In this posting, the Supply Chain Matters blog provides highlights of from last month’s report of both fiscal Q4 and full-year FY20 financial performance by Oracle Corporation. We do so because what was reported by Oracle senior executives is somewhat indicative of how the ongoing COVID-19 pandemic is impacting the demand for Cloud based infrastructure and applications systems, by the observation of Oracle.

In terms of the numbers, the financial performance headlines for the fiscal fourth quarter that ended in May included:

  • Q4 revenue of $10.4 billion, down 6 percent year-over-year, 4 percent in constant currency.
  • Q4 Cloud Services and License Revenues of $6.8 billion, up 1 percent year-over-year, 3 percent in constant currency.
  • Q4 Operating Income of $4.3 billion, up one percent year-over-year.

For the full FY20 fiscal year the headlined numbers were:

  • Total Revenues of $39.1 billion, down one percent year-over-year and flat in constant currency.
  • Cloud Services and License Revenues of $27.4 billion, up 3 percent year-over-year, and up 4 percent in constant currency.
  • GAAP Operating Income of $13.9 billion, up 3 percent year-over-year.

In the briefing to investors and equity analysts, CEO Safra Catz, and Chairman and CTO Larry Ellison expressed a very upbeat view in regard to how this technology provider was weathering the ongoing COVID-19 pandemic and it associated impact on technology investing.

Oracle

CEO Catz declared: “Overall, we found ourselves working with our customers and believe we have weathered the pandemic well and we’re pleased with our overall performance in the quarter.

Like other technology and industry businesses, Oracle had to transition its global workforce to working from home, and employees reportedly rose to that challenge. They were especially keen on helping customers and organizations to overcome their own technology challenges as well as contributing to efforts of public health agencies to battle the virus globally.

As this blog had shared, Oracle, among other technology providers offering complimentary services to challenged businesses. The company  elected to provide training and certification on Oracle Cloud infrastructure (OCI)  and autonomous database through Oracle University at no charge to all who desired such training. Executives indicated the company experienced a significant surge as a result of that announcement with hundreds of thousands of individuals being trained and certified. In a follow-up call that this supply chain technology analyst had with Executive SVP of Applications Development, Steve Miranda, who indicated that there was also uptake regarding the technology provider’s  complimentary offering  for Oracle Financial Business Statement Planning.

Oracle subsequently discovered that reduced travel costs helped to manage overall expense rates during the quarter. Equity analysts noted that Oracle retained all of its existing workforce thru the end of the fiscal year because of diligent cost management.

Like other enterprise tech providers, Oracle entered the May ending quarter with what was described as a robust pipeline of transactional business, but some drop off in deals was experienced in industry sectors especially hit-hard by the pandemic. However, executives expressed optimism that most of this business will ultimately be booked.

 

Cloud Computing and Database Infrastructure Adoption Trending

Founder Ellison pointed out to analysts that the COVID-19 disruption forced companies to come to grips with the shortcomings of existing on-premise IT infrastructure and applications systems. That included more seriously evaluating Oracle as a more feature-rich Cloud infrastructure provider as an alternative to Amazon AWS and Microsoft Azure. He then rattled off a number of significant OCI deals booked in Q4 that included names such as Goldman Sachs, JP Morgan, Quest Diagnostics, Suntander Bank, TD Bank Group, Verizon, Zoom, and others. The Zoom win was significant given the over 200 percent growth in customer demand experienced by this conference IT provider. Ellison’s message was that Oracle’s advantages in speed, security and higher performance are becoming more recognized.

In the important area of database technology, Ellison stated:

In Q4, we launched a vastly improved version of our Exadata Cloud@Customer service. Exadata Cloud@Customer now enables our existing on-premise database customers to run the Oracle Autonomous Database in their own datacenter; previously, the Oracle Autonomous Database was only available in Oracle’s Gen2 Public Cloud.  Enabling all our on-premise database customers to upgrade and run Oracle’s latest and best database technology in their own data center should dramatically accelerate the rate of adoption of the Oracle Autonomous Database…especially by our largest customers including banks and governments that are not currently planning to move their largest and most critical systems to a public cloud.

The above has significant implications, not only in the Cloud IT infrastructure dimension, but in the Cloud SaaS applications support area as well. Readers should watch this area since Oracle may have finally found its secret sauce for broader Cloud IT infrastructure adoption.

 

Cloud SaaS Applications Adoption

Executives pointed to over 7100 Fusion ERP customers and nearly 22,000 mid-market NetSuite Cloud ERP customers making this provider a more recognized market leader in this broad applications area. Executives cited analyst firms Gartner, Forrester and IDC each ranking Oracle as a leader in the ERP technology segment.

Ellison, true to his direct style of communication relative to competitors indicated: “We have taken a huge lead in the Cloud ERP market because our largest competitor, SAP, never rewrote their ERP applications for the Cloud.”

Regarding added color and background to Fusion ERP adoption, both executives indicated that COVID-19 has provided impetus for many existing Oracle E-Business suite customers. Stated was that about 6 percent of E-Business installed base customers have upgraded at this point, and that associated business pressures, rising confidence and customer reference levels are indicating added momentum.

One area of Cloud applications that this author really homed in on were specific statements made by CEO Catz:

And one of the things, by the way, that was a very important was the releases on the supply chain side of the business. Many of our customers are manufacturers and they wanted to – they like having the suite. They wanted a full suite, of course our financials and HCM, but in addition, they wanted a mature supply chain product and now we have many references in the supply chain, of course including ourselves. And so the momentum has really increased.”

Ellison later chimed in with describing the differences in being to access business applications such as financials and supply chain management being accessible at home, or on a smartphone or mobile device, the same they would be accessible at the office.  He further cited what he termed as significant wins that included SCM SaaS technology deployment.

In our prior commentaries specifically related to Oracle SCM Cloud, we observed that late development of full functionality as compared to Oracle Cloud ERP. The stated reason was Oracle’s belief that customer Cloud applications adoption patterns would first favor baseline ERP, HCM and possibly CRM business process automation, followed eventually by SCM.

Our interpretation of Catz’s statement is that the ongoing challenges related to increased disruptions related to global trade tensions, coupled with the now global pandemic, have upped the need for more robust Cloud based SCM applications leveraging advanced technologies to supplement needed capabilities. We will elaborate further in an upcoming separate Research Advisory in the August time period.

In the end, Ellison summarized Oracle’s latest financial and business performance has focusing on growing technology segments such as Cloud ERP, HCM SCM  and Gen 2 Autonomous Database, all higher margin businesses in enterprise technology.

While the pandemic has brought significant challenges and disruption for businesses large and small, the advantages of Cloud computing infrastructure and SaaS based applications has brought new awareness to the meaning of being more agile, and to need to accelerate select business process digital transformation needs such as supply chain management.

 

Bob Ferrari

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