- As 2020 begins, experts say they expect Oracle to focus on making key changes to its top leadership and to fill the void left by CEO Mark Hurd's death.
- Hurd had played a key role in transforming Oracle's sales organization to make it more effective in the cloud market. Experts see the tech giant bringing in new leaders who could build on what he had accomplished.
- Oracle is expected to focus on acquisitions as a way of strengthening its position in the cloud. Experts also see the tech company opening up to more partnerships following last year's new alliances with Microsoft and VMware.
- "We need a kinder and gentler Oracle," VMware CIO Bask Iyer told Business Insider. "I would expect them to work with every cloud provider, every leading vendor. They have to coexist."
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Oracle kicks off the 2020s facing questions about how its top leadership could change and whether its cloud strategy could finally take off. The corporate giant will also be at center stage of a major tech showdown as Oracle's 10-year-old legal brawl with Google goes before the US Supreme Court.
The tech giant ended 2019 on a sad note with the death of CEO Mark Hurd, leaving Safra Catz as solo CEO with founder and Chief Technology Officer Larry Ellison playing a more prominent role. Hurd had played a critical role for Oracle's strategy and experts expect the tech giant to focus this year on filling the void he left, as it grapples with its biggest challenge: the cloud.
While Oracle is dominant in the traditional enterprise tech market, particularly for business software installed in in-house data centers, it has struggled against rivals in the cloud, the fast-growing market that lets businesses to set up networks and access applications on web-based platforms.
"To state the obvious, Oracle is undergoing a deep cloud transformation like all major incumbents in the industry," Christian Primeau, global CEO of Syntax, a cloud management services company that works with Oracle, Amazon and Microsoft, told Business Insider.
Caught in two battles
Jefferies analyst Brent Thill pointed to two key battlegrounds where Oracle is facing challenges.
"They are caught in the middle of two battles in infrastructure and applications, which is not a great position," he told Business Insider. "In infrastructure, Amazon, Google and Microsoft are cutting off the oxygen, and in apps other vendors are driving faster innovation like Salesforce, Adobe, Workday, among others."
Cloud infrastructure covers the basic components of a cloud platform, including access to servers and storage. Oracle is making a big push to be a major player in this space with Oracle Cloud Infrastructure (OCI), but many experts have been unimpressed with its efforts.
In fact, Oracle has reeled from criticism that it did not embrace the cloud fast enough.
"Oracle is so late to this, that they've really lost developer and IT mindshare to Amazon Web Services, Microsoft Azure, and Google," JMP Securities analyst Pat Walravens told Business Insider in a recent interview. "So looking forward, are they going to be able to get that mindshare back?"
Primeau said he thinks Oracle's cloud infrastructure will gain some traction this year, but said he doesn't see the tech giant's platform posing a serious challenge to the market leaders. "At this stage, it is really a 2-plus-1 leaders race: AWS and Azure plus Google," he said.
Strength in cloud software
Oracle is a strong player in cloud applications, a segment also referred to as software-as-a-service. Primeau said Oracle cloud-based financial products are particularly strong. "I see them continuing investing heavily and continue doing well with these very strategic product lines," he said.
But Oracle is hardly dominant in cloud applications, lagging Microsoft, which has 17% of the $72 billion market in 2018, and Salesforce, which had 13%, according to Gartner. Oracle was third with 6%.
Oracle is wrestling with a problem faced by other traditional enterprise software companies, like rivals IBM and SAP. These companies have made money by selling lucrative long-term contracts for business software, in which sales reps earned generous commissions on each contract.
The cloud is changing that.
Pioneer cloud software companies, such as Salesforce and Workday, embraced a system that lets businesses pay for software on a subscription basis, usually based on the number of users or the computing capacity they need or use.
"Selling motions to the cloud shift away from large deals to more frequent smaller deals," analyst Ray Wang of Constellation Research told Business Insider.
Sales organization revamp
For companies like Oracle, competing in the cloud era has meant revamping their sales organizations. That's why one of the changes Wang expects from Oracle is "a transformation of their sales and marketing teams."
In fact, Hurd had been Oracle's pointman in this transformation, and why his death was blow to the company, Walravens said. "He shifted that sales model pretty aggressively hiring a lot of people, you know, a lot of smart recent college graduates," he said.
Oracle has said it does not plan to appoint a new co-CEO but is looking to bring in new senior executives.
Wang speculated the Oracle is considering naming a new president, the post occupied by both Hurd and Catz before they were jointly promoted to CEO in 2014.
Walravens has said that Oracle should consider three experienced and prominent executives from successful cloud software companies: Todd McKinnon, CEO of Okta; Dan Springer, CEO of DocuSign, the e-signature company; and Rob Bernshteyn, CEO of Coupa, the business spend management company.
"Someone needs to rise up, either from the inside the company or someone needs to be grown groomed from outside the company to build the next layer of leadership," he said. "I think a great example is Salesforce."
He was referring to the recent leadership change at Salesforce, an Oracle rival, where Brett Taylor, who had been CEO of the work collaboration app Quip which the company bought in 2016. The well-regarded Taylor, who joined the Salesforce leadership after the acquisition, just got promoted to chief operating officer.
Primeau said he expects acquisitions to continue being part of Oracle's game plan for building a stronger presence saying, "I think Oracle is well positioned to take on strategic acquisitions."
Oracle is also gearing up for one of the biggest legal battles in tech in years.
The company is set to take on Google before the US Supreme Court over Oracle's claim that the search giant stole key code from its Java technology. Google rejects the charge, arguing that Oracle cannot copyright these types of code, known as application programming interfaces or APIs - a claim endorsed by other tech giants, including IBM and Microsoft.
Focus on alliances
But despite the high-profile legal brawl in which Oracle may find itself facing off with tech's other heavy hitters, the Redwood City, Calif. company is also expected to pursue what appeared to be a new strategy which became more evident last year: forging partnerships, including with one-time rivals.
In 2019, Oracle surprised many in the tech world by unveiling alliances with Microsoft, a major competitor, and VMware, an Oracle customer.
Primeau of Syntax said Oracle's partnership moves will definitely be worth watching. "Will we see Oracle opening up some of their core solutions to other hyperscalers?" he said, referring to companies that run massive cloud data centers. Referring to Oracle's cloud-based database offering, he added, "Will we see autonomous database running on [Microsoft] Azure?"
VMware, which has emerged as a major player in the cloud, offers software that makes it easier for customers to migrate to and operate in the cloud. But for years, Oracle has resisted supporting its products.
VMware CIO Bask Iyer said he was "very pleasantly surprised" by the alliance with Oracle which he said made so much sense for both tech giants. "This is a big partner ecosystem and the more you're collaborating the better it is for your customers," he told Business Insider. "They need to do more of that and they need to do it quicker."
He noted Oracle's reputation as a hard-nosed vendor who can be "very tough with customers." But he said that appears to be changing.
"We need a kinder and gentler Oracle," he said, adding that collaboration has become critical in enterprise tech. "It's not world dominance. You need to have constant innovation. I would expect them to work with every cloud provider, every leading vendor. They have to coexist."
"We want them to be wildly successful," Iyer said. "I would want as a customer for them to be successful."
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