A Big Week for Oracle – Ellison Yet Again Proves He’s a Master Strategist

So… What to make of all this. In the space of a week we have Oracle announcing deep partnerships with Microsoft, NetSuite and Salesforce. In the case of NetSuite and Salesforce the deal sees those two cloud vendors commit to long term hardware choices based on Oracle kit. Salesforce also commits to using Oracle’s OS, HCM and financial products internally. NetSuite is connecting the Oracle HCM products to NetSuite’s cloud ERP. Microsoft adds support for Oracle customers to run on Azure.

Seemingly all three of these companies, serious vendors in their own rights, have decided that Oracle is the one true vendor to partner with. This a distinct departure from only a couple of years ago when Oracle’s Ellison and Salesforce’s Benioff had a very public argument over their respective companies – both suggesting that the other’s offerings were in no way a “true cloud”.

There are so many layers to this, let’s pick them apart a little.

Salesforce and Oracle

Despite the fact that Benioff learned everything he knows from Ellison, the fact is that these two vendors have been on a collision course for years. Benioff has held the moral high ground in terms of articulating a vision for the cloud, while Ellison has resorted to continual FUD. Benioff’s comments about “true cloud” running on commodity hardware and not heavily proprietary kit like Exadata now sounds like nothing short of hypocrisy. It’s also a little surprising that Salesforce, a company with some logical affinity with Workday, would jump on board and push an Oracle HR suite – it’s going to be a very difficult story to sell to its customers – I sympathize with my PR friends at Salesforce looking for ways to spin this in a positive light.

For Oracle the tie up is logical – while Ellison has denounced Salesforce and the cloud generally, no one really believes that his hype is little more than posturing, and with this move the company gets to look like a credible cloud player creating a strong and vibrant ecosystem around itself.

But for Salesforce – hell, even if Larry had offered to give the kit to Marc for free, there is just such an incredible amount of reputational risk here that it’s a dumb move. While both these guys are master strategists, there are just so many people – analysts, customers and even staff themselves – scratching their heads over this that it seems a silly move.

Add to all of that the fact that Dell is a massive Salesforce customer, and the poster child for the use of Chatter within a large enterprise – and you’ve got some serious PR work to be done behind the scenes. As to Salesforce’s rumored development of PostgreSQL and the chance it could mean Salesforce could move off its reliance on Oracle’s Database technology – that seems to have dissipated into thin air.

NetSuite and Oracle

This one makes a little more sense. NetSuite already talks strongly of a two tier ERP strategy and Oracle are the logical partner for that since the company has long been scathing of all that SAP does. Add to that the fact that Ellison owns a significant chunk of the company and there is a logical fit here. Of course the partnership at this stage only covers the Oracle HR suite, the company obviously isn’t ready to publicly endorse a two tier ERP approach but I expect this will come soon enough.

Microsoft and Oracle

A more cynical soul would say that this tie up is a case of two elderly souls getting together two remind each other of their exciting youth. While Azure is (slowly) starting to look like a credible alternative, and Oracle is finally removing its head from the sand about the validity of the cloud, both companies are being left behind my others – this partnership sees them pool resources to tell a boarder story and, at its simplest, surely there are Oracle customers who want to run their software on Azure. It does seem to open up a licensing nightmare – but at the end of the day this is more about marketing posturing than it is hard technology requirements.

Elison the Master Strategist

I don’t know what all of this cost Oracle – At face value Salesforce is a big credibility loser form the deal and hence needed some serious benefits to sign up. Many suggest this comes by way of massive discounts, but there has to be more than that, some would suggest even getting kit for free wouldn’t be enough for Salesforce to agree to this partnership. In the case of NetSuite, this is probably a neutral deal – they get another public anointing by Oracle, likely get some nice discounts on kit and most importantly, haven’t got a historical position viz Oracle that they now need to modify.  Lastly in the case of Microsoft this is broadly neutral, the company doesn’t lost anything – it’ll likely not make the gains it thinks it will but since when did large legacy vendors derive the benefits they thought they would from partnerships.

No the real winner in all of this is Oracle – in one fell swoop they have created a vibrant story around cloud ecosystems, have gained themselves a massively higher level of credibility for their cloud story, and have managed to sideline a third party that some believe is a real threat. Many people are suggesting that all these moves are largely fuelled by some widespread panic within Oracle at the threat that Workday raises. Workday seems to be doing everything right and it’s HR suite of products seem to really be resonating with customers.

Summary

Actions speak louder than words. In so many ways. This deal has shown that the “real cloud” vendors are prepared to forego their moral high ground for commercial deals that are attractive. As someone who has been following the space for a long time it’s frankly a little distressing to see companies like Salesforce and NetSuite fold to arrangements such as this. True they mean very little in real terms, but they mean a lot for those who would have liked to believe in the new guard severing the grip of the old. We now have a new guard that seemingly wants to do everything it can to help the legacy vendors survive.

For Oracle it is a master stroke, Ellison has proven, once again that he’s more Machiavellian than Machiavelli and understands the Art of War better than Sun Tzu did – no matter how one feels about oracle, one has to bow to Ellison’s incredible master stroke.

In two years time we’ll be looking back and chuckling, likely because these partnerships will have amounted to nothing – but for now… it’s a fairly bitter series of pills to swallow.

4 Comments
  • much ado about nothing??

  • I’m not sure moral high ground turns you in to a 10, 20, $50bn business? the real money is in oracles client base for SFDC this will probably be viewed as a credible move by them. And like you say it’s mostly just bluster.

  • Ben,

    I think that you’ve captured the essence from Oracle maneuvers. Yet, I wonder whether this is a set of holding alliances designed to distract cloud frenemies until Oracle unleashes the next salvo.
    The interesting aspect to this rash of announcements is the perceived impact of these announcements irrespective of substance. Or, the reality of how these agreements are implemented. (Remember ‘Duet’, for example.)
    It’s also interesting how ‘big marketing’ noise can still shake up the market in this social media world where brands (generally) don’t own their brand. If Oracle is not able to sustain the glow from these agreements, it could be a new ‘only the paranoid survive’ inflection points.

  • It does seem like an odd move by Salesforce, yet given Benioff’s track record so far I wouldn’t be surprised if there was a good reason for it and he’s got something hidden up his sleeve. Definitely going to be interesting watching this all pan out!

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