No one trusts Oracle, shrieks CCL as cloudy ball misses its goals

No one trusts Oracle, oh come on really? Yes. Aivars Lode avantce

No one trusts Oracle, shrieks CCL as cloudy ball misses its goals 

By | Gavin Clarke 6th January 2015 14:02 

If only they did as I want them to, sighs pressure group

Oracle’s cloud growth hinges on overcoming “deep-rooted mistrust” of its core customer base.

That’s according to software-licensing pressure group, the Campaign for Clear Licensing.

“If Oracle does not address these concerns then the company’s ability to meet its stated $1bn cloud sales target next year, together with the longer term outlook for its cloud computing business, will remain in doubt,” the group has written in an open letter to Oracle and its former chief executive Larry Ellison.

According to CCL press releases from last year, Oracle’s licensing practices are unclear and enforcement and audits are unhelpful.

The group published a survey in November claiming businesses view their relationship with Oracle as “hostile” and are “filled with deep-rooted mistrust.”

CCL has now followed that up with a series of seven steps in its open letter, which it claims customers want Ellison’s software giant to follow.

The top-most request is strategic focus – that Oracle focus on customer satisfaction and the “relationship” rather than pure audit revenue.

CCL's open letter also calls for greater clarity on audits with customers having had enough of getting passed around between individuals and departments inside Oracle at audit time.

The pressure group doesn’t say how or why Oracle’s cloud goals are at risk should the company not follow its advice; rather, the implication is existing customers would use the break in IT infrastructure provision afforded by the switch to cloud to pack up and move to new, online suppliers.

Competitors are arranged on the platform, application and infrastructure side of cloud – from Amazon and NetSuite to Workday and Salesforce.Yet cloud is Oracle’s fastest growing business – in spite of the supposedly poisioned relationships.

Cloud grew 45 per cent year on year to $516m in the second quarter, as reported in December, with cloud revenue spanning PaaS, SaaS and IaaS.

It’s sales of new Oracle software that’s really suffering – and hurting the company – falling 3.6 per cent year-on-year. Yet they still netted the company $2bn, eclipsing cloud income.

Customers are not totally out of love with Oracle on-prem gear: updates to existing licenses grew 5.6 per cent to $4.8bn.

Typically, Oracle takes a tough line on charging and licensing – not compromising unless you're a massive customer with the upper hand.

Oracle is no different to another big software provider. Its biggest business apps rival, SAP, is undergoing exactly the same transitional pain: fast growth but small numbers in cloud versus a massive, multi-billion-dollar core business that's floating. Neither is Oracle different to any other big software provider in terms of its approach to licensing and audits.

The question is whether Oracle will continue to uphold its traditional imperviousness to customers' fear and hatred of licensing and audits at this critical transitional time. ®

Amazon’s Attention Deficit and Spending Spree

Looks like amazons growth is slowing down and trying to grab valuation with its cloud offering. Aivars Lode avantce

Amazon’s Attention Deficit and Spending Spree

High Investment Spending Is Likely to Last

By Miriam Gottfried 

And Dan Gallagher

 

March 23, 2015 4:14 p.m. ET

Amid its meteoric rise, Amazon.com hasn’t exactly showered attention on one key constituency: its shareholders. Suddenly, though, that reticence appears to be lifting.

Amazon is meeting this week with East Coast investors. This alone is notable, considering the company’s previously rather sparse involvement in such activities. It also follows January’s announcement that the company would begin to disclose some financial details for its Amazon Web Services business, while also saying it had spent $1.3 billion on streaming-video licenses.

Why this seemingly unprecedented level of hand-holding? One possible answer: Slowing top-line growth and its effect on Amazon’s valuation. The stock fell 22% last year—making it one of the worst performers among large-cap technology companies—at a time when Amazon is expanding rapidly and relying on its shares to lure talented employees.

The charm offensive seems to be working. Amazon’s share price has rallied more than 20% since the beginning of 2015, regaining last year’s lost ground.

Much of this seems to relate to the promise of new disclosures surrounding AWS, which has given Amazon a strong lead in the rapidly growing market for enterprise cloud computing services. According to one investor with a representative present, AWS featured prominently in a meeting with investors in New York on Monday. RBC Capital Markets estimates Amazon’s market share of the public cloud category at about 64%.

But it remains unclear exactly what Amazon will disclose about AWS when the time comes. And with the stock nearly back to its record highs, the risk is also mounting that the actual numbers could be a disappointment, or shed little additional light on the business.

To date, investors have used Amazon’s “other” segment in its financial reports as a proxy for AWS. That segment had revenue of $5.6 billion in 2014, up 42% from the previous year. That is the company’s fastest-growing category by far but the retail business still dwarfs it.

Amazon also hasn’t typically disclosed the profitability of its various segments. But it seems clear that cloud services isn’t a cheap business. Microsoft,Google and International Business Machinesare pushing hard to grow in this area and have the necessary cash flow to stoke an expensive spending race with the e-commerce giant.

Amazon’s capital expenditure last year of $4.9 billion looks low compared with Google’s $11 billion. But investors shouldn’t ignore another $4 billion of investment by Amazon under capital leases. As Robert Peck of SunTrust points out, simple measures of free cash flow don’t always capture outflows associated with capital lease payments, so investors may be missing the underlying capital intensity of Amazon’s business.

So Amazon’s shareholders will ultimately have to weigh the value of the company’s leading position in the cloud against the costs of staying there. Mr. Peck estimates the company will have to spend an additional $35 billion over the next five years to support its fulfillment infrastructure and AWS.

Investors spent last year worrying about Amazon’s big-spending ways. The company’s recent outreach doesn’t mean it plans to break that habit.