Oracle gets aggressive about its cloud business

  • Plans to cloud-enable 95% of all its products by end-October
  • 1,000 news sales personnel for APAC, which suffered 2% revenue decline
Oracle gets aggressive about its cloud business
REDWOOD City, California-based software company Oracle Corp has aggressive plans to grow its cloud business in Asia Pacific, including South-East Asia.
                                                                                          
It recently announced it was going to hire 1,000 sales personnel in Asia Pacific over the next three to six months, with about 180 of them in South-East Asia, including 49 in Singapore.
 
“As for Malaysia, the new additional staff force will represent a 50% growth in our present sales force, so that’s quite impactful,” says Oracle Malaysia country manager Jimmy Cheah, without giving actual numbers.
 
The recruitment drive is part of Oracle’s game plan for its cloud business. Recently, its co-chief executive officer Mark Hurd told Bloomberg that the company plans to make almost all of its services available on the cloud by the end of this year.
 
Hurd said that the company, which currently has about 65% of its products available on the cloud, hopes to cloud-enable 95% of its products by end-October.
 
The recruitment drive may also help boost its business in Asia Pacific, which suffered a 2% decline in revenue for the nine months ended Feb 28, 2015.
 
In the period in question, Oracle’s revenue globally grew by 2% to US$27.52 billion, versus US$26.96 billion in the same period a year ago. From that amount, about 15% of its revenue, or US$4.23 billion, came from Asia Pacific, versus US$4.31 billion in the same period a year ago.
 
The decline in its Asia Pacific revenue was partly due to its exposure to foreign exchange (forex) volatility. Excluding the forex impact, Oracle’s business in Asia would have grown 2% during the nine-month period. (Refer to pages 34 and 35 of its filing with the US Securities and Exchange Commission).
 
Demand drivers
Oracle gets aggressive about its cloud business
Meanwhile, speaking to Digital News Asia (DNA) in Kuala Lumpur recently, Cheah (pic above) says he is confident that demand for cloud-related services will pick up.
 
For a start, organisations always look for ways to lower the cost of running their IT operations. “They are looking at ways to optimise the cost ... and cloud solutions are a viable solution,” he says.
 
Cheah acknowledges that some believe the cost of moving the bulk of IT operations to the cloud is higher than running it in-house, but he remains firm in his conviction that there is a solid business case for cloud solutions, especially in the long-term.
 
“There are a few assumptions you have to put in place,” he says.
 
“With any system, the infrastructure you have has to be refreshed, so one has to put a cost to that,” he says, adding that on the cloud, the responsibility for refreshing the infrastructure rests on the cloud service provider.
 
“People who assume that the cloud is more expensive than [having IT] in-house may not have included the cost of refreshing of the infrastructure,” he argues.
 
Another factor that is seldom taken into account in this debate is maintenance cost. “Maintenance is not just about the software, it is about the people. You need to train them,” says Cheah.
 
“If you include these costs, then leveraging on cloud service-oriented applications would give you a different perspective,” he declares.
 
“More importantly, by moving to the cloud, you are moving your cost from capital expenditure to operating expenditure.
 
“This means no heavy investment upfront – let’s not forget, hardware is a depreciating asset,” he adds.
 
Competitive advantage
 
Currently, Oracle’s cloud services include Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) offerings.
 
“We are the only company that offers all three [layers],” Cheah claims.
 
One SaaS solution it offers is Customer Relationship Management (CRM), where it goes up against pioneering cloud company Salesforce.com. How will it compete against the incumbent in that space?
 
Cheah says Oracle is banking on is its ability to offer a full suite of SaaS solutions.
 
“If you look at any organisation, it would need ERP (enterprise resource planning) and HR (human resources) solutions,” he says.
 
“This is where our full suite of offering becomes an advantage – we have enlarged the proposition,” he adds.
 
For the nine months ended Feb 28, 2015, revenue from Oracle’s SaaS, PaaS and IaaS business jumped by more than 34% to US$1.52 billion, versus US$1.13 billion a year ago. This figure does not include revenue from new software licences, updates and product support.
 
Cheah declines to reveal how well Oracle’s Malaysia business has performed in this area, but argues that the numbers above are an “indicative sign” of the country’s and the region’s performance.
 
There has also been good response to its PaaS and IaaS offerings, he claims, with two customers in Malaysia already using its PaaS offering – one “transportation-related” and the other “government-related.”
 
“Hopefully, with the new sales force, we can secure more customers in that space,” he adds.
 
Cheah says that PaaS offers a good value proposition for organisations which want to develop and test a product or solution.
 
“Typical organisations will generally get the licence for the software and database when they want to do testing. If there are other areas of testing, they will get more licences.
 
“PaaS becomes an interesting proposition because it is on-demand,” he says, adding that organisations can sign on for the resources they need at first, then reduce their subscription when testing is over, “rather than license the software and let it sit there.”
 
“Generally, if they license software for testing, they tend to forget to redeploy it once they are done with testing,” he says.
 
When it comes to IaaS, Cheah admits that “it is still in its early days” for Oracle.
 
“This is pretty new to us – we are currently in talks with some customers which are very keen on it,” he adds.
 
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