While software as a service was the driving force behind Oracle’s Q4 revenue and earnings growth, Oracle Executive Chairman and Chief Technology Officer Larry Ellison said during an earnings call with analysts that he expects Oracle’s two other cloud pillars—platform as a service and infrastructure as a service—will become even more powerful growth engines for Oracle than SaaS.
To illustrate his point, Ellison cited the recent agreement AT&T signed with Oracle to move petabytes worth of data currently running on Oracle databases, as well as the associated applications also running on premises, to Oracle Cloud. Oracle’s PaaS and IaaS fourth-quarter revenue rose 40% to $397 million in Q4, compared with the prior-year fourth quarter, reaching $1.4 billion for fiscal year 2017, which ended May 31.
SaaS revenue grew 67% in the fourth quarter to $964 million, reaching $3.2 billion for the fiscal year, thanks in large part, Ellison said, to its cloud-based application suites for ERP, HCM, and CRM.
Impressive as that SaaS growth is, Ellison believes the future of IaaS and PaaS will be even brighter. “As our customers begin to migrate their millions of Oracle databases to Generation 2 of Oracle Public Cloud, the AT&T deal is just the beginning,” Ellison said. “We expect that our Oracle PaaS and IaaS businesses will grow so fast that they will be even bigger than our SaaS business.”
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For the 2017 fiscal year, Oracle’s total cloud revenue rose 60% to $4.6 billion, and its fourth-quarter growth rate makes Oracle “clearly the fastest-growing cloud company at scale,” said CEO Mark Hurd. Oracle’s total revenues rose 2% to $37.7 billion for the fiscal year, with operating income of $12.7 billion.
Here are four points that Oracle’s executives shared on the conference call discussing financial results that shed more light on Oracle’s cloud performance.
1. In SaaS, Oracle added 1,575 new customers in the fourth quarter, most of whom had not been Oracle application customers before.
Since organizations can run Oracle SaaS applications without a large IT staff or data center, midsize companies and public-sector agencies who in the past might not have considered Oracle on-premises applications are jumping onto Oracle’s cloud applications. Large multinational companies also have implemented Oracle SaaS apps.
In ERP, the largest SaaS segment, Oracle added 868 new customers (not including new NetSuite customers), about two-thirds of whom had not been Oracle app customers. Gartner recently named Oracle a “leader” in the cloud ERP segment. Rival Salesforce.com doesn’t have an offering in the ERP or HCM segments, Ellison noted, which is why he said Oracle is “well on our way” to overtaking Salesforce’s SaaS revenue and “becoming number one in the enterprise SaaS market.”
2. In PaaS and IaaS, organizations are looking to move their databases to the cloud.
IT organizations that want to run an Oracle database in the cloud have a choice. They can take a licensed database and lift-and-shift it onto IaaS (run either by Oracle or another cloud provider), or they can tap Oracle’s database as a service, which includes the database plus infrastructure, plus the operation of that stack.
Oracle saw rising database revenue as customers embrace both models. Oracle’s database-as-a-service revenue was up and Oracle’s database business also grew in total, counting both database as a service and its on-premises licenses and support.
Speaking of Oracle’s cloud transition, Hurd said: “We love what we see in the applications business so far, and I think you’re at the beginning of seeing it in the database business as well.”
3. Oracle’s unique Cloud at Customer offering gained traction.
Oracle customers subscribed to more than 100 Oracle Cloud Machines in Q4, Hurd noted. With this Cloud at Customer model, Oracle does everything it typically would to run a cloud service—manage, patch, upgrade, and secure the hardware and software—and the customer pays based on usage or subscription, as they would for a typical cloud service. The difference is that the machine physically resides in the customer’s data center, behind its firewall, which appeals to organizations that need to keep data on premises because of regulatory or other concerns.
4. The AT&T deal shows how big, vital Oracle databases can move to the cloud to reap operating advantages.
Oracle’s executives noted a long-term agreement by AT&T to migrate thousands of its existing Oracle databases and related application workloads to run in Oracle Cloud, tapping Oracle platform-, infrastructure-, and software-as-a-service offerings.
CEO Safra Catz said the deal showed that when organizations with a large base of existing Oracle databases do research on the best cloud to run those workloads, they pick Oracle. “The folks who could go anywhere and do anything come to us,” Catz said, “and that’s the really important message.”
Given how many organizations rely on Oracle Database (it has the largest share of the database market), Oracle looks at the AT&T deal as a model for helping organizations move their workloads so they can reap the advantages of the cloud. “It is the opportunity for us to now do this for hundreds and thousands and tens of thousands of customers,” Hurd said.
Chris Murphy is Oracle Director of Cloud Content
