Industry acquisitions continue to improve Oracle’s cloud execution, with the tech giant on track to sell more than $US2 billion of Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) annually recurring revenue.
Revealed ahead of database and NetSuite influence, Oracle’s first quarter financial results in 2017 highlight that cloud growth is finally outpacing licensing declines for the vendor.
“We believe this will be the second year in a row that Oracle has sold more SaaS and PaaS than any cloud services provider,” Oracle CEO, Mark Hurd, said.
While such bold comments from Hurd are commonplace, this time, he might have a point.
In the first quarter alone, Oracle added more than 750 new SaaS customers including 344 new SaaS Fusion ERP customers.
“That’s more ERP customers than Workday has sold in the history of their company,” Hurd claimed.
Amidst unimpressive financial results for the first quarter of 2017, the vendor’s top-line growth benefited from ongoing cloud-based momentum.
Cloud SaaS and PaaS, the segment in which Oracle has put significant financial investment, messaging and sales efforts behind, grew 77 per cent year-to-year to $UYS798 million in 3Q16.
“Oracle remains unfazed by declines across its professional services, hardware and new software license revenue streams,” Technology Business Research principal analyst, Meaghan McGrath, said.
“Instead focusing on the positive growth in cloud segments and software license and update support, all of which led to year-to-year growth of less than two per cent for the firm.
Although Oracle CEO Safra Catz noted organic SaaS and PaaS growth has accelerated for seven straight quarters, McGrath believes the assertion that this growth was only helped a little by acquisitions is misleading.
“Opower and Textura together contributed close to $US45 million of the $US108 million sequential increase in the segment,” McGrath observed.
Going forward, McGrath expects similar acquisition-related SaaS and PaaS revenue increases in the coming quarter, with the closing of the NetSuite acquisition set to contribute partial-quarter revenue and growth from PaaS products announced at Oracle OpenWorld.
As explained by McGrath, these include Oracle Database 12c Release 2 (Database 12.2), and Oracle MySQL Cloud Service will offer only a full-quarter impact in F3Q17.
“Even faced with accretive NetSuite revenue and the expected acceleration of customers moving to cloud from the cloud-only-at-first Database 12.2 launch, Oracle will need to initiate other accretive acquisition(s) to achieve its $10 billion annual SaaS and PaaS revenue goal over the course of the next two fiscal years,” McGrath explained.
As the company stands, its $US3.2 billion run rate will reach only around $US4 billion with the addition of NetSuite’s last reported $US721 million subscription run rate.
Barring other substantial acquisitions, Oracle’s Database 12.2 release and other organic growth efforts would have to more than double the Cloud SaaS and PaaS revenue stream to execute on the $10 billion goal before Salesforce (which achieved a $7.5 billion run rate at the end of July) reaches it.
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