The cloud deal question that follows on from an Oracle audit

On 17 December 2019, the US District Court, Northern District of California, San Jose Division, dismissed the 2018 class action case brought by the City of Sunrise Firefighters’ Pension Fund against Oracle, which alleged securities fraud.

The pension fund has until February 17, to provide a list of people with written statements that back up its claim.

On the one hand, the case is a win for Oracle. But, in many ways, the evidence presented by a confidential witness, is a bit of an own goal. According to court papers posted on CaseText, the witness, a regional sales manager for Oracle, reported that he (and other sales teams) discussed their “audit-driven cloud deals.”

It is something IT buyers should be mindful of, whenever they receive a call from Oracle sales.

Oracle as a cloud services provider

During the earnings call for the company’s Q2 2020 results, CEO Safra Catz stated that total cloud services and license support revenues for the quarter were $6.8 billion, up 3%. Catz said these revenue streams accounted for over 70% of total company revenues.

Has Oracle, the top database company, moved its customers to the cloud, and is now achieving record growth?

Gartner’s latest Magic Quadrant for cloud infrastructure describes Oracle as a “niche cloud platform”. In its report of the cloud infrastructure market, Gartner notes: “Oracle is mainly targeting customers who want to run Oracle software on cloud IaaS, particularly those who prefer to run on Exadata appliances and bare-metal servers.”

So it is no surprise, the company has combined maintenance contracts and cloud subscriptions in its latest financial reporting. And there is anecdotal evidence it is also actively encouraging its sales team to grow this revenue stream. “We are seeing, as part of any audit settlement, strong pressure to acquire some Oracle Cloud products,” Robin Fry, a solicitor and legal director of Cerno Professional Services, who specialises in helping clients deal with software audits, recently told Computer Weekly.

While Oracle may indeed succeed, in enticing customers to buy its cloud platform, a recent poll by The Itam Review has found that IT buyers are treating cloud deals like shelfware – and not bothering to use them. But unlike traditional software, cloud infrastructure requires on-going investments in datacentre capacity, funded by customer renewals. The question prospective Oracle cloud customers need to ask is: how long will Oracle continue to invest, if it remains a niche cloud services provider?

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