Oracle CEO Ellison Changes Tack On Cloud Computing
June 24 2009 - 9:09AM
Dow Jones News
Oracle Corp. (ORCL) Chief Executive Larry Ellison appears to be
rethinking "cloud computing," saying his company was creeping into
the space just nine months after he mocked the business model.
Many software companies are embracing cloud computing, a broad
term for a shift towards paying for technology on a subscription
basis, storing information on large servers and accessing the data
via the Internet. But just last September, the outspoken Oracle CEO
described the trend as "gibberish" and expressed skepticism as to
whether companies could make a profit from cloud computing.
On Tuesday, Ellison appeared to change his tune. During a call
following Oracle's fourth-quarter results, Ellison said the
company's Fusion products - software that aims to tie together
technology from many of the Redwood City, Calif.-based company's
acquisitions - would be "on-demand ready," suggesting they would be
available on a pay-as-you-go basis. He added that a portion of
Oracle's revenue from Fusion products could come from subscriptions
in the future, rather than from one-off sales. Licenses to most
Oracle products have a one-time fee, but can be augmented with
maintenance and support, which would be charged separately.
The comment immediately provoked interest from analysts, one of
whom asked if Oracle was now getting into cloud computing. Ellison
admitted the company was getting "a little bit" into the space.
Ellison's remark underscores the recognition that cloud
computing will likely play an increasingly important role in
corporate computing. Companies like Salesforce.com Inc. (CRM) and
Netsuite Inc. (N) have begun offering software that they host on
their own servers and which customers access via the Internet.
Similarly, online retailer Amazon.com Inc. (AMZN), is allowing
companies to pay for computing power on a per usage basis. Those
products challenge incumbent software makers, many of which, like
Oracle, have been testing the water with some online products.
Oracle's chief executive indicated that he viewed such companies
as potential competition to his own software giant. In particular,
he referenced Salesforce.com, the largest company that makes only
on-demand software.
"We think we can be very competitive against Salesforce.com,"
Ellison said. "Virtually every time we compete with them on large
deals and with large customers we win and in some cases replace
them."
Ellison said Oracle had spotted a significant gap in the market
for on-demand products that Salesforce.com didn't currently
address. That's the market for software hosted and stored at a data
center owned by a customer but operated by a software firm, such as
Oracle.
"We think this is the interesting model, and that's the model
Salesforce.com doesn't offer," Ellison said.
Last September, Ellison told investors that cloud computing,
along with other related trends, such as software as a service,
were over-hyped and ill-defined buzzwords embraced by companies
mainly to market products. He said the computer industry was almost
as fashion-driven as the women's clothing industry.
"We'll make cloud computing announcements because if orange is
the new pink we will make orange clouds," he said, mocking spin
from some of his competitors.
San Francisco-based Salesforce.com, whose CEO Marc Benioff is a
former Oracle executive, has positioned its products as a
cost-effective alternative to those of Oracle and other large
software companies. Salesforce.com's annual revenues, of $1
billion, are dwarfed by Oracle's $23.5 billion, but the company has
shown strong revenue growth rates since it was founded at the
beginning of the decade.
-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455;
jessica.hodgson@dowjones.com