Mark Hurd, Oracle's co-CEO, expressed optimism about his company's cloud business and about global IT spending in general in a keynote address on Wednesday at Goldman Sachs' (GS) annual technology and internet conference in San Francisco.
Here are the top takeaways from the presentation by Hurd.
- Hurd talked up Oracle's ability to grow its enterprise app business in the years to come by migrating much of its traditional (on-premise) app customer base to cloud/SaaS subscriptions. He insisted Oracle's SaaS growth to date has "mostly" come from new app customers, and claimed that Oracle gets about three times as much long-term app support revenue from SaaS deals as traditional ones (though it's worth noting that SaaS gross margins are lower than margins for traditional deals).
- Hurd also declared Oracle's new 18c database, already available for data warehousing workloads and due to be available for transaction-processing workloads this summer, will allow Oracle's database revenue to grow at a stronger clip than it has in recent years. Oracle has gone to great lengths to talk up 18c's "autonomous" features, which automate software patching and other time-consuming maintenance tasks (cloud providers offer managed database services that handle some of this work), and contractually promises less than 30 minutes of downtime per year. Earlier this week, Oracle unveiled similar automation technology for cloud solutions in areas such as app development tools, analytics and data integration.
- Though Microsoft (MSFT) and Amazon (AMZN) have been seeing healthy growth for their respective SQL Server and Aurora database platforms, Hurd dismissed competitive fears. He stated that Oracle's total database business (on-premise plus cloud) has been slightly outgrowing a database market growing at about 3%, and -- using some back-of-the-envelope math -- Hurd roughly estimated that over 10% of the 1 billion or so enterprise server CPU cores in operation are used to run Oracle databases.
- One area where Oracle and Amazon see eye-to-eye: A belief that enterprises have strong incentives to shutter their data centers and move workloads to the cloud, given the operational cost savings involved in doing so. Hurd, citing research, said about 15% of U.S. data centers closed last year, and reported frequently hearing from cash-strapped firms that they lacked the funds to modernize their aging IT infrastructures. Two major impediments to cloud migrations include IT staffers worried about losing their jobs, and regulatory/compliance needs in fields such as healthcare and financial services.
- Though much of Oracle's $70-billion cash balance is located overseas and can now be repatriated at a 15.5% tax rate thanks to the new tax bill, Hurd downplayed M&A possibilities. Though refusing to rule out a major new acquisition, Hurd echoed executive chairman Larry Ellison in saying there aren't many firms of interest left for Oracle to buy, and stated M&A isn't "at the core" of what his company is thinking about right now. Oracle inked a $1.1 billion deal in December to buy Australian cloud construction software firm Aconex, and in late 2016 closed its $9.3 billion deal to buy top mid-market cloud app provider NetSuite.
- When it came to IT spending in general, Hurd was fairly upbeat. "I think people are more optimistic" than they were a year ago, he said. Hurd noted that enterprise IT spending has seen minimal growth in recent years (cloud spending has grown strongly, but at the expense of on-premise spending) and that businesses tend to be upbeat when they see global GDP growth forecasts around 3%. In January, The World Bank forecast 3.1% 2018 global GDP growth, with 2.2% growth in developed markets and 4.5% growth in emerging markets.