Computing world moves away from Oracle

Oracle's results aren't being hurt by a single competitor, but rather by the insects and microbes of the new cloud-based computing world.

By TheStreet Staff Sep 19, 2013 1:33PM

Oracle logoBy Dana Blankenhorn, TheStteet


For investors, the worst news can be news you don't hear. Oracle (ORCLmade that kind of news Wednesday, missing analyst revenue estimates for the fifth time in 10 quarters.

thestreet logo


It's getting to be a habit. It's getting to be such a habit it's not news anymore. When it's not news anymore investors may not hear that it's time to get out.


It's time to get out.


Oracle was the last company standing in the old client-server era. It bought Sun Microsystems, and it bought most of its competitors in the database space. The rest it seemed to crush. When CEO Larry Ellison hired Mark Hurd as co-president in 2010, it seemed he could put his full attention on transforming, and defending, sailing's America's Cup, which has become his passion.

What went wrong?


That didn't work out so well either. Despite transforming the rules and moving the races onto San Francisco Bay, it looks like rival Emirates Team New Zealand is going to take the prize away, perhaps as early as today, as the America's Cup Web site reports.

What went wrong? For Oracle, technology changed. Cloud computing -- masses of low-cost servers using virtual operating systems -- have proven themselves far more cost-effective than the architectures Oracle made its living on.


It's not so much the "cloud stack" as the result of building such a stack that's the problem for Oracle. When software becomes a service, when you can replace your whole IT department with something you buy like you buy electric power, and at a low, low price, that's compelling.

The company sells an "Oracle Cloud," based on its proprietary hardware and software, but many analysts have been calling that "faux cloud" since it doesn't deliver the full savings of cloud to customers, and I agree.

Oracle has long been known for having an iron grip on its customers, making the costs of switching away from its architecture appear prohibitive. But you don't have to switch to make an impact on Oracle's numbers. Just slow your upgrades, experiment with cloud, and don't grow your Oracle stack -- that's enough.

Ellison wasn't on the latest earnings call (the transcript of which is available at Nasdaq's Web site), but Hurd was relentlessly upbeat. He said competitors are doing worse, that the strong dollar hurt, and that some hardware gains are showing up on the support revenue line, meaning that they're understated.

A thousand little beasties


Asked to name competitors, Hurd mentioned IBM (IBM), SAP (SAP) and EMC (EMC). Then he mentioned, almost as an afterthought, (CRM) and Workday (WDAY), adding "albeit mostly in North America and mostly in one process." Then he said, "I could go down a slew of others in various product groups," he added, and that's the problem.

Oracle isn't being hurt by one big competitor it can buy out. It's being hit from all sides, by tiny cloud-based competitors, each taking little bits of its business away from it.

Customers are looking to save money, and when one of these small fry say they can do that for them, they go for it, maintaining their Oracle stack but gradually moving more and more work off it, often into off-site clouds, buying the software as a service.


Think of it as evolution in action. Oracle created a sort of "climax state" in networked computing, becoming its king of the forest, its T. Rex. But computing's equivalent to climate change has come to eliminate Oracle's sources of food.


That's the way evolution works. It's not always another big beast that gets you, sometimes it's a thousand little beasties that do it, the insects and microbes of the business world. 


At the time of publication, Blankenhorn owned shares of IBM


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Sep 19, 2013 2:51PM
Oracle has the same problem IBM has with their mainframe technology.  Anyone in tech will tell you that for pure processing, security, and stability; nothing touches IBM's mainframes.  The problem is, IBM has made licensing and support so ungodly expensive for MF technology that companies are moving to the distributed systems (virtual servers especially).

Oracle is the same way. Their software licensing and support contracts are too damned expensive.
Sep 19, 2013 3:53PM
Yet another article written by a guy that doesn't know what cloud is.  It is just a new word it isn't anything new.  Exactly how would you get rid of the IT department.  You still need an internal network. You still need internet.  You still need people to fix basic computer issues.  And of course, you still need people to write software.

It might be cheaper, but that is because the servers are all the way in China.  No company that has anything private would use that.  Plus picture the US having a feud with China and the government deciding to block internet access to US. Every company would be screwed, and China can do that.
Sep 19, 2013 4:06PM

Well I wouldn't put much faith in Hurd.

He pretty much put Digital Equipment Corp out of business by himself.

Yet got that bonus each year until the board threw him out for the next loser.


Sep 19, 2013 4:55PM
The biggest problem is Larry, the second problem is he hired a guy who was fired for inappropriate behavior at work. Larry thinks he's better than us, he's not. Qwerty is correct, the Cloud isn't anything new.
Sep 20, 2013 2:32PM
Don't misunderestimate Larry Ellison. Many have and lived to regret it.
Oct 3, 2013 4:09PM
Hmm nice OpEd but a tad shy on references I feel making the associations to the conclusion a bit thin. They are having some troubles I would agree. Yet any company on the top can almost only fall anywhere they look as its part and parcel with being on the top. They do seem to have trouble changing somewhat.
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