Editor’s note: At its recent Oracle OpenWorld conference, the tech giant concentrates on a full stack of cloud offerings while spending little time on traditional software and hardware. Technology Business Research concludes that the cloud is the key to future growth. Here’s the second of two reports.
Impact and opportunities
The implication of Oracle’s portfolio and sales transformations are that the company will shift from a big bang “make and sell” business to a business that generates continuous flow. Continuous delivery of services means Oracle will now ship new features at least each month, rather than each year. Cloud delivery means potential customers can trial offerings on their own, and Oracle can track which functions customers use or request most frequently.
On the sales side, the continuous relationship with the customer brings implementation support and customer success managers into the process — key elements in making the promise of the offerings a reality for customers.
More services, applications and data mean Oracle intends to gain a larger footprint inside enterprises. In the long term, the shift to cloud could significantly alter Oracle’s relationship with the market in terms of technology offerings and customer interactions.
Oracle has the opportunity to build a base of highly engaged product communities that advocate and refer Oracle to new customers as well as provide invaluable guidance on the next portfolio elements. From a business model perspective, the shift to continuous delivery should smooth out the growth cycles previously tied to big product releases and steady profitability. Whether operating margins will remain at historic levels is debatable, as Oracle’s financial transition will continue for the next few years. But Oracle executives maintain the “trough” is behind them.
With a goal of 80% gross margin for the Cloud SaaS & PaaS segment, as compared to 96% for software updates and support and 56% for hardware, the business’s ability to scale effectively will determine the profit levels achieved, as Oracle makes it easier for clients to adopt more Oracle technology faster.
Partner opportunities shift as Oracle moves to its new model. Opportunity will be centered on a new customer life cycle of engage, experience, enable and expand instead of the traditional model of buy, build, deploy and maintain. The lighter weight of cloud services and simpler integrations means systems integrators (SIs) need to shift to adding business value over technical value. TBR believes SIs should broaden their portfolios of technology providers beyond the core group of traditional enterprise vendors and specialize on integration services, security services and business operations consulting over traditional technology consulting.