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Oracle SaaS Earnings Rattle Salesforce

There is a battle among the world’s largest software vendors to retain the throne of No. 1. Earlier this year Microsoft CEO Satya Nadella declared today to be the age of B2B Software-as-a-Service and “the dawn of a new generation of business systems,” while just days ago Hewlett-Packard announced that it would be splitting into two separate companies, one of which – Hewlett Packard Enterprise – would focus on strengthening its position in the horizontal services market, which includes SaaS offerings.

But the fiercest clamor for greater SaaS market share is between Oracle and Salesforce, the latter of which currently stands in top place. In an interview with reporters last April, Oracle Senior Vice President Shawn Price declared the company’s plans to dethrone Salesforce as the leading cloud computing software vendor by the end of the year, and to reach a goal of $2.5 billion in revenue while doing so.

The Numbers Boost Confidence

Last Wednesday (June 17), Oracle released its quarterly earnings report, closely watched by the market waiting to see if Oracle could live up to its own hype. Indeed, Oracle did. “We dramatically overachieved in the cloud,” said the firm’s CEO Safra Catz during the earnings call.

According to the figures, during the last quarter of the fiscal year ended May 31, Oracle’s SaaS and Platform-as-a-Service units saw a 29 percent increase in revenue compared with the same period one year prior. According to reports, SaaS revenue hit $416 million – more than $125 million more than Oracle had forecasted for itself at the beginning of the quarter.

Fellow Oracle CEO Mark Hurd added that the figures, which equate to a more than 200 percent year-on-year growth, are “a cloud industry all-time record” for new business in a single quarter.

Additionally, Oracle reported SaaS and PaaS combined revenues of $1.5 billion for FY2015, signifying a 32 percent increase from the year prior.

More than 1,200 new SaaS customers were obtained by Oracle’s SaaS unit, while an additional existing 760 customers expanded their business with the company. This growth is key for Oracle’s market share, Hurd said, as a steady increase in new customers across geographies will ultimately secure the lead position thanks to an expanding customer reference base.

Oracle Executive Chairman and CTO Larry Ellison perhaps put it most simply during the call: “Things are good for Oracle and the cloud,” he said.

Still More To Go

According to reports at Forbes, Oracle is on the path to reach its goals of surpassing Salesforce as the world’s largest cloud service company. But it isn’t there yet.

Oracle reportedly did not offer specific figures to differentiate between SaaS and PaaS sales, instead choosing to combine the two. According to Ellison, however, Oracle’s PaaS service is expanding faster than its software unit, while its Infrastructure-as-a-Service unit surpassed other figures with a 33 percent increase in revenue for the fiscal year.

During the call, Hurd said that the company currently runs more than $2.3 billion in annual cloud revenue. While impressive, reports note that it is still significantly shy of the $5.37 billion of SaaS and PaaS revenue combined for Salesforce.com, the figures of which were released for its own earnings report for the fiscal year ended Jan. 31, 2015.

But Oracle’s growth rate percentages are outpacing Salesforce’s, providing Oracle with a wider opportunity to snag more market share, reports said. Salesforce has predicted revenue growth rates of about 21 percent for FY2016, lower than the 32 percent growth rate seen in FY2015. Oracle, on the other hand, forecasts up to 60 percent in revenue growth.

Looking ahead, the company expects about 90 percent of its products and services to be offered as a cloud service as early as October.

The clamor for top spot comes at a lucrative time for the main SaaS players of the world. According to data from Bessemer Venture Partners released only days ago found that the global cloud computing market will surpass a $500 billion valuation by 2020, overtaking traditional in-house IT solutions.

Researchers found a market cap of $5.6 billion in 2006 to a tenfold increase of $56.6 billion in 2014. “The depth and breadth of cloud progress is pretty shocking,” said leading cloud investor Byron Deeter, who heads BVP. And SaaS providers like Oracle and Salesforce, researchers predicted, will become more prominent than on-premise solutions in the customer resource management sector by 2016.

While all SaaS players could see significant growth by the end of the year according to the forecast, it’s Oracle that has its eye on the top prize. That unfaltering confidence to surpass its largest rival was reiterated by Hurd during the earnings call: “We are doing what you very rarely ever see happen in our industry,” he declared. “We are getting bigger and our growth rate is expanding. We will be the world’s largest enterprise cloud company.”


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