Ruminations on Oracle, Microsoft, Salesforce and Those Deals

I wish I could get a penny for each time I was asked in the last week or so what I thought of Oracle’s new GTM (go-to-market) strategy.

I have said this many times but I finally have some time, 30 minutes or so, to sit down and write it (if you read this before 10 AM on Friday June 28th, we are doing a webinar about this – sign up here).

First, this is Oracle’s strategy and the rest of the participants have different reasons to agree to it: Microsoft cannot, reportedly, get SQL Server running well enough on Azure and needs a powerful database; Salesforce’s future (as it has in the past) depends on negotiating good licensing rights for the Oracle database that powers their solution and platform; Netsuite – well, it’s eighty-percent owned by Oracle’s CEO Larry Ellison.

Dispel any myths you may have about a collusion or cartel being formed between the many different vendors – this was mostly done for the benefit of Oracle.

Oracle came from a pretty — well, not-so-good year.  Following billions of dollars in acquisitions of cloud properties, more invested in becoming a cloud player, time and efforts in bringing Fusion applications to market, and a failed attempt at becoming cloud-ready doubts and questions continue to emerge around them.  Listening to the last quarterly call (also end of the fiscal year call) showed that there is no love lost between Wall Street and Oracle – and they had to do something.

From that perspective, this was a brilliant move: it brings the largest players in the cloud world to collaborate / co-opete (hate that term, but it applies) with Oracle in an attempt at taking over the world of cloud.

However, this is a bad move for customers (at least the ones that are not too busy deploying a “private cloud” – which its a misnomer that means “lazy CIOs” – to notice).

First, it sets back the movement to build an open cloud infrastructure for customers by potentially nine years, if not longer (that is the length of the deal with Salesforce, the de-facto cloud standard until now).  By locking in the largest cloud proponents into their “cloud-in-a-box” strategy (which, although not mentioned continues to exist as a strategy heavy on end-to-end engineered systems and private clouds) Oracle has essentially become the provider of cloud solutions for the next decade.  And, by extending existing licenses to operate in that cloud, it continues to lock-in customers for another ten years into an archaic and abusive licensing model (which, is the same used by most of the other vendors – so it is not exclusive to Oracle).

The potential to break away from this model and use an open, public cloud to leverage the best solutions out there into an integrated, pay-as-you-go, value-based solution quickly dissipates.

Second, it positions Salesforce as the most important solution for cloud out there.  This is not a big problem for those people who believe that Salesforce was already a cloud provider, but in fact their approach of delivering SaaS and PaaS layers together in their applications is not very “cloud like”.  Although their strategy to continue to grow (which I have referenced in writing several times before) and their platform business was a good show-of-force towards embracing an open cloud model, I am not sure yet how this deal will slow down or derail those efforts.  This still remains to be seen (and not a lot about it is coming out from Salesforce’s camp); my main concern is that this will considerably slow or stop Salesforce’s efforts to implement a three-tier open cloud model, and being the leader in cloud it would put a severe barrier on the way to that model for other vendors and customers..

Third, Microsoft and Oracle, indirectly, concede it has been a hard road to cloud (and one that is not yet finished).  Although initials reactions (for Microsoft) would be that bringing in a third-party database into their cloud makes it more open and extensible, in reality they are merely conforming to Oracle’s view of the cloud as another expansion layer in their move to rule the world.  In the five or six years Microsoft has been trying to bring Azure to life (which is only slightly longer than the time that Oracle has spent trying to bring Fusion to life) there have been few true successes (ibid for Oracle and Fusion).  The migration from existing enterprise software vendor to the cloud can be best exemplified by the results both of them experienced, and the willingness to embrace a “private cloud” solution to bypass many of those problems.

The biggest problem, aside from the potential headaches it brings to each of these vendors customers trying to figure it out, is that it creates a two-cloud system for enterprises.

On one hand, the continuation of the triumvirate’s control of the not-so-open cloud strategy, which in spite of being a good-enough first step to embracing an open cloud model is not a final solution, delays investments and plans to embrace a totally open cloud model.

On the other hand,it positions the vendors that have been building in that open cloud model (of which probably Workday and Sugar CRM are the most notables in the CRM world) in a situation where they need to figure out a way to positions themselves in a separate world (or concede defeat and embrace Oracle’s private cloud model).  Either way, adoption of these solutions by enterprises committed to the Oracle vision for the world is becoming more challenging.

Finally three closing thoughts, although i could go on forever – but feel free to contact me for more discussions:

  1. This does not mean that Oracle will give up selling RightNow, Inquira, and the other acquisitions they made around CRM.  They expect to make a lot more than $900 million (what Salesforce is paying) over the next nine years selling those products.  As a matter of fact, expect a more aggressive selling strategy from Oracle in the next year for those products.
  2. Salesforce will not embrace Oracle 12c to run their solutions.  If you ever built a product, especially about fifteen years ago as Salesforce did, you know that changing databases is not that simple.  The amount of work they have done in customizing, optimizing, and extending what their current database can do is never going to be replaced by a new out-of-the-box solution.  There is so much work to do (my best guess would be a complete rewrite of all applications and platforms, a different architecture, and a brand new deployment model) to do that, that it is not  feasible for Salesforce to do it.
  3. There is little more to this deal than a move to lock-in existing revenue and licensing models by three of the largest holders of enterprise software licenses (well, there is great marketing – but that is another topic).  There is no innovation, no integration, and certainly no willingness to help their end users innovate and improve how they approach enterprise software.  There is another decade of licensing solutions in a way that benefits vendors over users, and of securing revenue levels as we have seen in the past decade.  And for three publicly-held companies, that is never a bad thing.

One more thing.  There is a little discussed aspect to this, and something that I am not very clear on yet – but it could be an incredible thing.  Until now Salesforce had been forced to curtail the power of Chatter due to licensing restrictions (especially when it came to accessing and contributing knowledge and data for non-Salesforce users).  A little bird told me, and it was not on Twitter, but I have not confirmed that this deal gives Salesforce the ability to offer a full chatter solution to all of their users (whether corporate or not).without regards for licensing.  If this is true, this is a fantastic deal for Salesforce and one that could certainly accelerate adoption of Chatter (although,on the counter side, it would be within this “private cloud” architecture).

Many questions remain in all aspects, but we now need to wait how the deal progresses before we can answer them.  From where I stand, today, this is a good deal for the three vendors, a poor and uncertain long-term picture, and a lot of uncertainty and confusion from customers in the next six months as these deals get put into practice.

Stay tuned.

disclaimer: Microsoft, Oracle, Salesforce, and SugarCRM have all been or are customers.  Netsuite has never been a customer, but has always graciously invited me to their event and covered expenses for the past three years. Workday has never been a customer, nor are they likely to become one in the short term.  Any other vendor mentioned could or could not have been a customer – but at the end of the days it does not matter… these are my opinions and they are not influenced by any vendor or customer – even if they don’t renew contracts or terminate current contracts earlier.  They will remain my opinions even when I am broke and bankrupt.
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