Oracle's cloud strategy has kicked into overdrive as the company aims to be the No. 1 provider of services and eclipse Salesforce.com. In terms of perception, Oracle has turned the corner and has everyone from Wall Street analysts to customers at least interested in buying cloud products from the company. The big question: How should IT buyers factor Oracle into their cloud plans?

Here's a look at the moving parts.

History and strategy

Oracle's cloud strategy has been in the works for a few years and the approach revolves around having the largest lineup of cloud services revolving around applications, platform and infrastructure. Oracle's take---like SAP---is that the suite will win in the cloud too. That approach isn't surprising given both enterprise software vendors became massive by selling suites.

To get to Oracle's current cloud position, the company has gone on an acquisition spree. That merger and acquisition strategy is also from Oracle 101. Oracle entered the application market via buying PeopleSoft, Siebel and a bunch of others. In recent years, Oracle has acquired companies that can build out its HR and marketing clouds with an emphasis on the latter.

A few recent acquisitions include:

  • BlueKai (data);
  • Eloqua (marketing);
  • Responsys (marketing);
  • Taleo (HR);
  • Datalogix (data).

This slide from the Datalogix acquisition highlights Oracle's cloud acquisition strategy. The aim is to fill in parts. Oracle's prevailing view is that the data cloud is the glue to everything. Given Oracle's database heritage, the focus isn't all that shocking.

datalogix.png

For Oracle, the most basic cloud approach is to deliver its applications as a service and keep its customer base engaged. Other services---platform and infrastructure for instance---are table stakes needed to sell more cloud products to customers and ultimately get them on a full stack. Oracle is claiming that it can implement a cloud service in 12 to 16 weeks.

At Oracle's recent CloudWorld powwow in New York, Thomas Kurian, president of product development, simply stated the strategy: Bring business applications to any partner, customer and anyone in the world through a browser. Kurian walked through Oracle's revamped user interface, drilldowns and visualization tools. In addition, Kurian walked prospective customers through setting up an instance---a detour that probably wasn't necessary given many folks were at least somewhat experienced with Amazon Web Services.

In any case, it's hard to argue against Oracle's strategy of offering dozens of cloud services across multiple categories. One third of Oracle's cloud customers buy multiple services. Some customers get CRM, HCM and ERP in a cloud bundle. And fewer go with a red cloud stack throughout with infrastructure to platform to software as a service.

The following chart from Oracle's December quarter earnings statement highlights the company's cloud traction as well as its biggest challenge: Ramping up services fast enough to offset what could be a hit to licensing and maintenance revenue. Oracle is making the same journey that Adobe successfully made.

oracle-cloud-tpr.png

Do you believe?

Oracle's cloud turn has been impressive, but there's still a legacy to overcome. Oracle's core business still revolves around licensing and maintenance. While executives from co-CEOs Safra Catz and Mark Hurd to CTO Larry Ellison to senior vice presidents talk cloud, the rest of Oracle's more than 130,000 employees need to think different. Maintenance and licensing revenue in one shot is a hard habit to break. There's a reason companies like Workday, Salesforce and Amazon Web Services snuck up on the big vendors: Large tech vendors had revenue to protect and you'd be nuts to disrupt the gravy train too quickly.

Simply put, Oracle's cloud shift will have to overcome some inherent skepticism. Will Oracle truly deliver beautiful cloud applications and more importantly will the company remain on the user experience bandwagon? Can Oracle innovate over time for you? If you go with Oracle's cloud stack aren't you just locking yourself in again?

Additional reading: Oracle woos cloud customers: Time for a kinder, gentler enterprise experience? | Oracle: Winning cloud perception game with IT buyers | Oracle gets its cloud due: Can it sustain it? | Oracle's Larry Ellison talks cloud catch-up game with Salesforce.com | Enterprise vendors: Can they scale and keep it simple? | Can hardware makers handle rapid cloud turn?

There's no reason to pick on Oracle. You could swap in any traditional enterprise giant gone cloud happy and ask the same questions.

However, it's worth noting that Workday, Salesforce and cloud-first companies don't have to overcome the questions that the established vendors do. Although even with the new breed of enterprise vendor you need to ponder lock-in and future proofing too. In my view, the jury is still out on whether the suite wins in the cloud too. After all, there are application programming interfaces and inter-cloud connections that change the equation dramatically.

I'd argue that Oracle has become a formidable cloud player. And Oracle has done enough cloud work to at least keep a lot of its current customers in the fold. All of those legacy customers are likely to ultimately move to the cloud over an on premise app. While that reality is impressive, I think it's a big leap for an enterprise buyer---current Oracle customer or not---to buy the company's cloud pitch wholesale. Oracle should be treated like any other cloud provider. You start small with a few workloads and then consider more services if the returns are there.

In journalism there was an old saying that if your mother told you she loved you that you should check it out. If Oracle is throwing cloud love your way you should trust a smidge, but verify the hell out of it. Oracle may need a few more years to prove itself in the cloud and establish a new track record. By all means, dabble with Oracle's cloud.

A new Oracle (at least from an aspirational perspective)

Oracle execs speaking at the New York CloudWorld event seemed to realize how the cloud has changed the customer engagement model. Oracle wants to become easier to work with and spoke to the IT buyer base well. Shawn Price, senior vice president for Oracle's cloud business, acknowledged that the company has a lot of work to do on the frictionless transaction and deployment front, but the thinking is in the right place.

Oracle is aiming to get customers on the cloud quickly, deliver a good experience and then start landing industries as a whole with help of word of mouth. Price's message is that Oracle is "deploying in 90 day increments. "It's our responsibility to keep pace with innovation and regulations. Each deployment we do is an audition for the next," said Price.

Price said Oracle is aiming to reduce the need for consulting where possible, simplify deployments and make it easier to engage with the company during the sales cycle. Price said that the cloud engagement model is an 80 percent use case, fixed fee consulting and cloud pricing. This simplified sales effort is fully baked in some categories and evolving elsewhere, said Price. "We are rethinking the engagement model," said Price.

Consider the old IT procurement model:

  • Customer and vendor would engage in some kind of discovery on requirements, needs and functionality;
  • References would come at the end;
  • Pricing would come at the end;
  • And consulting requirements would take a month to figure out.

Price said the new engagement goes like this:

  • The customer has done 60 percent of the research on functionality before even visiting a site;
  • Customers want consulting costs at first meeting;
  • Customers want unit costs and the big-bang transformation costs up front;
  • And they want transparency and ongoing innovation.

My hunch is that the cloud forced Oracle's hand on pushing a new engagement model with customers. Cloud services are simply easier to acquire without a lot of hassle. Traditional IT procurement was like going to the used car lot and haggling for hours. Today's IT procurement is more like shopping at Amazon.

I asked Price how far Oracle was with its customer engagement overhaul and he noted that "we're just getting started." In other words, you mileage away from Oracle's cloud business may vary.

Price said Oracle would get to this new engagement model because senior leadership was committed to the cloud. The other reality: Oracle can't make its cloud transformation without a new engagement model. And the company can't make that transformation without turning customers into advocates for Oracle's cloud.