Oracle Corporation (ORCL) Earnings Call Transcript & Summary

So I think a lot of us feel, I mean, based on -- we know how you're competing in the marketplace. We see who are you up against. We can read Gartner's and CX' reports. So I think the place that we've seen less messaging from you. And again, I think as you pointed out earlier, a place that's been in the "not growing as fast" bucket has been customer experience management front office. So what's the opportunity there? You just said you feel like you can get that growing faster. How do you do it? When can it happen? And it just seems like a layup in some ways that you could leverage your strengths in areas like AI and analytics to really accelerate that product area.

Yes. I think it's historically been probably a little more disappointing than it should have been. And we've now had a single senior executive in charge of the development and now part of the sales organization for CX. So he's now -- has the ability and has been making investments over several years now. Those innovations are finally coming to market. And what he did was he really sat down and tried to understand how do I differentiate ourselves from the market? How do I accelerate the innovation? I don't want to just be a me too in terms of keeping track of the sales pipeline and forcing my salespeople to update it. Why don't we change the dynamics? Why don't we move into something like engineered selling, where we figure out what's the next best offer that the salesperson should make and help deliver to them that advertising message and do the follow-ups with them? I mean, automate more of the selling cycle to actually drive revenue as opposed to the thing that just figures out how to track the pipeline of things. And that's -- again, that's something that we're adopting here internally at Oracle ourselves and putting into place, again, in the spirit of being our own best reference. But those -- so that's really where we're attacking it. It's a combination of that, which is new innovation and new ideas, along with the fact that I think people are long in the tooth with their Salesforce bills. I mean there's not a person that I don't run into that goes, "Gee, I spend an unbelievable amount of sales on Salesforce, and I just don't see that much value for it." So there's also cost efficiency, which is other than somebody saying, "Well, I've had Salesforce for a long time, and I hate to change my users." At some point, the economics just overwhelm it and makes it desirable along with if you can show them a pathway to revenue acceleration from an innovation standpoint. To me, those are the 2 things that are going to really help drive our CX business going forward.

Right. So I want to switch over to cloud and OCI. So again, I think of you guys as -- I think in terms of the apps business, the cloud, the OCI business although it's relatively small and specifically cloud, OCI, thinking of it from an Infrastructure as a Service perspective, not separating that from SaaS. And I'll talk about database later. I think that there's never been a clear view from investors on exactly what Oracle's strategy in cloud, meaning Infrastructure as a Service will be. Obviously, there's a lot of opportunity, and there's a lot of technical innovation there. But the question has been, what are you going to do? Are you going to go out and try to compete directly with Azure, AWS, GCP and being a broad horizontal play for all types of applications? What end of things or which, by the way, would you think would require a lot of CapEx? Or would you be a more focused company, primarily thinking about migrating Oracle workloads? And I feel like it's starting more of the latter and maybe it's moving more towards the former at this point. But maybe you could tell us the story and tell us where we're going.

Sure. No, I appreciate the question and the opportunity mainly because I think folks have not seen us in the marketplace as much historically and so think of us as a bit player. The reality is we want to be in the top 3, top 2 from a cloud infrastructure standpoint. And we think we can. And the reason why is that we're -- we believe we're the only company that really truly understands enterprise scale requirements. The other folks have different approaches they've taken. But I think Oracle is unique in this standpoint given that not only are we in the infrastructure business, we're also in the applications business. In fact, today, every one of our incremental customers that we're bringing on, we're bringing -- that's running one of our cloud applications, they're going to be running it on OCI. We've built and are deploying all of our own internal applications to run on OCI. So we learn and are able to experience things that uniquely help us. Now we can do things for both Oracle customers and non-Oracle customers from a database perspective. I think that was the -- your statement was a little bit of the -- just the general expectation, which is, "Gee, Oracle, you have a big database -- sorry, installed base of customers, why wouldn't you be the ones that run those for customers in the cloud?" And you're absolutely right. That should be the case and will be the case. What we have found is when customers try to do it in other public clouds, those vendors just don't understand how to optimize and run Oracle as efficiently as we can. And so we're seeing a lot of activity on that front. But you have to remember that much of our customers, they come from the mission-critical applications. These are the things that are -- that keep the lights on, say, for this house apparently. They connect the calls, right? They do the financial transactions. We do the most mission-critical of things. Those applications, obviously, are going to move to the cloud eventually. They're not the test, dev applications that have already moved. So I think that remains a huge opportunity for us and one in which we believe we're most uniquely suited to do that. But we've also found as a result of getting into cloud infrastructure that, quite frankly, customers are not going to just move to your cloud for one single application. They want to move for the environment. And so -- and in fact, Gartner, I think, has themselves come out recently and talked about how powerful our cloud is from a service capability standpoint. So we're offering the set of cloud services in order to ensure that an enterprise customer can come and run any type of workload in our cloud infrastructure. And in fact, many of the ones we've been capturing that you've heard a lot about are things that we found are uniquely suited that are not related to the Oracle database. So things like high-performance computing, things like the network-intensive applications like a Zoom and an 8x8 or Kaltura, these are -- we're finding areas and then ISVs. A lot of ISV adoption where they want to be part of the Oracle application ecosystem and realize that running on the Oracle Cloud infrastructure make it -- makes it very easy. So the bigger our apps business is in the cloud, the more we're going to get more of the ISVs who want to come in and participate in as well. So I think generally, there's a lot of momentum. We're getting -- we're finally getting the recognition from the analyst community. And quite frankly, given that there's still only $100 billion of infrastructure in the cloud, still a very small percentage of the overall IT infrastructure spend. There's huge opportunity still available to us to capture.

So to be clear, your opportunity and your strategy certainly includes not only non-Oracle applications, but applications which are non-Oracle database, and let's call it, third-party open, something that's completely out of that Oracle environment could be well hosted on the -- on OCI, too.

Yes, absolutely. I mean we're -- obviously, we're doing it with MySQL. We've got a bunch of different open-source services that are already live on OCI or being brought up as we speak. We have a lot of third-party applications, infrastructure applications, PaaS services that are running on OCI as well. So yes, you can't just be -- just have one environment. So I actually run strategic partnerships at Oracle, and that's one of our big pushes right now, is to go and bring on the right partners so that, again, as the customer moves the workload, they can move a lot of their workloads and realize that they could get the enterprise-class capabilities from someone like Oracle all in one spot.

So you mentioned MySQL. So I'll take that as an opportunity to make a segue into database. A lot of questions. But I think, I mean, I just hosted a panel at the conference here this week, where we had an enormous diversity of different database, let's call it broadly speaking, data stack participants. We had a document database provider. We had a graph database provider. We had a data link provider. We had analytics provider. So in many ways, we've seen a data stack world, if you will, that's become highly fragmented. Oracle was one of the participants in a period of time where the data cycle is much more consolidated. And I think the one way to interpret the strategy around database has still been fairly, let's just say, more simple in the sense that you've got Oracle database itself at the top. You've got MySQL as well. Why is that the right strategy versus the strategy that some of the cloud providers who have had fragmenting and also offering lots of different flavors of data store, database, et cetera?

Yes. So the first thing is you've got to meet customers where they want to be. So us, as I mentioned, bringing on new things like a streaming service, elasticsearch service, a postgres service, these are all things that are being added and made available to customers on OCI. And we recognize that, that's important to customers to see. At the same time, I don't think there's anybody who would disagree that ultimately suites of capabilities still have a huge differentiation in the marketplace that, that when you're able to offer more of the capabilities from out of the box, then all of a sudden, you can have much more efficiencies. And so we saw that in the dot-com crash. We saw that with the financial recession. So I do think that there will be -- continue to be a place where folks realize that the feature set that comes from the Oracle database has a high degree of value. And we're spending a lot more time really reinstructing or reteaching customers about what that means from a usability standpoint, which is to go more to a consumption-based model, to stop focusing on trying to sell $10 million or $15 million transactions, and we're trying to help them get in and see it and try the Oracle Database out. Now that being said, everybody's got the current flavor of the day, all the cool new things they want to have on an individual basis. And so we -- basically, it's the idea of balancing those 2 things, being able to continue to offer something that has a lot of efficiencies and a lot of benefits from a single-use standpoint like the Oracle Database with its features, while also bringing up the rest of the services that you want to have in order to be competitive and enable people to move their workloads. So I think we're committed to both of those things, and I think that will have a unique proposition in the marketplace.

So looking back to the framework that I had before, which is to talk about this question of acceleration. You saw more acceleration on the application side last quarter than you did on the database side. And yet, it feels as if things are primed for that acceleration in database as well. Obviously, you've been moving to Autonomous Database and AT&C and beyond. And now my understanding is that the availability of OCI-2 to both provide that as a service actually in the cloud, in your cloud as well as for customers that [Technical Difficulty].

Sorry, could you repeat the last part of it? You just broke up for a second.

Right. So it is whether or not the availability of OCI-2 underneath both AT&C in the cloud as well as Cloud at Customers should be something that accelerates growth and growth in that business?

Well, I think they're related and they're unrelated, which is at the end of the day, the Autonomous Database is a completely unique feature that no one else has. And as a result of it, it is fantastic innovation that takes time for people to understand. I mean being able to turn over your database operations to a machine is sometimes a scary moment for customers. And so as we get proven workloads that have done it and we're able to show other customers and have all the references and proof points, that sort of takes care of itself. And I think that's really where we're at, which is it's been out there in the wild long enough that now our sales people have the references, they're able to go in and show customers how it gets done and how much they can benefit from doing it. So that itself is helping Autonomous Database get adoption. I think having on a Cloud at Customers another great reason because, again, we need to meet the -- meet our database customers where they want to be done. And the easiest way to migrate a mission-critical workload that I described is to get the cloud benefits, but keep it inside your data center until you're ready for the public cloud. So being able to move those into Cloud at Customer is another great win for us and an opportunity for them to now start using the autonomous database. So that all is a positive on its own. By running it all on top of the OCI Gen2, we now have the common infrastructure, which, again, is giving us scale and other efficiencies because everything -- we're able to procure our compute power and our storage, things like that in OCI, and we can now send it off to any type of workload. This was something that has taken some time to get to. But whether it's Autonomous Database application, it's a Zoom application or it's a Fusion application, all of it running on the same -- on that same cloud infrastructure makes it easier for us to manage, easier for us to procure, easier for us to provision, et cetera. So I think there's -- all of that put together, I think is, again, part of helping get the traction with the autonomous features.

Although I promised that I'd ask you about spend as well on investment, but we have unfortunately run out of time. So we'll save that for another time. But this has been great. I mean you've been a part of the Oracle story for a very, very long time and have a great perspective. So I want to thank you and Ken and the whole Oracle team for supporting our conference and being part of this. Great to hear your assessment.

Yes. Thanks for your time. Appreciate it.