I expect that Oracle will resume year-over-year declining revenue with next week's earnings report. In the celebration and stock price increase that followed Oracle's seemingly good Q42017 earnings, there are a few facts that perhaps Wall Street forgets. All of the earnings growth for Q4-2017 was the result of a one-time tax break. Over 90% of revenue is still from on-premise hardware and software, both of which have experienced catastrophic attrition and layoffs since Q1-2018 started on June 1. Much of the revenue is due to what Gartner group calls "draconian audits", shaking down existing customers to the tune of millions of dollars. Those audits usually include millions in "Cloud" credits ... deals that are booked eventually as cloud revenue without services ever being consumed. These customers are so alienated that they will never buy from Oracle again. They're running out of customers to audit. The biggest customers are not renewing ULAs or are renewing at steep discounts.
The transition from an experienced enterprise field sales force to new college hire telesales is happening to fast and is too disruptive. The college hires are told to undermine field sales. For example, we were trying to sell a customer a cloud solution while the new college hires were calling the customer and selling on-prem licenses without us even knowing about it. A typical customer gets multiple calls from different Oracle salespeople every week, none of whom are in communication with each other. Oracle's products and contracts are too complicated for a new college hire to handle. Oh, yeah, Oracle has a new "simplified buying procedure": you accept all of Oracle's T and Cs and accept no discount. Good luck with that. New college hires are trying to close multi-million dollar deals with CIOs over the phone and are getting laughed at.
The attrition and layoffs in field sales have resulted in awful revenue, which in turn will lead to more layoffs. It's a non-stop race to the bottom. Oracle's IaaS and PaaS offerings are simply not competitive in features and reliability. Oracle lacks security certifications like HIPAA and FEDRAMP, so some customers simply cannot use it. Customers wait weeks for services to be provisioned. For some services, you need to file an SR to get a port opened in the Oracle cloud firewall, and it takes 5 days, delaying your project. Customers of AWS and Google can do this themselves in 2 minutes. Billing and chargeback by project ID or cost center? Data centers for Cloud? Fuggetaboutit. Search for "AWS Cloud Data Center List" or "Google Cloud Data Center List", and you get a map showing data centers all over the world. Now try "Oracle Cloud Data Center List", and you get marketing statements about sustainability. Why? Oracle has only two data centers in the US, Chicago and Ashburn, both just leased space from Equinix. West coast customers do not buy Cloud solutions that require disaster recovery 3000 miles away in Ashburn.
Which challenger to AWS do you think will win, Oracle or Google? Google, AWS, and Salesforce are hiring away our best sales consultants. Google is spending $30 billion on cloud infrastructure. Oracle spending $3 billion.
Perhaps the biggest problem, not only for Oracle but for IBM, Dell, and Microsoft as well, is the Cloud pay-as-you-go model. Customers no longer need to write a check in advance for millions of dollars to get new projects off the ground. With AWS and Google, customers provision Cloud services as they need them. There is no more shelfware; you get billed only for the services you use. Customers are using open source software through Cloud services and are not buying proprietary close source software licenses anymore. Although Microsoft has taken Cloud far more seriously than Oracle, they too are experiencing catastrophic layoffs as the "pay as you go" model disrupts everything that they are about as a business. Also, there is no more pump and dump. WIth pay-as-you-go, customer applications must get into successful production in order to generate significant billing for Cloud services. Oracle, IBM, HP, Microsoft, and Dell do the multi-million dollar deal on last day of the quarter, then they disappear and move on to the next deal. It doesn't matter if the customer is successful or if they never deploy the software or hardware they bought. Now that customers have a pay-as-you-go alternative, they're not buying under the old system anymore.