and 1 in 7 dollars of revenue went to R&D. In contrast, a pretty typical marketing budget would only be ten percent of gross revenues; in this case that’s a bit less than $4 billion. Hmmm…
You might see bigger percentages in some analyses like 46 percent for Salesforce or 22 percent for Oracle, but those are categorized as Sales and Marketing and include a lot of salaries plus commissions and bonuses so to keep things on an apples to apples level let’s say spending ten percent on marketing alone is an accepted and reasonable practice though there are no standards.
Surprise! They’re all marketing companies.
At some point a company emerges and has more product to sell than the market has new niches to fill so the emergent company decides to sell lemonade rather than grow more lemons. Yes, I realize what a terrible metaphor this is, (sorry Oracle) but it seems to make the argument more vivid, so there. But despite all this, there’s still plenty of R&D to do to get ready for the next big thing.
So, every successful tech vendor is a marketing company trying to sell new ideas into established businesses. They’re not very different from companies selling branded commodities to consumers like colored-sweetened-flavored-carbonated-water for instance.
These statements from the article are revealing, “Oracle is not a company good at creating innovative tech, but it is a genius at marketing mundane tech to enterprises.”And, “It often attempts to spin its newest endeavors as next generation, but most are rehashed technology. One of the company’s biggest marketing campaigns in the recent years has been the “autonomous database,” which is also not a novel idea.”
I can agree with the author that others have had similar database approaches in the past, but they’ve usually been more niche, not mainstream. Amid the hacking and data theft that is reaching epidemic proportions today, you haven’t seen any other vendors stepping up to the challenges of autonomous database.
Bringing stable solutions to the enterprise
A generation of IT executives cut its teeth in the years leading up to the turn of the century when systems had to be upgraded to four-digit date formats and many of them have the scars to prove it. Many enterprises flirted with disaster as the new systems were late or teetered on malfunction. Some went over the edge. These people, now IT decision-makers, are loathed to re-experience anything remotely resembling the mishaps and failures of that by-gone era. So, one of their biggest concerns going into a technology acquisition is ensuring that the new stuff is tested and solid and the vendor is big enough to deal with whatever may come during the deployment experience.
This might be especially true when selling cloud and autonomous database solutions. According to a recent report from analyst firm G2.com, “Enterprise Grid Report for Relational Databases/Spring 2019,” only 17 percent of Oracle’s database is in the cloud, 83 percent on the ground. A few years ago, Oracle founder and current CTO Larry Ellison said the transition to the cloud would take a decade or longer, so it looks like things are on schedule.
So as far as rehashed technology is concerned, there’s an element of truth to this but in a good way. No enterprise is likely to jump at a bright, shiny object no matter what the vendors promise because there’s too much at risk. Therefore, it makes sense that although the cloud computing revolution is now 20 years old, that major corporations are only now stepping up.
The way this looks to me
IBM made multiple fortunes not selling the latest technology but by selling the latest, vettedtechnology to customers who utterly depended on the vendor to have their interests at heart. For that reason, selling non-IBM solutions to IBM shops was an exercise in futility, which I can personally attest to.
Oracle gets high marks so far during this transition for the way it has gone out of its way not to push its customer base into the new technology. Nevertheless, the company is selling its new technology reasonably well as the numbers show.
Autonomous database is a big idea that requires a decent amount of compute power and new-fangled storage technology to pull off. It’s not surprising to me that the transition is slow because the purchase process includes determining whether to maintain a large datacenter presence or to shift to the cloud where all that hardware can be had for the cost of a reasonable monthly payment. The decision is not a slam-dunk for companies whose revenues are many times Oracle’s. For them and their leaders, “What keeps you up at night?” is not a speculative question.
(Cross-posted @ Denis Pombriant | Medium)