For instance, Salesforce charges a surprisingly low monthly fee for a one-year software contract with them. Compare that to the thousands of dollars that a company pays for Oracle’s software, not to mention the whopping annual fee-based expenses and the ‘minimum user number’ requirement that comes along with it, and you can see what makes the difference. Salesforce.com’s top as well as bottom lines exceeded Street expectations in the fourth quarter, but what’s more important is that four-fifths of its customers actually signed up for annual contracts during that period. That spells bad times for companies like Oracle, as people are now more willing to go long term with competitors like Salesforce.com.
Another area that Oracle really needs to be cautious about is the recent phenomenon of Big Data, mainly due to the overwhelming presence of long-time rival SAP AG (ADR) (NYSE:SAP). Like Oracle, SAP has also expanded its business largely through the acquisition route, with notable recent ones being Ariba and SuccessFactors. But the similarities seem to end there. SAP’s HANA offering in the cloud and mobile computing space has significant advantages over Oracle’s answer in the form of Exalytics. HANA is able to run on a real time mode and can be operated using a single database. That’s where it also scores over Exalytics as the latter requires as many as three levels of databases, along with the subsequent storage and server requirements. After all, this is one more way in which Oracle has to justify its Sun Micro buyout. But sadly for Oracle, HANA is obviously much more cost-efficient in the long run, a point which the market has increasingly realized. Big Data business may grow more than 150% over a five-year period, highlighting the urgency for Oracle to do something about it fast.
And this is not the end of the sad story for Oracle Corporation (NASDAQ:ORCL) these days. The company has also been plagued by the rise in open source, free to use database tech platforms such as Hadoop, a product developed jointly by software giants Google and Yahoo. Big Data operations can be carried out much faster and at a much lower cost by platforms like Hadoop, in contrast to Oracle’s own Exadata database software that is commercially marketed and is pretty expensive too. Not to mention the fact that Exadata is an instance of scale-up software as compared to Hadoop being a scale-out software. This means that while you can harness the power of multiple machines on a network while using scale-out software like Hadoop, scale-up ones like Exadata limit you to the scale or performance of a particular hardware. The result is Hadoop’s improved performance level at a lower risk.
The chinks in the armor are becoming pretty evident for Oracle Corporation (NASDAQ:ORCL). What also does not help is its significantly late start in the space of cloud computing. If there is one single biggest thing that the company needs to focus on now, it is probably the ‘cost’ factor at all levels. And that obviously requires a complete restructuring of its software approach, along with reduced focus on hardware. Having said that, this is too big a company to take an immediate tumble, but even then, blaming it all merely on the sales force will probably not help in the long run. It’s certainly not the whole truth as told by Oracle. Time to keep a close watch on this stock for the next couple of quarters just to see where things are really headed for.
The article Is Oracle Really Telling Us The Whole Truth? originally appeared on Fool.com and is written by Subhadeep Ghose.
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