This week, Oracle reported its fiscal FY18 Q1 financial performance and the results are being billed as solidly exceeding Wall Street estimates. Oracle itself depicted its performance as the best quarterly performance in six years as well as a very, very strong start to its FY18 fiscal year. 

The financial headlines included:

Total Revenues up 7 percent to $9.2 billion.

Cloud Plus On-Premise Revenues growing 9 percent to $7.4 billion.

Applications Total Revenue up 17 percent to $2.6 billion.

Total Cloud Revenues up 62 percent to $1.5 billion.

Operating Income up 31 percent to $2.8 billion.

Total Cash balance of $67 billion with Net Cash (less debt) balance at $13.6 billion.

From an applications perspective, the results reflect some significant momentum in the company’s Cloud based and SaaS applications platforms. Co-CEO Mark Hurd indicated to analysts that Cloud ERP revenues grew 90 percent organically reflecting a $1.3 billion run-rate. Executives characterized much of the current Cloud ERP growth coming from net new customers for Oracle, customers that Oracle would not have considered a mere three years ago. Some ERP customer wins mentioned included names such as Advanced Auto Parts, Glaxo SmithKline, Grupo Bimbo, Honda Motor, Modine Manufacturing, Nestle, United States Steel, among others. Having followed the ERP and enterprise software technology for quite some time, this industry analyst can attest that such names had indeed appeared on other enterprise software vendor customer reports.

ERP Cloud momentum is also an important indicator to SCM Cloud adoption momentum since ERP customers adopt supply chain management focused functionality in a phased approach after the ERP backbone platform is implemented.  While specific numbers related to SCM Cloud were not shared in the investor briefing, Supply Chain Matters has reached out to Oracle and will share performance highlights when we have them.

A significant challenge for any software company with a history of prior on-premise software implementations is managing the total revenue line as new Cloud-based customers are acquired. As we all know, cloud revenues are amortized over the expected life of customer contracts while the full on-premise contract values are recognized at time of sale. In its latest quarter, Oracle executives informed equity analysts that on-premise license, support, and SaaS combined grew 17 percent in the quarter. That reflects a healthy transition to-date.  Once more, Oracle senior leadership declared that they expect even higher Cloud growth rates in the coming quarters. Hurd himself declared:

I expect Q2 Cloud booking growth to be strong or stronger than our Q1 growth rate. Our Cloud bookings were executing well on a very big and growing pipeline.”

Hurd further declared that Oracle is now the fastest growing Cloud company at scale, which can be construed to reflect the usual bravado of this tech provider but perhaps has a further meaning from performance of a few quarter’s past.

In briefing investors on Q2 financial performance, Oracle executives have often provided some indications of announcements expected to be made at the annual Oracle OpenWorld customer conference in October. Oracle Founder and CTO Larry Ellison indicated that the company will announce the next generation of the Oracle database at the OpenWorld event starting on October 1. He described the release of a totally autonomous database technology predicated on a foundation of machine learning and artificial intelligence capabilities. In-essence, the database will not require a human to either manage or tune the database, and Oracle plans to offer customers a guarantee of 99.995 percent system availability on an annual basis. That equates to less than 30 minutes of planned or unplanned downtime in a year.

Such a capability has significant implications for supply chain, customer order management and business analytics focused applications and systems that have reliance on large scale databases. It has further implications for future Internet of Things and machine learning capabilities applied to operational and supply chain planning and control systems down the road. Obviously, this will be a significant announcement with implications for enterprise software and other tech circles.

This Editor will once again be in-attendance at this year’s Oracle Open World and Supply Chain Matters will feature additional perspectives on new product announcements and their implications for the broad umbrella areas of what makes up today’s supply chain management technology landscape.

Bob Ferrari

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