Enterprise software and technology provider Oracle reported fiscal Q3 financial results this week and the headline was increased growth in cloud based revenues and customer pipeline amidst continued currency headwinds.

Financial highlights of the quarter included:

  • Total Revenues of $9.0 billion, down 3 percent in U.S. dollars and up 1 percent in constant currency.
  • Operating income of $3.0 billion down $.4 billion or 11 percent from the year earlier period.
  • Cloud plus On-Premise Software Revenues of $7.1 billion, down 1 percent in U.S. dollars and up 3 percent in constant currency.
  • Cloud software as a service (SaaS) and platform as a service (PaaS) revenues of $583 million, up 57 percent in U.S. dollars and up 61 percent in constant currency.
  • Cloud infrastructure as a service (IaaS) revenues of $152 million, down 2 percent in U.S. dollars and up 2 percent in constant currency.
  • Total On-Premise Software Revenues of $6.3 billion down 4 percent in U.S. dollars and unchanged in constant currency.
  • Total Hardware Revenues of $1.1 billion, down 13 percent in U.S. dollars and down 8 percent in constant currency.

Behind the numbers is a technology company transforming itself to take advantage of an ongoing generational shift of technology deployment, namely that of a broad based offering of Cloud based technology, IT infrastructure and applications support.

In a Supply Chain Matters published commentary in January, we observed that the overall value-proposition of Cloud based computing is much broader than actual software applications. So much so that Oracle remains convinced that wide-scale adoption of Cloud is an unstoppable force.

The vendor’s broad spectrum of Cloud based technology now spans everything from hosting an entire computing, networking and data management infrastructure to various enterprise suite applications that can either run on the Cloud or behind the firewall. The performance numbers highlighted in the latest quarterly results would seem to point to the building market momentum not only in deals but in pipeline interest. Oracle executives reported to equity analysts that bookings for SaaS/PaaS deals grew 77 percent in the quarter on top of the 129 percent increase reported in fiscal Q2.

In the earnings press release, Oracle Chairmen and CTO Larry Ellison declares that Oracle is now selling more enterprise SaaS and PaaS revenue deals than any other technology company including Salesforce.com. Such a statement needs to be independently verified by multiple analysts, it does however reflect increased attraction to these new paradigms of computing. In today’s more challenging business climate, broad Cloud based technology deployment options provide more business flexibility in capacity and scalability with operating and maintenance costs more aligned to technology usage on an annual basis. The potential is for the entire IT infrastructure to flex or adjust with growth patterns of the business

As noted in our other recent Oracle focused commentaries, the enterprise technology provider has also recently announced the availability of Oracle SCM Cloud, a rather broad-based product suite available on a public cloud-based platform. This Cloud based suite includes integrated functionality support that spans product lifecycle management, supply chain planning, procurement, customer fulfillment, transportation, warehousing as well as manufacturing management.

While it may well be too early to assess how this new suite is being viewed by prospects and customers, in the earnings briefing, Oracle executives indicated that the Oracle Cloud ERP application that includes basic supply chain management and procurement support recorded sales to 334 customers in Q3, 175 of which did not have Oracle on premise ERP systems before that purchased. An Oracle industry analyst briefing in December indicated 1500 Cloud ERP customers at the end of fiscal Q2, thus the overall number is approaching near the 2000 mark.

The close association of ERP to broader needs in PLM, supply chain management and manufacturing process support may be an indication that cross-selling opportunities may already be building. Oracle refers to this as the cross-pillar approach, where customers may start with Cloud HCM and ultimately move to broader support Cloud ERP and Cloud SCM deployments.

A final observation related to Oracle’s latest financial results reflects on sales execution.  In prior briefings, Oracle has stressed that its sales teams have been trained to be more focused on targeting line-of-business and functional business challenges and technology needs.  From our lens, that effort may be paying added dividends.

We plan to provide a reader update on Oracle ERP Cloud and SCM Cloud early deployment adoption before June.

Bob Ferrari

 Disclosure: Oracle is a client of the Ferrari Consulting and Research Group, the parent of the Supply Chain Matters® blog.