During the recent OpenWorld 2016, Oracle announced a variety of products and initiatives designed to deepen its commitment to the cloud. Given Oracle's size and scope, examining the company's market position and products demands nuance and analysis.

For this episode, we bring together three top industry analysts to examine Oracle and its market position. All three of today's participants, including host Michael Krigsman, are members of the prestigious Enterprise Irregulars group.  

Michael Fauscette is the chief research officer at G2 Crowd, a platform and community where people can connect and share experiences about business software. Prior to joining G2 Crowd, Mr. Fauscette spent ten years as an executive and senior analysts at technology market research firm IDC,

Louis Columbus is the Director of Global Cloud Product Management at Ingram Cloud with a background in marketing, product management, sales, and industry analyst roles in enterprise software and IT industries. His writing focuses on covering CRM, Cloud Computing, ERP, and Enterprise Software.

Larry Dignan is Editor-in-Chief of ZDNet. He leads the editorial team in ZDNet coverage of the stories and events that impact today's business professionals and oversees the ZDNet blog network, which features some of the most authoritative and well-respected voices in the IT community.

Transcript

Michael Krigsman: Welcome to Episode 194 of CXOTalk, and this special episode of CXOTalk is going to explore Oracle and the recent conference Oracle Openworld. As you know, CXOTalk brings together the smartest, most innovative minds in the world for in-depth and highly substantive conversation. And today, I’m joined by three excellent analysts, the top star analysts, among the best in the world; and in no particular order I am joined by Larry Dignan, who is the Editor in Chief of ZDNet. Larry Dignan, how are you?

Larry Dignan: Good! How are you?

Michael Krigsman: I am doing fantastic. And, Louis Columbus is a longtime analyst. Hello, Louis.

Louis Columbus: Hey, good afternoon. Thank you for having me on. Appreciate it.

Michael Krigsman: Thank you for joining us. And, Mike Fauscette is the Chief Research Officer of G5, sorry, G2. Mike, how are you?

Mike Fauscette: You promoted us! That’s pretty good, we got an extra three. [Laughter]

Michael Krigsman: So, everybody. Thank you for taking the time. So, Oracle at Openworld made a whole series of announcements, and who would like to jump in and place Oracle for the moment, to context. What is Oracle doing at this moment in the broader context of the industry, and where are they going? Who would like to begin?

Larry Dignan: I’ll take that one.

Michael Krigsman: Ok, Larry. Go ahead.

Larry Dignan: They’re taking their huge install base, and all their on-prem. people, and trying to move them all to the cloud. And that applies to a Chinese buffet of apps, that applies to database customers, that applies to damn near everything they touch. So, Oracle, for all intents and purposes is a cloud company. And, that’s the transition they’re making. They’re trying to do...you know, broadly speaking, they’re trying to make that pivot that Adobe did so well.

Michael Krigsman: So Mike Fauscette. Oracle, the cloud company.

Mike Fauscette: Yeah, I mean, obviously there’s this transition. Obviously you need to think of them as a company in transition. They have lots of cloud offerings, they have lots of non-cloud offerings, they have lots of stuff. They have a lot of things. And, it takes a long time to move a revenue model from one to the other, it takes a long time to move the culture from one to the other, it takes a long time to move a salesforce from one to the other. And I think we saw a few years ago, things got pretty unstable for a while, from a sales perspective, but then they stuck it out, it worked there, and now the applications are starting to settle out into logical blocks and movement. So, it just takes a long time to make that transition and I think some people expected them to do things a lot faster, but you can’t just do that; you can’t just move things that quickly.

Michael Krigsman: Louis, do you maybe want to weigh in with the financial aspect of this? Oracle is moving to the cloud, yet their overall cloud revenue is still relatively small, compared to the others.

Louis Columbus: Yeah. It’s 9% of general revenue right now. It’s growing at an 82% comped down annual growth rate, which bodes well for them. When you look at the financial models going out after IaaS and Platform as a Service, they’re pretty robust opportunities there. On IaaS, they have the potential to do 40% - 46% Gross Contribution Margin all the way through 2017. So, you know, the likes of the bare metal server, where they’re going with Ravello [Systems] and VMware compatibility and VMware machine compatibility, which is essential for those services to succeed, could supplant that revenue. And, what’s going to be interesting is to watch how they play in the Platform as a Service space and how they go ahead and derive gross margin out of that. They roll together, in all the estimates I’ve seen, roll together SaaS and Platform as a Service, so it’s hard to differentiate what the revenue contribution of patch is alone, however the bottom line is;

Michael Krigsman: Welcome to Episode 194 of CXOTalk, and this special episode of CXOTalk is going to explore Oracle and the recent conference Oracle Openworld. As you know, CXOTalk brings together the smartest, most innovative minds in the world for in-depth and highly substantive conversation. And today, I’m joined by three excellent analysts, the top star analysts, among the best in the world; and in no particular order I am joined by Larry Dignan, who is the Editor in Chief of ZDNet. Larry Dignan, how are you?

Larry Dignan: Good! How are you?

Michael Krigsman: I am doing fantastic. And, Louis Columbus is a longtime analyst. Hello, Louis.

Louis Columbus: Hey, good afternoon. Thank you for having me on. Appreciate it.

Michael Krigsman: Thank you for joining us. And, Mike Fauscette is the Chief Research Officer of G5, sorry, G2. Mike, how are you?

Mike Fauscette: You promoted us! That’s pretty good, we got an extra three. [Laughter]

Michael Krigsman: So, everybody. Thank you for taking the time. So, Oracle at Openworld made a whole series of announcements, and who would like to jump in and place Oracle for the moment, to context. What is Oracle doing at this moment in the broader context of the industry, and where are they going? Who would like to begin?

Larry Dignan: I’ll take that one.

Michael Krigsman: Ok, Larry. Go ahead.

Larry Dignan: They’re taking their huge install base, and all their on-prem. people, and trying to move them all to the cloud. And that applies to a Chinese buffet of apps, that applies to database customers, that applies to damn near everything they touch. So, Oracle, for all intents and purposes is a cloud company. And, that’s the transition they’re making. They’re trying to do...you know, broadly speaking, they’re trying to make that pivot that Adobe did so well.

Michael Krigsman: So Mike Fauscette. Oracle, the cloud company.

Mike Fauscette: Yeah, I mean, obviously there’s this transition. Obviously you need to think of them as a company in transition. They have lots of cloud offerings, they have lots of non-cloud offerings, they have lots of stuff. They have a lot of things. And, it takes a long time to move a revenue model from one to the other, it takes a long time to move the culture from one to the other, it takes a long time to move a salesforce from one to the other. And I think we saw a few years ago, things got pretty unstable for a while, from a sales perspective, but then they stuck it out, it worked there, and now the applications are starting to settle out into logical blocks and movement. So, it just takes a long time to make that transition and I think some people expected them to do things a lot faster, but you can’t just do that; you can’t just move things that quickly.

Michael Krigsman: Louis, do you maybe want to weigh in with the financial aspect of this? Oracle is moving to the cloud, yet their overall cloud revenue is still relatively small, compared to the others.

Louis Columbus: Yeah. It’s 9% of general revenue right now. It’s growing at an 82% comped down annual growth rate, which bodes well for them. When you look at the financial models going out after IaaS and Platform as a Service, they’re pretty robust opportunities there. On IaaS, they have the potential to do 40% - 46% Gross Contribution Margin all the way through 2017. So, you know, the likes of the bare metal server, where they’re going with Ravello [Systems] and VMware compatibility and VMware machine compatibility, which is essential for those services to succeed, could supplant that revenue. And, what’s going to be interesting is to watch how they play in the Platform as a Service space and how they go ahead and derive gross margin out of that. They roll together, in all the estimates I’ve seen, roll together SaaS and Platform as a Service, so it’s hard to differentiate what the revenue contribution of patch is alone, however the bottom line is; IaaS, bare metal servers - high margin business with an upside growth potential of 16% compound annual growth in that business.

So, I think they’re on the hunt for, you know, additional revenue growth figures in that 82- 80% compound annual growth rate range. And, in an upside scenario, their licence growth is flatlining to growing maybe 5%. And they know that SaaS, the entire cloud model has to succeed if they’re going to overcome the flatlining of their overall licence revenue growth.

Michael Krigsman: So guys, who’s got additional color on this aspect of Oracle’s market position and what it’s doing with the cloud?

Larry Dignan: It’s going to… their cloud position is going to be pretty strong. I mean, assuming they can keep their customers, which is the big assumption really. Because a software company doesn’t really want to get into a game of churn, and once a CIO or someone else bets on a platform, chances are they’re staying on for a while. So, as long as Oracle can migrate its customers, I think the trick is kind of balancing the cash cow that is support and maintenance with new licences, with a cloud subscription model. And that’s going to be a tricky act, but Oracle, the last few earnings conference calls, they’ve been able to gloss over some of their financial issues, missing revenue or whatever, by talking about the cloud growth and the potential there. So, as long as they can do that and Wall Street is willing to buy it, then it’s all good as far as transition goes.

Mike Fauscette: Well, you know, true. The transition when we talk about licence growth or perpetual license growth, it has to at some point start to see a decline there, because it is a shift. You know I think that makes sense, it’s just that you’re right, things are going to be really challenging with the Street, I think. You know, the other thing I wondered about when you look at their movement now to areas that have changed and people buy...maybe that supports the transition better I don’t know… but in the app space, it’s just rare today to see a company rip out everything and put a bunch of new stuff in it. They kind of go piece by piece, by piece, by piece. And then not always piece by piece from the same vendor. So it’s kind of a different mix now with integration being just as important really in a lot ways. Integration from cloud back to cloud, to on-premises-type apps. So you have to be more open, and I always wondered about that. Do you think they’re open in that integration world to coexist in that. And I’m really not sure.

Louis Columbus: I think that’s an excellent point. I think also looking at the fact that so many people, so many applications and companies are dependent on PL and SQL integration, in the stored procedure layer of many apps off the Oracle databases, it’s very difficult to move off of that. And, what they’re talking about with regard to 12c in the platform layer, you know, it’s a build out strategy to move eventually into the cloud and as many people have said, this cloud strategy is another approach to being able to migrate database workloads proactively, reliably, and securely, under their control into a cloud environment. And, you have to stop and think: do they do this as a competitive blocking move against AWS, picking up more workload?

And you know, I think that there’s a truth between there. I think there’s a nuance, I don’t think there’s an absolute definition, and I think the definition is it’s still a Red Stack. A Red Stack is in the cloud, and they have control over those workloads. And I think in the moving of those workloads into the cloud, and how they manage VMware pricing and VM pricing, it is going to determine the success or failure of this initiative.

Michael Krigsman: What about the role of the suite in all of this? Because the cloud is, of course, the underpinning, but from a software strategy, Oracle is very heavily invested in this notion of a suite of products that work together across a very wide range, right? HCM, Human Capital Management, RP, customer experience, supply chain; what about that aspect of it? Larry, what do you think about the suite?

Larry Dignan: You know, anyone who’s heard SAP CEO McDermott talk at all, you know, he always says the suite always wins. As you see the cloud develop, every vendor’s running towards a suite of some sort, right? So, certainly the cloud, since APIs are the glue for everything, certainly things can be mixed and matched better. But certainly the whole industry thinks there’s going to be a suite of things. I mean, when you look at Workday, it’s HCM to financials, obviously SAP and Oracle, they all have cloud extensions to their on-prem. suites. You look at what Salesforce is doing, I think I referred to it a year ago, it’s sort of like a relationship operating system where they take your CRM data but then they’re extending it out to other things, whether it’s analytics, IoT, other areas. So, you know Salesforce isn’t building what we know as a “traditional” ERP suite, but they’re certainly building a suite of some sort.

So, I don’t know if the suite’s always going to win for the customer, but my guess is vendors are kind of forcing you into suites anyway, and the challenge is - the challenge for these vendors is can they develop suites where they are better...good enough in all areas. So, you know, is Oracle’s HCM good enough to convince a customer not to go with Workday, or etc.? You know, I kind of look at history here, when you look at Oracle vs. SAP and enterprise applications, you can almost count on one hand how much one of them coached the other one’s customer. So, in the cloud I think a lot of these guys, I think, are going to have a lot of joint customers, but, there’s going to be some semblance of suite everywhere. And that’s just the way they’re playing it. So I don’t know if customers are really going to not go that way, because the volume discounts and deals are all going to be skewed towards favoring suites.

Michael Krigsman: But Mike Fauscette, isn’t it for the customer, the argument is that it’s just much easier to have a suite. You have one footprint, a common application, you’re with one vendor, it’s a fair argument, isn’t it?

Mike Fauscette: It’s a fair argument, but I think Larry, one of the things you’ve said, that really, it’s the vendor’s choice. The vendor wants you to move to a suite. Of course they do, because they sell you more things, they lock in more, they own that relationship more, the less likely you are to go over to someone else. But I think you’ve got to get buying patterns lately too. And you know, we talk mid-market? It’s suite, there’s no question. You know, if I’m a mid-market company and I go to look for something, I’m looking for a simple product to get access to operate layout, everything I want in one place, fine.

But if I’m in the enterprise today, the IT organization, the architecture, the way that they’ve looked at things for a while, it’s just complicated. It’s hybrid, and it’s going to be hybrid for a long time because they have some things aren’t going to move for now, some things they didn’t think they could move but they had to move, and then they have marketing going on with a credit card, and finding new solutions and line of business strategy, a bunch of different decisions around functionality. And, so I think if you start to look at the shops of larger companies, you realize that they already are multi-vendor and probably, even to rationalize that and get it under control, it’s just not a set up for a suite, for a long time.

It doesn’t mean that they don’t have core applications that they use from one vendor to another, but they have all of these other things that hang off of it. They’re specialty, they’re digital marketing, they’re whatever. And they’re not in the suite, and they’re not going to convince the line of business to go that way that they want, because they want the best that they can get out of that activity.

Larry Dignan: Yeah, I think you might see a case where you will have, maybe three suites. I mean, if you think of all the applications, it might wind up in pods. Like, you’ll have your financial suite that’s attached to, maybe, HR. And then you’ll have your Data as a Service slash marketing, and then you’ll… So you might have a trio of vendors at one level of the stack, and they’ll have to play well together, which is kind of what you’re seeing. You’re seeing this a lot with partnerships. If I could see all the collaboration players playing together, whether it’s Cisco or IBM, all of these guys are working to get along and integrate their things. So, I think people recognize it, but the vendor can’t resist going forward with some semblance of suite play.

Mike Fauscette: No, I mean, like I said, it’s better for them, there’s no question. But I think …

Michael Krigsman: Well, it looks like we just lost Mike Fauscette. Louis, what do you think about this suite argument?

Louis Columbus: Well, I think that Larry and Michael brought up some great points in that clearly, vendors

want to move in this direction and also from a system of record  perspective. And, on the “pro” side of the suite, it’s what I’m starting to see with a lot of our customers in distribution, they want one single system of record to drive analytics and intelligence off of, and Oracle’s data cloud, and there are adaptive, intelligent apps that they talk about in Oracle world. You know, there’s potential there to bring a level of intelligence and intelligent agent technology, which is going to be a huge deal at Dreamforce next week, I’m sure, with Einstein and everything else going on there. It’s in building that system of record that the suite argument becomes more relevant, because you have contextual intelligence, and now you have a shot at delivering an excellent multi-channel experience, getting complete visibility up and down a overall sales funnel. The sell-side implications of a suite are tremendous.

That said, now counter to that. Look at people like Hubspot, people like, you know, startups in the cloud space. Now, I’m a big fan of CrunchBase data, and you have to look at the overhang on marketing analytics, marketing automation, you know, Internet of Things. There’s a tremendous overhang of VC money out there right now that is betting on the suite not being real. And I think the bets on the suite not being real are exemplified by companies like Site Machine, that do in-depth apps, big data analytics into core verticals. See, these slices of high-growth potential like Site Machine’s doing, and others, I think explain, first of all, why there is an overhang in VC right now and intelligent agent, artificially intelligent analytics, because some of these niches are so granular, that it’s just difficult for someone like Oracle to get to

I think for the broad stream of CIOs that have successfully passed an Oracle audit, or dodged an Oracle audit, the opportunity to be able to be able to build that out and have a contiguous platform is quite alluring. If you’re competing against Oracle in a suite deal, they’re going to bundle, they will beat you, and they will beat you on bundling, and that is the strength of having a suite strategy, and you can go ahead and absolutely crush a competitor in that area, and then the competitor has to, you know, the startup or the investor breed company has to rise to the occasion and deliver greater value and a deeper app. And in that tension is great innovation. So I don’t think it’s a clear-cut answer, but I think it’s a healthy competition that brings great innovation from these smaller companies, and it challenges them to improve to compete against Oracle in deals. On the same side, if you’re on Oracle’s side, you could bundle and just blow through deals. And, you know, you could really dominate in a customer if you choose to.

Michael Krigsman: But isn’t that the argument that explicitly says, “This is what customers want.” You’re making the argument: you can bundle these deals, and customers will buy it. That’s the demand argument, right there.

Louis Columbus: Yeah. It’s the issue of “good enough”. It’s the issue of “is that app good enough” or is HCM, Oracle HCM which is growing by leaps and bounds, as well as SCM and ERP from everybody that I’ve talked to, SCM and ERP on the cloud is doing incredibly well, and leading a lot of opportunities for them. The issue is, is it good enough, does it meet the core requirements? Or does someone need to...does a company need to draw down, or by “draw down”, by the heterogeneity of these apps, think of the typical company’s marketing stack - marketing technology stack - Scott Brinker: genius in this space. And, you know, a typical company over 150-200 million dollars will have 40-50 vendors in the marketing technology stack alone. So, that, I think, exemplifies what I mean by very unique, very differentiated needs maybe outside the scope of what Oracle could do. But if you’re in a core vertical that Oracle excels at, and they have that suite, then yes, that means they will win, and they have the economics to make it win. It’s just a matter of, “Is it aligned, and does it exceed the expectations of this customer far enough where the suite makes sense?”

Larry Dignan: Two points on that. One, just a startup comment on the VC overhang: I think the reason for that is the VCs and those startups, they’re looking to be bought. So, the exit strategy isn’t necessarily “grow up”, it’s possibly “become part of this.” And, you know, that’s how they get acquired. And, you know, the whole suite argument and a lot of what Louis talks about really comes down to who’s making that buying call. CIOs, CFOs for ages, they do skew towards that “one throat to choke” thing. You know, if it’s an HR person’s call, maybe Oracle doesn’t get that deal, or SAP, maybe they want to go another way. And, you know, when you look at Salesforce. Salesforce’s attraction to the enterprise didn’t come from CIOs, it came from marketing people, and salespeople. So, what remains to be seen for me is the line of business people believing in the suite, and that’s kind of what it comes down to, right? And alright, there’s probably some CFO going, “Alright, well this is crazy expensive,” or whatever. But, that remains to be seen because I don’t think line of business people have been exposed to the suite thing nearly as much as tech-bred CXOs.

Mike Fauscette: Well I think a lot of it is that it’s not that advantageous to a line of business person either. They’re trying to solve a specific problem, and do they really care how it fits into the broader suite? I just don’t think they do.

Michael Krigsman: So the advantage is at the enterprise level.

Larry Dignan: Yeah, the advantage is at a high level. If you’re just in charge of that one unit, you want that unit to play well with others. But at the end of the day, you’ve got your own P&L, you have your own goals, you’re playing for a silo.

Mike Fauscette: That solves your problem.

Michael Krigsman: Let’s talk about Oracle. One of the interesting things was at OpenWorld, how they really leaned heavily on their competition with Workday, and pretty much just dismissed SAP as a contender at all. So what’s that about?

Louis Columbus: I think it’s a total available market issue. I mean, to your point earlier, these are very, very sharp people and of course, Larry knows exactly what he’s doing. The total available market of Workday is 10x what our salesforce is right now. So, it’s a very attractive target, and positioning against them relative to SAP is completely understandable. I mean, SAP clearly has a strong ERP base, has done fine with a variety of its acquisitions, however, it’s not nearly as attractive as a cloud-based company making headway in a market with a 10x market-sized multiple than other competitors that have gone down the path. So really, he’s signaling, “There’s a total available market pool, this is a great profit pool and I want a part of it.” I think that’s what he’s really saying.

Michael Krigsman: So the point here...go ahead Mike, I’m sorry...Did we lose Mike Fauscette again?

Larry Dignan: Well, there goes the WiFi.

Michael Krigsman: Yeah, well, Mike is on WiFi. So Louis, then, but going back again to this competitive issue, they’re saying that the Workday-addressable market is better than the SAP-addressable market? I mean, is that the point or am I missing something?

Louis Columbus: It shows potential for growth, whereas the SAP market doesn’t. I don’t think that Larry wants to take a high profile event and go into the trenches of how they win and lose deals every day against SAP on their core business, core functionality around ERP. I mean, that’s probably where they face a majority of competition. SAP’s efforts into the cloud had been sometimes strong, sometimes weak. They’re not a poster child of exceptional cloud competitiveness and strength. He’s further ahead, looking at Workday and saying, “How do I position against HCM there?” That’s a growing market. The total available market is much larger; the compound annual growth rate is greater. They’re dealing with customers who believe in the cloud at the enterprise level, to Larry’s point that the CIO believes that. And, I think, to Larry’s point, the heterogeneity of technology stacks is driven by the decision-makers: CMO, Chief of Marketing, is going to go, “That is a great analytical tool, I’m going to need that to be able to manage my pipeline or to quantify my value as a business unit,” relative to the CIO saying, “I need a business consistency.”

Yeah, and back to your point: I think that that’s what’s going on. I think that’s just a prime base. It’s an enterprise that believes in the cloud, it can go to hundreds and thousands of seeds easily, plays exactly to where he wants to go with his revenue model.

Larry Dignan: The other thing here is, don’t forget the narrative, right? These conferences are about a narrative. They always are. So, you know, the narrative for Oracle, “It’s cloud,” they’re innovating. Two words, that’s what they’re trying to project. So, if you come out and you start yappin’ about SAP, well, it’s like reading a sports story from ten years ago. We’ve all heard it over and over again, right? You know how it’s turned out, how it will turn out, whatever. But it’s an old story. And that’s why you see Larry Ellison going off about AWS, right? Because Workday arguments get a little tired, right? I mean, I see Workday, Oracle, I’m thinking apples and oranges. I mean, they compete in the same space in HCM, and ultimately financials, but it’s a different kind of company that they go after.

Michael Krigsman: But Louis has a really interesting point though, and it’s all about going into the future, because, you know, Oracle right now is not investing heavily in new features with it’s on-premise product. It’s not talking about the on-premise products very much, it’s all about “We’re going into the cloud.” I mean, Oracle’s cloud revenue, it’s almost a billion dollars…it’s a run rate of about 4 billion dollars, which is a lot of money on the one hand, but for Oracle, it represents a small part of their business. But it is all about looking forward.

Mike Fauscette: But I think that supports the idea of its position as much as it is anything else. It is in fact the right opponent at the right time, and the story against SAP, you’re right. It’s over. So I want to tell an exciting new story that sets me in the markets, in the focus, in the way I want to be seen. And that perception shapes a lot of people’s reality.

Michael Krigsman: So the narrative, as Larry Dignan was saying.

Mike Fauscette: [inaudible]

Michael Krigsman: Ok. So what about, so we’ve spoken about the apps side. You know, actually, before I was going to say we should go to the infrastructure, but there is one other piece that’s very important, which are these intelligent apps - basically, AI apps, and also their new data clouds. So, thoughts from anybody on that before we go on to the infrastructure?

Larry Dignan: So, AI is basically becoming the new cloud. It’s a term everyone and their mom’s going to use, and it’s becoming fairly meaningless. Give it another six months, and I’ll be totally AI’d out.

Michael Krigsman: I was thinking it was like digital transformation. It’s like digital transformation, the way it was say, two years ago.

Larry Dignan: And if I hear one more cartoon character tied to AI, whether it’s Cortana, Alexa, Siri, on and on, Einstein, for the love of God, right? It’s just, the marketing terms, Watson, Watson’s the frontrunner of this whole thing, it’s just going to be played out. And to me, the best AI, the most effective AI is AI you don’t see, right? It just kind of works. So the fact that we’re talking about, “Our apps are going to be intelligent!” You know, a lot of people are going to be saying, “Weren’t you supposed to be intelligent when you pitched me this stuff a decade ago?”

Mike Fauscette: You definitely were. But were they, is the question.

Larry Dignan: Yeah. You know, the whole AI, intelligent apps, AI-powered apps, I don’t know, if I was a big tech buyer I’d be a little pissed right now because you sold me some dumbass apps ten years ago! [Laughter] So, I don’t know, I’m not feeling so great about it. But, you know, I think a lot of it’s going to be marketing, a lot of it’s going to be you know, it’ll be proof – use cases. But, I mean, the other thing with artificial intelligence is it’s hard to judge who has what going on, because they talk about what it can do, but you know, you’ve got a real life company, you’ve got their data, and the things that matter is what they actually do with that data to figure it out. And right now I’m seeing the vendors doing the exact same thing they always do, which is, “Here is this magic ball.” And you know, the actual analysis, insights,that’s all going to be very company-specific.

Michael Krigsman: But Larry, what about the Oracle data cloud, which they announced, which they claim is the largest global consumer dataset in the world, with 1,500 data providers, and 5 billion cross-channel consumer profiles. And that dataset is used as the feed into these new machine-learning based apps. So you combine that with the transactional data.

Larry Dignan: I think that’s the most promising thing Oracle has. But, you know, that was also acquired through BlueKai and a bunch of other purchases, right? And, you know, Salesforce probably has similar things on customer data that, you know, if you aggregate it. So I think there’s something to that. But I’m very wary of Data as a Service claims when they say we have every profile, partially because I’m in a bunch of profiles as a tech buyer, and I’ve gotten calls from Oracle, I’ve gotten calls from all sorts of vendors looking for people at CBS sports, which, you know I read CBS sports but I have to go back and tell them, you know, I play a tech decision-maker on TV. I have, I’ve got some buying influence, I’m sure if I yelled and screamed enough somebody might listen, but at the end of the day my tech buying influence is pretty minimal.

Michael Krigsman: Even though you do work for CBS.

Larry Dignan: Right, so maybe they’re just trying to find someone at CBS, but either way, they don’t listen to me when I say what to buy.

Michael Krigsman: So you’re not running the CBS datacenter.

Larry Dignan: Well, what I’m saying is, you run around saying, “I’ve got a zillion consumer profiles,” well, I’d rather hear, “I have two million kickass complete profiles, and I can read some of their minds.” That’s so much more valuable to me than the bulk numbers, right? Because, you know, eventually we have to start talking about data quality, and that’s where you… That said I think Oracle’s in a good position for Data as a Service, I think it’s a promising thing, and for somebody like Oracle, I think the best case scenario is to wind up something like Dun & Bradstreet, which you have to buy their data and their profiles to do any risk metric stuff that, if you’re running a credit check on somebody or anybody that takes money from somebody and has to do a background check, that’s D&B data for them. And so Oracle’s saying, that’s a nice model for them, that’s kind of what they’re looking at. And Salesforce will be there too. But, you know, when I hear this big things like, “Oh my database is bigger,” you know, I kind of question it because I know a lot of those profiles are utter bullshit just because I’m getting calls from people thinking I can actually buy software.

Mike Fauscette: So Michael, let me see if I can get this out. Let’s get back to AI for a second, there are a couple points I wanted to make. The first one is, I think you’re right, I think it could be Flavor of the Month, but the real opportunity? There is a real opportunity with adding intelligence in the app, and there are sort of two streams. There’s the Oracle stream, which has been really built around decision making and decision-systems, so can you make the app present things to you that help you do something, like make a decision. And the other stream is, can you make the app do something for you that you don’t have to now do? And that’s more that what Einstein and the platform that Salesforce is talking about. I think both area interesting, I think both do important things, and they use similar technology, but they’re focused on a different outcome.

Michael Krigsman: But part of it, though, at the end of the day, as Larry said earlier, both Salesforce and Oracle are trying to win the narrative wars around AI and the present. But all vendors are trying to win the narrative wars.

Mike Fauscette: Yes, they are. Well they are, but there’s a real advantage to what they’re doing for the customer, and I also think Larry’s point about AI is best when it disappears, that’s correct. I want it to do things that I don’t have to think about. It will save time, it will help people work more efficiently better, help make better decisions, all those things. But it has to start to blend into the application, and eventually you should start to expect that the application works that way.

Michael Krigsman: So in a way, it becomes like what you’re describing. It becomes, like, social collaboration features where 4-5 years ago, social collaboration was this separate app almost siloed. And now, all of the vendors are building, intertwining social collaboration right into the heart of what they do, so as you’re working on a spreadsheet; I mean, Workday showed this; you can call up your neighbor, you colleague, and collaborate right then and there on that Spreadsheet, on that cell, on that moment in time. And then the collaboration feature goes away into the background.

Mike Fauscette: Well, that’s correct in some cases. What you just described is that there are certain things that have to just fall down into the platform, and have to be available inside every application. Collaboration? That’s one of those. I don’t want to do it outside my workflow, I want to do it when I’m trying to do something and work together with you, or whoever. The same thing with analytics; I want the ability to look at some data to use to make a decision, in context, inside the platform. And it’s the same thing with AI when it gets to the point where there are just functions that humans shouldn’t have to do inside the application. Why get all the trials scheduled for a project when I can just have AI do it, and I just approve it, for example? There are a lot of those activities that could be handled with AI that would make it a much better application.

Michael Krigsman: Gentlemen, we have ten minutes left, and we need to talk about infrastructure: Platform as a Service, and Infrastructure as a Service, because a key part of OpenWorld this time around, was the focus on the competition with AWS, with Amazon. So Louis, do you want to share some thoughts on this infrastructure strategy, which was so prevalent, so powerful at OpenWorld?

Louis Columbus: You know, I think we covered over some parts of this earlier, and one of the key elements of this, what it all boils down to, from a purely Oracle-centric perspective, is moving database workloads into the cloud as fast as possible. So when you look at things like RDBMS r2, and capturing workloads back from AWS on that alone, Oracle RDBMS r2, that’s something that definitely, it’s got to be a high priority for them to be able to capitalize on it, because AWS has got so much of those workloads already.

And then also, coming back from the pure workload perspective, and the economics of that, if we talked about bare metal, Ravello, container Cloud services, the ability to innovate; I think there’s two really critical pivot points for them on this whole infrastructure strategy. First of all, can they innovate at the speed of Amazon? Arguably, yes. Oracle is a powerhouse Silicon engineering center company. So yeah, could they match them on pure patent production? Sure. And there are plenty of engineers there who would love to rack up a hundred patents in their career by going after Amazon. So that’s a pretty compelling value proposition.

The issue with this is, can the culture of Oracle engineering sustain the kind of culture that Amazon has right now in terms of a market leadership position and the way that engineers get their work at Amazon. So, can they pace on innovation? Sure. I mean, they’ve got to win a patent war somewhere, they’ve got to rack up a couple hundred patents really fast, and Oracle has the ability to do that.

Can they match the cadence of price cuts of Amazon? That’s a completely different story because while they do have that great revenue stream coming off their database business, matching the cadence of the price cuts of Amazon? Really hard to do, and stay profitable and still grow; and balance that: balance that, with apps that make money. So you’ve got this triad of factors that they have to keep in balance: drive a profitable applications business as they transition to cloud, be able to deal with the cadence of innovation of a competitor that has attracted world class engineers daily, and then third, being able to deal with the touring pace of price reduction. So yeah, it can be done. But will it be done in the short term? Probably not.

These are things that they have to start thinking about, and Amazon’s way ahead of them in terms of thinking about Brexit, for example. Brexit is a prime opportunity for Amazon to capitalize on the inherent instability in an economic system to be able to bring the stability of cloud platforms. That’s one aspect. The other aspect is the development of the community around Amazon. So, you know, these are all the factors that go into it. It’s going to be a tough one, but I think they’re after the RDBMS r2 business, capture that, lock that down, turn that red again, and it will all be good. At least they’ll have that revenue.

Michael Krigsman: You know, I did speak with Steve Miranda, who is responsible for the development of apps at Oracle, and I asked him this point that you raised. One of your points was essentially around the culture of development. And development in a cloud environment is very different than on an on-premise environment. You’re doing much faster releases, and a bunch of other things. And Steve said to me they have changed, and they still are changing their development culture. And they’ll get there; if they’re not perfectly there today, you know, that’s a matter of time they’ll do it, because they’re just investing very heavily there. But Larry Dignan, what about the question that Louis raised of the ability of Oracle to keep undercutting Amazon? They’re both very large companies, so what about that?

Larry Dignan: There are some things with Oracle’s AWS fascination that kind of boggle the mind a bit. A. just on margin, that Infrastructure as a Service business? It’s challenging, right? So my guess is, you know if you read Clay Christensen, you kind of see that slide where Toyota started down here, and the established players, in this case Detroit, kept moving up and up the stack, and then eventually the players at the bottom were also there too. I think that’s what this is about, because the biggest takeaway I had watching Ellison’s keynote is that yes, AWS must be taking database workloads from Oracle, otherwise Oracle will not be trying to punch them in the face. So, when they talk about their databases, their AWS databases not being as open, AWS being harder to move from, there may be some element of truth in that, but the bottom line is AWS made that stuff very easy to consume. And, that’s a hurdle.

And, the other hurdle here is just the companies come of things a different way, right? I mean AWS is what works because it’s still in that Amazon DNA, which is customer service; give the customer what they want, respond rapidly, rinse and repeat day after day after day. So, AWS’s innovation cadence and all that is not, “Hey, we want to lock you into a stack,” it’s “Hey, we want to give the customer what they’re asking for.” And it’s a materially different approach than what the enterprise software vendors have traditionally done, right? Or you would have large vendors saying, “Look, we’ve got to writ this now. We’ve got it right now, we’re nicer, we care about you, blah blah blah.” You’re not doing that at Amazon! So, yeah, they’re different animals. And to go out there, and you know for Oracle’s purposes, you want to look like a challenger to AWS because you want to look innovative and stuff, but deep down this isn’t much different than say, when Microsoft went after Google and Search, and Google tried to punch Microsoft in the mouth with Google Apps, right? It’s, “You want to attack my beachhead? I’m going to attack yours.” And that’s what it’s about. At the end of the day, it’s all about AWS taking database workloads. That’s the holy grail, because once you do that, then Oracle’s screwed.

Michael Krigsman: But doesn’t that mean that Oracle will do…this is now strategic, and obviously it is because of the Larry Ellison presentation at OpenWorld. So doesn’t that mean Oracle will do anything possible on a technical level, on a financial level, anything to … they’ve thrown down the gauntlet. They are pulling customers out of Amazon into Oracle?

Larry Dignan: Maybe. I mean, what the cloud gives you is probably, let’s get real, you’re probably going to be; and Oracle infrastructure is a service customer, and Amazon infrastructure is a service customer, you’re probably going to have Azure in there, and by the way you might have Google in there just for pricing momentum, right? And, we see this all the time in the cloud space. Google cloud has been doing this all year. They claimed this big win against AWS and you read the footnotes and you’re like, “Well, not quite. They gave Google some new business but it’s not quite, it’s not a rip and replace of AWS.” Right? So, I think from Oracle’s strategic point of view, they need the infrastructure piece because they need to sell you on the platforms and ultimately the applications, because that’s where the money is.

Michael Krigsman: So it’s the fuller scope, so it’s the infrastructure that’s the fuller scope of the suite.

Larry Dignan: Right. And Oracle can’t lose infrastructure because once you’re in AWS, you’re probably going to buy higher level services. And, there’s not question that AWS is moving up that stack, they’re moving up that value prop, and that’s showing up in database workloads. So, if all these databases run around and they have this serverless infrastructure, and all that, then … So the real race is, you’re going to be buying business functions in the future …[unintelligible] … and I don’t know if Oracle plays that game, or can.

Michael Krigsman: Guys, you know, unfortunately, as interesting as this conversation is, we’re unfortunately out of time, and I know Mike Fauscette has got to go on stage in a moment. And, I apologize for interrupting, but let’s go on for a moment, but we have to finish this out, and each of you, if you would, just offer final comments. Where is this going? What does it mean for CIOs, and maybe Mike Fauscette we can just start with you because I know you have to leave in a moment to go on stage.

Mike Fauscette: Sure. Big question and I’ll try to do a really short insert. So, company transition. They are really trying to do interesting things around applications, they are fighting some specific battles, they do have some products, some portfolio projects that are really good, they’re resonating, they’re doing well. But, we’re not moving to a world where one vendor’s going to own everything. It’s a world in the cloud where you’re going to have to see a lot of peaceful coexistence, you’re going to see a lot of openness. And it’s something they’re not quite… and no vendor from the old world to the new wants to accept that, but that’s just the world that the cloud is leading to.

Michael Krigsman: And, Larry Dignan, your final thoughts and advice for CIOs.

Larry Dignan: I mean, I think any tech buyer is going to play ball with Oracle. And if you’re an existing customer, trading up in the cloud might totally work well for you. You’re going to get bundled deals, and yeah, a CIOs got to look at Oracle just as they would any other vendor.

Michael Krigsman: And Louis Columbus, you’re going to get the final word here.

Louis Columbus: Ok, well I appreciate it. Well, my advice to CIOs is: use this ambition from Oracle to your advantage and push them to bundle in everything you possibly can. If you’re looking at a suite refresh, push for that. If you’re in an audit, threaten to leave and move your database loads to AWS and watch the audit probably drop. But you know, play hardball, because the ball’s in your court as a buyer now. Competition’s a beautiful thing, and competition brings out the best there is to offer, I think, from all these people. And I think you can look at beginning to reduce even maintenance fees, if you’re a CIO. And, in other words, Oracle’s hungry to build out this stack on the cloud, and use AWS pricing as a barometer in your negotiations with them. So, you’re in a buyer’s market. You’re in a great position, so make the most of it. And go cut a great deal with them.

Michael Krigsman: Yes there is a lot of competition out there right now, but for sure, Oracle is a contenter.

Louis Columbus: Oh yeah. Definitely.

Michael Krigsman: I mean, they have 4 billion dollar run rate in the cloud, their cloud business through cloud apps, or maybe it’s their entire cloud business, grew 82% in the first quarter, but there are a lot of other competitors out there as well.

Louis Columbus: Definitely, including Mongo DB and all of these other open-source databases. So use it to your advantage. I mean, if you’re going to go all open-stack, you know, be a good negotiator and go after it.

Michael Krigsman: Ok. Well, you have been watching Episode 194 of CXOTalk, and we’ve been talking about Oracle and Oracle OpenWorld, and what’s happening in this part of technology. Our amazing guests today have been Larry Dignan, who is the Editor in Chief of ZDNet, and Louis Columbus. Louis, what is your exact title?

Louis Columbus: I’m the Director of Global Platform Management and Cloud Services at Ingram, and I run development of cloud apps on our APS, Odin, and Inset Platforms.

Michael Krigsman: And Mike Fauscette, what is your exact title?

Mike Fauscette: It’s Chief Research Officer for G2 Crowd.

Michael Krigsman: Chief Research Officer at G2 Crowd, you were breaking up. Don’t you love technology? I’m Michael Krigsman, thank you so much for watching today, and we will have another show tomorrow with the CIO of Dylan’s Candy Bar. And that’s going to be a lot of fun. So join us again, tomorrow on CXOTalk, and that will be at 3 o’clock Eastern Time, for Episode 195. Thanks so much everybody, bye-bye.