you very much for being here. Yet another open world, yet another amazing week. Couple of things to take care of here. 1st and foremost, you'll note the date is September 22. I want to take care some personal business and extend a very happy warm birthday wish to my mother, 78.
I know she's listening. She's worried about her little boy. Is he okay? Is he hanging in there? There's a lot going on.
Mom, I love you. Happy birthday. Other housekeeping items. If you have not seen Larry Ellison's Tuesday keynote, watch Larry Ellison's Tuesday keynote. Phenomenal.
Just a lot of clarity on some topics that I know that are on your minds. And you can't get any clear by what you're going to see, watch it. So basic housekeeping. So I think you've all done the drill. Thankfully, we've all been here many times.
The restrooms are over there. The Wi Fi is in the air. The cables are on the floor. Don't kill yourselves. Now, let me do my favorite slide.
Dorian, are you here? Dorian? Hi, Dorian. Dorian, this one's for you and the whole of the entire organization. I need to do this.
And so just as a heads up, you know how this works. But basically, I'm going to go through some of our slides around safe harbors and whatnot. And the idea being here is that each of the speakers as they come up will make reference to what I'm talking about here and now so that we don't have to run you through it each time. So the statements in this presentation relating to Oracle's future plans, expectations, beliefs, intentions and prospects are forward looking statements and are subject to risks and material risks and uncertainties. Many factors could affect our current expectation and our actual results and could cause actual results to differ materially.
A detailed discussion of these factors and other risks that affect our business is contained in our filings with the SEC, including our most recent reports on Forms 10 ks and 10 Q. Copies of these filings are available online from the SEC or by contacting our Investor Relations department. All information set forth in this presentation today is current as of today, September 22, 2016. And lastly, Oracle undertakes no duty to update any statement in light of new information or future events. In addition, we will be making forward looking statements and we will use non GAAP information in the presentations.
And then lastly, as I just want to make sure each of you understands that the presentations are being made today for informational purposes only. So thank you for indulging that. Now let's kind of step through the agenda for the day. So welcome. Following myself, Thomas Kurian will be coming up and he will be speaking with you all talking about platform as a service as well as infrastructure as a service.
He'll also be having a customer panel where we'll have a number of customers, you can see the chairs up here, coming up and sharing with you their experience using not only our infrastructure, but our Platform as a Service offerings. We'll take a break. Now that break will probably run right around 11 So about 2 hours from now, we'll have a break. Now as we come back from the break, Steve Miranda will come up and he'll speak with you about Software as a Service. And Steve likewise will have a customer panel where he will bring up some customers to share their experiences.
That will take us to right around 12:30 when we will have a break. And so there will not be any presentations or discussion during the break. It's time an opportunity for you to informally meet and talk with each other. And we will resume the conversation and the meeting at 1 At 1 Doug Carring, our EVP of Corporate Development, he'll be up here speaking with you about a project that he's been working on leading an initiative, which has sponsorship from Larry, Safra, and Mark at the highest level to basically how we are transforming the way that we work and engage with our customers. So he'll be up here speaking about that.
Then Mark will come up and he'll follow-up the conversation we started last year. We had a long conversation with you about what was going on as we were migrating or transforming from an apps company to being a software as a service company, started that conversation and said that, look, when I come back next year, I hope to talk to you more about what's going on from technology software going to platform as a service. He'll be starting that conversation with you today as well. Afterward, he will join Safra and the 2 of them will do Q and A with you to kind of talk about the things that you would like to talk about, the executive Q and A at that point. We'll have a break just a little bit before 3 o'clock and then we'll bring Larry back and we'll do the Q and A.
So this is the agenda for the day. We look forward to having a great day. And so I think what we'll do is we'll we've got a video and then we'll bring Thomas up. The modern CFO is in an enviable position. Their point of view is distinct.
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Ladies and gentlemen, please welcome to the stage Oracle President, Thomas Curran.
Good morning. Thank you for coming to this investor conference. I'm going to focus the session on Infrastructure and Platform as a Service. Now to give you a sense, when we started our cloud effort, we said that we were going to build an integrated suite, Infrastructure as a Service, Platform as a Service, Software as a Service and Data as a Service. And we now have a fully integrated cloud offering that covers all these pieces.
A customer can choose to use 1 or more of these pieces and you'll hear from several customers and I'll also give you examples as I go of customers who use 1 or more of these pieces together. Okay? Now over the last several quarters, we've had very strong growth in customers. Today, over 60,000 customers use our cloud, whether it's infrastructure as a service or platform as a service or software as a service, there's 2 70% growth over the last 8 quarters or 10 quarters. 27,000,000 people log in every day in the cloud.
That's 170% growth in that period. And they process 60,000,000,000 transactions every day in the cloud, 50,000,000,000 transactions every day in the cloud. Okay. Now all these growth metrics come because of the technology that we've built. And I'm going to start by talking about Infrastructure as a Service and what our strategy there is.
So what have we what are we doing with Infrastructure as a Service? What we're giving customers is the ability through a browser or through an API, an application programming interface to create a very high performance, highly secure, software defined virtual data center that runs in the cloud. So as a customer, you can go in and say I want a data center, software defined virtual data center. I need it near my operations, so I want to stand up in the Western part of the United States. You get an account, you can then go against an API and create a local area network, You can then carve it into virtual subnets.
You can attach high performance compute servers to it. You can attach high performance storage to it. You can add network devices, firewalls, load balancers, etcetera. And then you can deploy workload on top of it. And it's all done elastically for you through an API.
What we've really done is taken hardware and made it programmable, so that you don't have to manually stand up these things, wire them together and you get them elastically. Here are our regions where data centers exist. I think you see a broad number and we continue to expand the coverage in many more countries every year, Okay. Now in every region, we have 3 highly available data centers. We call them availability domains.
They are not on a single power grid. They are not on a single ISP network. Typically, they appeared 9 ways with ISPs. They have a terabit per second latency bandwidth and less than 5 millisecond latency between the regions. So what that allows a customer to do is build a very highly available system with 3 replicas within a region.
If you're worried about the entire Western United States having a problem, you can also build an application that spans one region across for disaster recovery for remote Doctor. And our regions are connected on a fiber ring, so that you have a lot of bandwidth and very low latency as well. Now the heart of our innovation in Infrastructure as a Service is what we've done with the actual design inside the data set. If you look at a software defined Infrastructure as a Service, historically and in all other platforms, virtualization has been done in compute with something called hypervisor. What we did was move virtualization from being done in compute to where it should be done into the network.
So, our data center network is a very broad network. Every customer's traffic is isolated in a private Layer 3 virtualized software network. Okay, so I'll talk about why that's better for security first. Most importantly, three other things. It allows us to present customers a compute server with 0 Oracle software running on it.
It's a raw physical host, which means there are 3 benefits. First of all, you can install as a customer your own stack on top of it. It gives customers the ultimate in portability between their premise to the cloud. And we have a lot of customers talking about how easy it is to move workload because they can bring their own stack on top of it. They do not have to use any Oracle software or any other operating system that they're not comfortable with.
So, one is portability. Number 2 is security, because there is no Oracle stack running on it and there's no hypervisor running on it, Not only are you protected from anybody's software coming in and providing a backdoor into your compute environment, You're also isolated from any other customer software running on the same physical server. Okay, so for example, there's a company that runs logistics for the United States into areas of threat like Syria, Iraq, Afghanistan. By law, they are required to run on compute hosts where there's no one else on it. And because our compute hosts are physically locked down, there is no ability to share an address space with anybody.
They use our cloud for this purpose. Okay? The 3rd benefit so, one benefit is portability. The second benefit is security, the third benefit is performance, because there is if you want the ultimate in performance and you will hear from a customer today, you don't have to run a hypervisor, you get a raw physical host, you get really, really good performance. So the first big innovation we've done relative to any other cloud vendor is to move virtualization into the core network.
And as a result of it, we can present customers a raw physical host, we can provide them unbelievable security and we can give them ease of migration. Now, if you're a bank or a financial services institution or a Department of Defense customer who on premise has standardized on a certain set of physical appliances. Let's say, you've got Apollo Allotone Networks physical security device or you're using a vendor's security intrusion detection and monitoring device. In other clouds, it is very clumsy to plug those devices into the network, because the network is virtualized with a hypervisor, Because we have this new design for where we virtualize, we present the network as just an IP address and host name endpoint. So, you can attach your own physical devices into the network just like plugging it in to an Ethernet port.
It is actually literally integrating an Ethernet port. Now why is that relevant? When big corporations move their workload to the cloud, they want to make sure that the perimeter defense, the load balancing stack, etcetera, that they have standardized on their premise, they can continue to use in the cloud. And with our cloud, it is very easy to do that. If you look at the traffic in the network, you've got 3 customers, 1, 2, 3 coming in.
We have a shared physical network, but all customer traffic is isolated in their own private overlay. Think of it as this physical network looks to individual customers as though it's a private pipe. What's the benefit of that? It's security built in the lowest level of the infrastructure right into the network. You don't have to therefore do necessarily cryptographic encrypt decrypt while your traffic is running, because you're isolated at the physical network.
And therefore, it gives you much better performance. It also gives you much better isolation. We also have quality of service on the network. And why is that important? In the cloud, performance is not just raw performance, but how predictable the speed is.
Now in our network, because it's isolated in this way, if 2 customers, let's say customer 1 is running ERP and customer is running a big Hadoop job, they don't step on each other, not just on the compute side, but even on the network. And therefore, we can not only guarantee better performance, but we also guarantee better predictability of that performance, which is very important for customers moving mission critical workloads. As a customer, we provide you a variety of choices on how you can connect your data center to the cloud. For example, if you want to see our cloud as just an extension of your corporate data center's IP address base, you can do that. If you want a 10 gigabit per second link into the data center, so that your traffic doesn't go over the Internet, you can do that.
If you want to run a software defined VPN, you can do that as well, okay, and they're all available. Attached to this network substrate, we also differentiate on compute and storage in 2 important ways. Our compute servers are ultra dense. They are specially engineered so that you get ultra dense footprint. So, on a compute node, you can run as much as a terabyte of DRAM and 29 terabytes of flash.
Okay, so that's 30 terabytes essentially of local memory, which means you can fit almost every OLTP database directly in memory, which means you get amazing performance, because you never have to go over the network to disk. Secondly, because that memory is local resident on the compute host, you get very, very predictable performance, because you're not going over the network except if you want to do so. We've also attached high performance storage to it. We have a distributed storage environment with local flash, high performance block and object storage. How many IOPS can be delivered to 1 physical host?
4,000,000 IO operations per second. Again, IOPS are essentially a direct correlation of readwrite speed that you're going to get. So, you're welcome to look at our website and also the competition's website. For 80% of the price, you get meaning or 20% less, 80% of the price, you get 2 times the number of cores, 2 times the amount of memory, 4.5 times storage and 11 times the speed. So, it's a very different offering than is available in the market today for Infrastructure as a Service.
We present this Infrastructure as a Service in 4 or 5 different ways to customers. A customer can say, I just want a bare metal host on which I want to install my own operating system and my own hypervisor. We call that bare metal. A customer can say, I really just want hypervisor, elastic compute, you can run elastic compute, we run Linux, Windows, UNIX, Debian, CentOS. So, you can pick from an array of different operating systems to give you choice of what you want to deploy.
If you're a customer who is building a next generation application, typically designed around an architecture called microservices, you can stand up something called a container. Essentially a docker container running either within the hypervisor or on raw physical host. The benefit of running on a raw physical host compared to everybody else is you don't pay the
tax
of the hypervisor's networking layer in order to then run Docker. You're running Docker on a raw host, so there's only one network stack running and therefore you get way better performance. If you have VMware on your premise and you want to move it to the cloud, We provide a mechanism based on technology called Revelo to lift not just an individual VMware virtual machine, but a collection of a number of them. We preserve all the virtualization, network virtualization, everything and you can move it directly into the cloud. You will hear from a customer today who uses that technology.
Now for customers who say, listen, I really, really want the maximum in isolation, you can buy a rack of compute, same software, but fully isolated rack. It's called dedicated compute. And then if you want Exadata or high performance database environment, for example, you can tie in Exadata into this environment, Exadata, supercluster, a variety of these. So we present this
high performance
infrastructure, this high performance infrastructure as a service in a variety of different ways. For storage, we offer similarly a broad profile of capability. The model essentially starts if you're running on a compute host, you get local flash. Okay. So, unlike other solutions which require local spinning disk, we give you local flash, which is way faster than spinning disk.
You can run all your calculations off flash. If you want to do persistent writes, you go to high performance block storage. If you want to replicate data across a bunch of virtual machines, you can take a snapshot, replicate it into the object store and the object store will replicate it across a bunch of virtual machines or posts. If you want, let's say, you're doing backups into object storage and you say the latest last weeks I want it in object storage, but anything older than a week, I want it archived. You can simply build an information lifecycle management policy and we rotate it into archive.
Archive is extraordinarily cheap. It is $12,000 a petabyte a year. Okay, dollars 12,000 a petabyte a year and you will hear from some customers who are using it for archive. You can put file and database backups. What we do with the storage cloud software appliance, See, big corporate customers have many applications have written over the years that expect NFS or the Windows protocol SMB, which is the file system protocol.
When you move objects to the cloud, they struggle because those applications don't understand object oriented storage. So, the storage cloud software appliance does is a docker container you put on your premise, it front ends our object storage and makes it look like NFS. So you can use the benefits of the object storage without touching any of your on premise applications. That's in a nutshell what we're doing with Infrastructure as a Service. How can you migrate workloads onto this platform?
We can migrate a range of different kinds of workloads. Let's take databases. You simply back up a database using the same tools that use to back up on premise, whether it's Oracle or MySQL, and then you can instantiate a database off the backup. We had a customer last week back up a 12 terabyte database into the cloud and instantiate a brand new copy in less than 2 hours. Okay.
So, it's literally trivial to move a database. We have a technology also available called Golden Gate, where if you're running an OLTP application on your premise and you're worried about taking it down while you're migrating to the cloud, you can keep it up and running on your premise. We can replicate the copy into the cloud and you can switch over your DNS. It takes about 8 seconds and you're up and running in the cloud. No one else offers such a capability.
You can migrate programming languages and your apps in a variety of different programming languages, not just Java, but Ruby, Python, Node, etcetera. Operating systems, I told you we have all the popular operating systems covered. We talked about what we can do for VMware and KVM, where there's a huge base of customers out there who want that capability. And then you can also migrate engineered systems to engineered systems because we have extra data offered in the cloud. So, you have a variety of different choices.
Here are some customers who use us for Infrastructure as a Service. You will hear from several of them and I'm also going to give you some examples. Now, why do they use it and what's the real business value of it? Think of a customer running a workload on their premise. They spend $30 this is a real customer's example.
It was for a typical workload and application workload And it was a calculation of what they were spending on a monthly basis in 1,000 of dollars. They were spending about $30,000 on facilities, dollars 120,000 on hardware. It was a very big gap, dollars 120,000 on hardware. There was additional spend on software. And when I say software, not Oracle software, because the database is above that layer.
This is on operating system, virtualization, Linux, hypervisor and tools. They were not using any Oracle software in this, okay? And then they had a set of people costs that were responsible for installing servers, wiring devices, managing the data center, connecting, handling SSL certificates, IP addresses, etcetera. So they were spending about that much on infrastructure. Okay.
Now, when they move to the cloud, the total cost for them, including the cost of their DevOps people was $440 So they were saving about 30% off the hop on their infrastructure. Now for a customer, the value is they can save 30% not on just the hardware, but on the total cost of running and managing infrastructure, which is big. For Oracle, the opportunity is none of this almost none of this revenue came to Oracle in the past. It was somebody else's hardware, somebody else's virtualization technology, etcetera, etcetera. Our differentiators, much better performance and you will hear from customers not just at this event, but there's lots of customers benchmarking and testing and they find that we have not only better performance, but much more predictable performance because of the design of our network and because we don't do something called oversubscription.
Oversubscription is where you say customer A asked for a compute host, customer B asked for a compute host. I'm going to try and put them on the same compute host because I'm assuming they're not going to be busy at the same time. If they do get busy at the same time, then you're going to contend for resources. We don't do that in our cloud. A lot better scalability and availability.
Scaling, the heart of it is we have so much denser servers and storage that there is a lot less traffic that goes over the network. And then because of the design of the network, we have much better scale. Security, so from a security point of view, I talked about the fact that every customer has 3 important things that they really like about the security profile. One is that their network traffic is isolated. Number 2 is that the physical host has no Oracle software running on it.
And number 3, they have a variety of things that we do for segregation of duties where our people don't even look at their software. We don't have access to it. We're locked out from that environment. So it is a completely isolated network and server environment. Therefore, they're very comfortable with it.
Now a small example, our control plane, which our administrators use to access all the servers is not even reachable on the internet. You can't even access it from the internet. No one else has that capability. Defense Department, security conscious companies really want that, because they don't want a threat to happen from the compute guests. Governance and compliance, see one common thing that customers want is the ability to say, I want to procure centrally and then distribute it to my departments and I want to monitor the usage.
We have a capability called compartments that allows a CIO to buy centrally, distribute budget and quotas to different departments, set up security policies on it and then monitor usage That avoids the sprawl of accounts that customers complain about when they go to the cloud. Hey, everybody is buying and bypassing my central procurement process. That's also important for customers. Portability of workload, we've had customers migrate very complex 12 hours, 2 weeks ago. Okay.
So, portability at some point, it becomes how well are you designed to mimic the protocol, the network design of the floor that a customer has in the data center, thereby making the move of workloads much easier. And then lastly, we recognize that a lot of customers say, hey, I really like the public cloud, but I'm not able to go there right now for a set of applications. It might be because of jurisdictional reasons, it may be because of regulatory reasons
or it may be
just a comfort level that the Board of Directors has. We are the only cloud vendor that offers the entire stack that we run-in the cloud is available on a customer's data center floor as a subscription of metered service. In fact, the price of it is the exact same as in the Oracle Cloud. Thereby, you can what's the benefit for a customer? You can standardize your DevOps tools, meaning the tools your programmers use to create cloud environments across the public and private because it's same software, same API, same tools.
And your choice of deployment, you can decide later rather than upfront, because we give you choice commercially as well on where you can deploy. Okay? Here are some customers who use our cloud. Pfizer is a project we did with the Accenture Business Group, Oracle Accenture Business Group. They're building pharmaceutical science lab for their drug research teams.
So, when they're doing research, they don't want to have physical infrastructure for their scientists. They want to just spin up a lab, put the statistical analysis software, their clinical data securely in the cloud, allow them to run their experiments and Quieset, where they run it on our cloud. Genelectric is using our compute platform to run their 3 DIX capability, which is their smart sensor, digital, industrial Internet platform, as well as they're migrating competitor's cloud to us, not just their test and competitor's cloud to us, not just their test and development, but also their production applications. They're a large ISV. The UK government is migrating a large number of legacy bespoke application workloads to Oracle's infrastructure and platform as a service.
Comcast, the cable company is using our platform to build the next generation suite of applications for its Xfinity service. Riot Games, they are the company behind the League of Legends. They are moving their production workloads to our cloud infrastructure as a service. T Mobile, their leasing application, which they use for financial leasing required 99.99 percent availability. They run it on our infrastructure service, production and disaster recovery.
Brink's, which is the security service company, the armored car service, is migrating their entire archive of documents, which is over 2 50 petabytes to our cloud archival storage solution. The State Bank of India, which is the largest financial institution in India, had a regulatory requirement to keep the cloud platform within the company's boundaries, within its data center floor and they're using our cloud at customer offer. So there are many, many, many more such examples. These are a short list just to give you a flavor of what people are doing with our Infrastructure as a Service. Let's talk about Platform as a Service.
What are we what's the core strategy behind platform as a service? The core strategy behind platform as a service is that companies spend a lot of money doing very mundane things with software, installing software, configuring software, patching software, tuning software, backing up software, setting up disaster recovery, etcetera. So, if you took any piece of software, take Oracle database, take MySQL, whatever it is, and ran it on Infrastructure Service, What infrastructure service is optimizing is giving you compute network storage elastically cheaper. But as a customer, you are still responsible for installing the database, installing the application, patching it, backing it up, maintaining it. So what we're doing with platform as a service is fundamentally eliminating the need for any human to ever have to do that ever again.
And we're doing it by automating it through software. Okay. So you come in the same account, you can come in and log in, you can choose from a catalog of these services. There's about 60 services in 8 categories. Let's say you want to create a database.
So you can come in and say I need a 10 terabyte, 16 core database, I need disaster recovery, I need clustering, I want it fully encrypted, I want it patched on the last Friday of the month, I want it backed up every night at midnight. You press you submit that both through an API or through the console. It's about 5 screens. You get a database 22 minutes later and you never have to touch it ever again. You never have to patch it.
You never have to back it up. You never have to set up disaster recovery. You never have to do encryption. All of that is done for you through software. And why is that attractive to customers?
It's attractive in 3 important ways to customers. The first way is it allows departments within an organization that never had IT resources like DBAs or companies that never had IT resources to be able to use the software. Number 2, it allows an organization that is bottlenecked in legacy system maintenance to free up people to do projects, because the work is automated in the software. For example, you can take all your Sys DBAs who are responsible patching and backup and help them focus on application performance tuning. The third thing it does, because the software is doing this, 100% of every piece, every database, for example, of which there are over 100,000 in our cloud.
Every instance is identically configured, identically configured. So for a customer, you get 100% repeatability of that config. So you don't worry about why is this issue happening in this test environment and not happening in production, because they're all identically configured to software. You don't have idiosyncrasies because one human did it one way and another did another way. So the heart of what we're solving with platform as a service is to eliminate the bottleneck in IT by automating how people can get a platform and use it to build cloud services.
There are 8 categories. I'll go quickly through the major ones. Data Management, we provide the ability to run Oracle Database, MySQL and a couple of different flavors of NoSQL. You can also run SQL Server on our infrastructure as a service and other databases. Okay.
With Oracle, we've automated everything. Same thing with MySQL, same thing with something like Cassandra, which is an open source key value database. You literally come in and say, I need a key value store, I need X amount of compute, I need so much scaling, I want you to monitor CPU. If CPU goes over 50%, scale it out. If it gets below 40%, scale it back down and the software takes care of everything.
Okay. So, we provide a lot of capability in our data management platform for people to run not just small databases. We introduced the product to allow you to run a very fast database for $175 a month. That's $2,000 a year. It is cheaper than Amazon's cheapest database and it is way faster.
And the reason we can do that is not only is that available, but as a user, you never have to touch the database. You simply load data and write your program against it. To build apps, we support 4 styles of app development. You can build apps in a variety of different programming languages, not just Java, but also the popular scripting languages. You can build mobile apps, mobile web, mobile apps, native apps for iOS, Android and Surface.
And at OpenWorld, we introduced something called Mobile Bots, which allows you as a user, if you're a millennial, for example, and you really want to use Facebook Messenger or WeChat, but you want to interact with enterprise apps like ERP or HR, you can literally be inside your Slack channel or Facebook Messenger and interact with enterprise apps using this platform. We give you the ability to open source development. We certify close to 600 different open source packages, not just for development, but what engineers call the DevOps pipeline. I can check-in source control, I can compile, deploy and run. And there are many customers now using straight open source, no Oracle software on our platform for development.
Okay. For microservices, if you're building a new style of app, we also provide you a Docker platform with the microservice framework on top of it to allow you to build microservices. Here are some people who use our database cloud. Here are some people who build apps with our app dev platform. Here are people who build with mobile, okay?
Analytics, what are we doing with analytics? Our platform offers the following capability. If you're a customer who wants to do move data into the cloud, you can sweep data into our object store. We have people running huge volumes, 50, 70 terabytes per day into the object store. You can also stream real time data into a technology called Kafka, which is very, very popular for real time streaming.
The data comes into Object Store and then you can instantiate a Hadoop cluster. It takes about 2 minutes to instantiate a Hadoop cluster. On top of which, you can run MapReduce or Hive. And most importantly, we have a lot of work going on with something called Spark, which is very, very popular in the Hadoop space now. It allows you to do streaming calculations, so you can look at a data stream and coming in real time and do calculations.
You can do machine learning on the platform and you can do SQL as well. If you're not so our differentiation here is the performance of the platform, the ease of use, because you don't have to manage the cluster. We're literally spinning up the cluster for you. You just describe the workload you want and we spin it up for you, because we have very, very dense compute nodes with a lot of memory. You don't have to go from your Hadoop node back into the storage system for read, write performance.
You just get it all locally. Many people use a technology underneath this called Tachyon for really, really great distributed IO performance. Okay? And if you're not a hardcore data scientist who loves writing Spark, Scala, there are lots of people who like doing that, but there are many more who are like, I don't even understand what that is. We give you a tool set on top of it.
You can go into a graphical user interface and model ETL with something called data flow machine learning. You can cleanse your data using data preparation. So, you don't have to go in and manually get your data lake dirty, as they call it. And then if you're a scientist who wants to collaborate on the data, we offer something called big data discovery, which allows you to build statistical models and on sample sets of the data. Okay.
So we give you a full tool set to do analysis on top of this platform. End user analytics. Starting about 5 years ago, we wrote a brand new tool set for data visualization and analytics. It was meant to solve a very simple problem. If you look at the average company, It's a data warehouse, so it has lots of data.
So people don't want to give everybody access because somebody may make off of the data. For 25 years, almost 30 years, all software vendors in BI were focused on that 20% of users, who are the power users who access a warehouse or a mart. We asked a question, what happens to the 80 data visualization. It had only 2 premises. You need a browser and you need to know how to load data using Excel, which we think most of the world knows how to do.
So you can bring your data in Excel. We load it, blend it. You can essentially do ETL within Excel. Okay. So you can cleanse, standardize your data, then we generate underneath the entire OLAP model that you need.
You don't have to know SQL. You don't have to know what a cube is. You don't have to know what an index is. It's all done in memory. You can then visualize your data and then we synchronize it to a variety of different devices.
So if you guys were using it and you're flying from New York here, you can detach, do analysis on your desktop, get your hotel, plug it back in, we synchronize it to our cloud and automatically distribute the analysis to all your devices and to the colleagues you want to share it with. So we made analytics, the content of analytics, exactly the way that you would use Icloud to synchronize your contacts for example, Okay? Now, here are some customers who run big data in a cloud. Ambev, for example, the big distiller, they moved from another cloud vendors, MapReduce platform to our analytics big data platform because of the performance and scale of the system. We have lots and lots of users running us for analytics, Kentucky Fried Chicken.
They want to do analysis for every restaurant and they didn't want to have a desktop in each restaurant that's required to run analysis, so they do it all off the cloud. And you'll hear more today from a couple of customers. Most large customers are going to end up with multiple clouds. And so we provide an integration layer in our cloud, connect our cloud with anybody else's cloud, including on premise. It's based on an architecture, which is very popular in the industry called SOA.
You can build an API gateway, which abstracts your APIs. You get a super high speed messaging system to connect the cloud with other systems. And then you can also build a business process or workflow on top of it. For security, we can centralize where you manage users. We can do strong authentication, if you're really concerned about security.
All the data in the cloud is protected by customers' encryption keys. We do not own the encryption key, the customer does. And the reason for that strong segregation of duties posture is, even if you get a regulatory request from a government agency, we're not allowed we cannot technically handle the data, because the customer owns the keys. Okay. Lastly, all the systems in the cloud.
If you wanted to monitor, administer your infrastructure or platform, we'll give you a whole toolset to do that. You can monitor them yourself. You can set up compliance rules to make sure they're in compliance with your best practice configurations. We give you a real time dashboard where you can see security events. If you want to remediate those, we've got a scheduling and orchestration framework, which auto remediates everything.
In everyone else's cloud, you have to do that with a different set of tools. So, you got to sort of stand it up yourself. Here, we give it to you built in. Here are customers who use our management cloud. I mentioned, we have a solution to run this entire IaaS and PaaS pack, not just in our cloud, but on your floor.
So the largest bank in Chile in South America moved from another cloud to our cloud for two reasons. The first one is their latency from Chile to the data centers for these cloud vendors, which are not in South America, take a lot of time. Secondly, the government requires the production data to sit on premise. So they run their test and dev in our cloud, production is on the premise. And we are the only vendor that offers this capability, it's been available since March.
Now, this is a real customer example. A real customer built a web app, 4 middle tiers, 4 web servers, a 2 node Oracle RAC cluster. They did it on premise. They did it on another platform. They did it on the Oracle Cloud using our platform as a service.
This is their own measurement of how long it took, how many clicks and commands, okay? The speed is a measurement of how much automation there is. And the fewest clicks and commands means the fewest mistakes and the highest degree of automation. I think the numbers speak for themselves. And I think that's what I mean by the PaaS is not about just running on the certainly does, but by automating all the manual steps that you have to do.
So what's the business value to a customer? So this is a metric from a financial institution. It is dollars per core per month to run the Oracle database at the customer, okay? They run about 5,000 Oracle instances. Facilities cost is $30 Hardware cost is $120 The software costs, not just the operating system plus virtualization plus tools, but also the Oracle license and support is $500 per core per month.
And then there's $8.50 in maintenance costs. So you're probably wondering why is that maintenance cost higher, because it not only included the storage network and Sysadmin, but it also included the SysDBA and AppsDBA. On our platform as a service, they can do it for $1,000 which is a 30% reduction of the top run and manage. If you look at the, let's call it, the scarlet boxes, the software cost, that was all that Oracle was getting before. I think in the cloud, you can see we make a lot more.
The addressable market for us is larger because we're not just moving your license to the cloud, but we're also eliminating that manual work and the value associated with eliminating that manual work. Secondly, if you look at Infrastructure as a Service, if you took that software stack and ran it on Infrastructure as a Service, what you're displacing is that $30 plus $120 and then there's some portion of that software cost, which is about $100 versus operating system and virtualization. So even if you cut that in half, what you're doing is taking $30 plus $120 plus $100 which is about $2.50 And even if you have that, you're saving $75 Here with the PaaS, we're saving the customer $500 which is a lot more. And so there's a lot more value in what we're doing with PaaS and just taking a stack and running it on infrastructure. Okay.
Now, there's been a lot of speculation about how is Oracle Database as a Service different than Amazon Aurora, for example. And so I thought it's better we just have a frank discussion about it technically. Amazon is a fine company. They have good products. But I think there are differences in reality between what we do and what they do.
Amazon is Aurora is Amazon's OLTP database. It's very new. It was released less than 2 years ago, and it started as a fork of MySQL 5.6. MySQL is an open source database. However, Amazon Aurora is not open source.
It is a private fork of MySQL and there are no changes from Aurora that have been contributed back to MySQL. So even if you just look at raw MySQL, our MySQL service is based on the open source version of MySQL. It is not on a proprietary port. Okay. So that's first thing is MySQL has existed long time in the industry.
People have taken a private fork of it and they're using it to run an OLTP system. What is Redshift? Redshift is their analytic database. It's a fork of Postgres by a small company called Parexel, which went out of business and they bought them in 2011. Redshift is also not open source.
And Redshift and Aurora are not compatible and they're not runnable on any other cloud. So our database service is open, meaning you can run our database on any cloud, including on your premise. We have a single source base for OLTP and data warehousing. And then, obviously, there are technical differentiators. So let's go through just a small set of them.
Amazon can only run a database up to 16 cores, because they don't have the ability to cluster to scale out. They have no scale out capability. Okay. So the largest they can go is 1 physical node or 1, what they call, compute shape. We can go up to 352 cores.
They cannot run a database with very high performance. The maximum IOPS they deliver is 48,000, which is the top end of Elastic Block Storage. Today, we can run 3,600,000 IOPS, which is slightly more than 48,000. Aurora cannot run a large database in size. And so, if you imagine you have a, let's say, your Dell computer and you have a customer table with all orders, purchase orders of all the customers.
That's over a 1,000,000,000 rows. In order to scan that to say, find me all customers who have bought a computer in the last month, you need to be able to scan the table in parallel. We call that parallel query. So you can run you don't have a single thread trying to scan that table sequentially. If you don't have that, you can't scan large databases with parallelism.
So their maximum database size is 60 terabytes. We go significantly higher than that. Now if you look at high availability, just two examples. Imagine we're running order entry. If one physical host goes down with Oracle RAC, Real Application Clusters, you can continue a transaction on another physical host.
Okay? The competition has something called a cluster. But what a cluster is, is they have one instance and they do asynchronous replication to another instance. It is not a single physical instance with real time connection. So what happens if one node goes down?
You cannot continue doing your updates, because you technically because it's using asynchronous replication, can only have one writer at a time. Okay. So you not only cannot scale out with the cluster, but it also has much less availability. So take us an example. Imagine you have a storage corruption, which happens reasonably frequently, like a storage volume got corrupted, because they depend on block replication for the Doctor location would also get corrupted.
Just at the moment, you really don't want that to happen. We don't use storage replication. We use a technology called Data Guard, which is based on the database replicating based on asynchronous logs. So we protect you to much higher degree than the competitors do, okay? It also cannot protect you for high availability if you have a secure database.
So if you encrypt your database, you cannot replicate an encrypted database. So either get security or you get availability. You don't get both. So, in a nutshell, there are lots of technical differences. I understand that they have a market that they're selling into and they're a fine company.
But when people say what they offer can easily replace you, it is absolutely not factually true technically. And they are very elementary differences between what they do and what we do. Okay. Now, here are some customers using us for Pass. Mazda, the car manufacturer runs their replanning calculations, supply chain replanning.
It's a custom statistical program, 24,000,000 parts and orders. Every time a specification changes, they run it on our Java Cloud, database cloud. Samsung runs all of its in store merchandising, sales and transaction processing. On the Oracle Cloud, there was a press release earlier this week about it. Manchester Airport, 48,000,000 counter rather than this, they use our mobile cloud service to build that.
Toyota is moving many test and dev and production instances to our cloud. They also use our cloud in North America for all their analytics for motor sales. Skanska, a Swedish construction company, runs all its financial analytics and corporate management reporting, including defining what they're going to report in their 10 Ks and 10 Qs using our cloud. Gilead, which is a pharmaceutical company, they use us for analytics and they've opened it up to all their line of business employees because we've got this solution, which I mentioned, which is simpler to use and you don't need a data warehouse expert. Avaya uses our Oracle Cloud to integrate its front office and back office applications using our integration service.
KPN, the National Telecom Company of the Netherlands, they wanted to run their test dev middleware database environments, because they have many applications that have telephone numbers in them and telephone records, they are not allowed to put that in a public cloud. So they are just like State Bank of India, they are going to run it on our PaaS on the Oracle CloudCustomer. Shrek Bicycles, for those of you who mountain bike, they have a fan club where people can challenge one another for races, something like 60,000 or 80,000 people. They collect the real time information coming off the sensors on the bike and they share it with other people through our mobile cloud. So, variety of different examples, all kinds of different scenarios and using a variety of different services from our cloud.
So that's a very, very quick tour of infrastructure and platform as a service. I'd like now for us to get some customers up, so we can talk to them about their experience using some of these services and the value that they get from these services. Thank you.
Good morning. Thank you, everyone. I don't think Ken, I don't have to read this, right? Okay, good. So good morning.
My name is Steve Miranda. I'm responsible for the applications development, our SaaS app, that's Oracle. I'm going to go through today essentially our definition of our SaaS Apps Cloud. And in particular, what I'm going to focus on and why I want to define it is to help you understand what we think are fundamental differentiators, both against other SaaS based vendors and especially as we get into ERP and supply chain manufacturing against our traditional on premise competitors, because we see that as a high importance to our customers and also give you a sense of what we see differentiated going forward and where we're making our investments. But what I'm going to really spend the bulk of the time is, we feel great, particularly on SaaS.
This is really this week's been a celebration of our customers. So if you've been with us for a while and you've been at this show for the last several years, you've really seen our themes go from we're going to build a set of cloud based applications to we have our 1st set of cloud based applications Do we have a set of cloud based customers now? And last year, really completing our SaaS based suite with the introduction of our manufacturing supply chain onto this year. And you'll see this expressed in our customer panel, really 100, if not 1000 of customers live on every pillar in our suite, from CRM, HCM, financials including EPM and now manufacturing supply chain as well. And I'll give you some of the examples as we go through and some of the importance of them.
With obviously the key highlights, we are now over 12,000 SaaS customers running our system in the cloud. We have more than 10 times as many ERP customers in the cloud as our closest competitor with Workday. And over the last fiscal year, we're growing our HCM cloud at about 2.5 times the rate. And then in marketing and other CRM areas, being the top and extending our lead, and particularly with data as a service, which I'll cover in some detail near the end of the presentation. And what we are seeing now, what we'll be saying for some time is that it's not a question of if, it's a question of when 100% of our existing, And I'll show you not only our existing customers, but other customers will move from their traditional on premise applications, either ours or our competitors or third party, but into our cloud.
Now to the differentiators. So first off, I think it's important to understand in the SaaS definition of cloud, what cloud is not limited to. So, it is not simply a hosting of the applications. We offer that for traditional service. Some of our existing competitors will try to talk about a cloud based application, but it's really their existing older platform repurposed and rehosted.
It is not simply a subscription versus a license a subscription fee or versus a license fee. The reason why we think 100% of our customers are moving to SaaS and the reason, frankly, why we did all these years of investment to rebuild our products from the ground up, because if you think about it, if that's all SaaS was defined to be and those are the only thing that would have been benefits for customers, we could have taken the E Business Suite or Siebel or others, hosted that and called it a day. We didn't do that. We did significant investment. And why did we do that?
The fundamental reason why is we could now deliver better software faster to our customers than we ever could before. And we can deliver applications that we never had a hope of delivering and no one has a hope of delivering in the on premise model, but save the new applications for a little bit later. First off, what do I mean by we can deliver better applications faster than we ever could before? So and the example on the slide, it says 3 to 4 times faster. It is probably that is probably understated.
So in the old model of the world, we had a software release. We release it probably once every 2 years, maybe 2.5 years, maybe sometimes up to 3 years. Why was that the case? We could have taken the same level of development, broken it up into smaller pieces and released every 6 months like we do in the cloud. The fundamental impediment to that is that our customers couldn't consume it.
Very common, almost universally in an on premise implementation, the customers take our applications, whether it's the E Business Suite or Siebel or SAP, by the way, and frankly more common SAP, and they customize those applications. So, the upgrade that we deliver, it's impossible for a customer to take that upgrade vanilla, run it because they would have to check their customizations, make sure to upgrade work with their customization, oftentimes redo their customizations and or replace their customizations. So, as all of you know from our existing customer base, in that profile and that model, it's a very slow, very expensive model. So, we, and I'll use we, the industry, ourselves, SAP, everybody in the on premise model released roughly once every 2, 3 years. So the innovation cycle had that for real innovation cycle, not just developing software, but developing software and customers actually implementing it and using it, conservatively, was once every 2 to 3 years.
That's if we just count how long we took to build it. More often than not, customers wouldn't start adoption, and you guys covered this when we have a new release, well, adoption is going to start really a year after it's out, 2 years after it's out, etcetera. And then implementation takes another year or 2 years after that. So, you're talking very commonly 4, 5 year release cycles, real innovation release cycles. And for our engineering teams, and again, I'll use the industry to actually get feedback on how well we did, did what we built actually work.
First of all, that release was usually long forgotten 5 years later. 5 years later, how do we do? The business problems have changed, the fundamental assets changed, and it was very, very imprecise. That's the old world, at least 5 years conservatively. Today, every 6 months, we have a brand new release of our SaaS based applications.
And we deliver that to each and every one of our SaaS based customers that I had on the prior slides immediately because they are all hosted in our cloud. And importantly, none of them have any customizations that preclude the upgrade and that need a redo. So we deliver that to them. And then because it's hosted in our cloud, we can measure precisely how well we did. What do I mean by that?
So as Thomas described, we never see, in fact, it's impossible for us to see our customer data. But we do extensive analysis on what our customers use in our software. Every click the customer makes, we measure the time. Any slow clicks, we fix that immediately. We measure what features are being used.
We measure what features aren't being used, we measure how the features are being used, we measure certain ratios of what customers are doing in terms of feature usage, and it gives us immediate feedback to then incorporate into the next release. So you've gone from at least a conservative 2 to 5 year release cycle to a 6 months release cycle. You've gone from little to no and certainly at least imprecise feedback to extremely precise feedback, we can deliver better software faster and keep this product more current. As an example, and you guys all live this in your own personal lives now, I'm sure every one of you gets frequent updates to the laptops that you're on right now. You get the updates, you get new features, you get new user interface going.
Your phones, you have automatic updates on your phone, automatic updates. Now, all of us have configuration in the products. We all have our own calendar settings. We have our own contacts in our phone. Maybe you have certain apps that you run that you've extended it.
Those are extending the applications. Those are not customizing the applications. So you extend it, you can stay modern and current with the latest new features, but you don't need to redo everything you've done before. And all of us can be personalized even though we're on the same device. That exact same analogy is what we've done in rebuilding our SaaS applications.
Frequency of updates, frequency of innovations, precise measurement without compromising on personalization. And you can't do that simply by taking your older technology and hosting that on the web. That technology was built with a customization, invasive changes in mind, and hosting is very, very different from SaaS on a go forward basis. And by the way, if you want to do a test just at superficial level to see what the benefit this is, if you have an old phone somewhere or if you have an old tablet somewhere and you haven't run those upgrades for, let's say, 3 years even, not that long, If you look at an enterprise software world, SAP on premise, Oracle on premise software, 3 years is not very old. Look at how old the user interface looks if you haven't upgraded your mobile device or laptop over 3 years.
Look at some of the applications that will not work on that application. Same thing is happening for enterprise app, same need for immediacy of speed and same reason we wrote real apps. In addition to that, we had to transform a lot of the ways that we actually engage and do business with the customer. And Doug Kieran, who follows, will talk a lot about our improvements in terms of 0 hassle buying, simplified our pricing experience, having accelerated buying. We went to great lengths to ease the implementation process because the mindset of a customer can change now.
When you get software delivery every 6 months and new and improved changes, as opposed to once every 4 to 5 years maybe, you can think in terms of phased implementations because you know that whatever you do in Phase 1, you're going to get software delivered that's quickly for Phase 2. If you're only going to get a delivery once every 4 or 5 years, the customer mindset used to be, we have to get this all in now. So, we eased that implementation towards a much more adoptive implementation and made our entire service delivery more cloud based. And again, that only happens from reengineering your applications top to bottom, not from simply rehosting your old application suite. And that's what we mean by SaaS.
Now, what are some of our key differentiators within that context versus other SaaS players? Our SaaS applications are complete, data driven, personalized, connected and secure. And let me go through them 1 by 1. Is there a way to get the current slide updated here would be helpful? So first of all, complete.
Complete, we mean robust functionality for not only multinationals, large enterprises, but also smaller enterprises across multiple product pillars. And you'll see when I bring up the customer panel, most of our customer base have started in 1 product pillar, whether it's CAX or even a subset of a product pillar like marketing, expanded to sales, service, move from that into the order management, order capture area and or supply chain manufacturing, moving to that into core financials, including consolidations and moving to that in HR, including the talent management and payroll, a complete suite of applications that customers can adopt in phases wherever it makes sense for them and expand as you go, both moving from our applications and moving from any other customer application. 2nd one is key and data driven. So, we've talked about this in the past as embedded business intelligence, moving from transactional apps, which is really where ERP started, into much more business decision apps. And a key distinction here where we've made the most investment in applications over the last several years is data driven not only means internal data, but external data.
So it used to be data driven was you can run BI on things that happened in your enterprise, things you knew about your customer, things you knew about your supply chain, things you knew about your financial cash position. But now, we like other applications, which I'll detail in a moment, can supplement that data with an extensive array of what we call 3rd party and 3rd party anonymous data. So, we supplement your internal data in the cloud with cookie data, mobile device data, consumer purchase data, and much, much more, which again I'll detail in a moment. The next fundamental piece that's necessary then in the cloud, because I said that we all had personalizations on our phone or a mobile device and our computers, but we were updating that. But personalization does not necessarily complete everything for an enterprise app.
You may need the ability to actually extend that application beyond what you can just tweak. And by extension, we allow you to use our platform as a service, the exact same tools that we use to build our apps, Java, the Oracle database, BI tools, mobile tools, all the tools that Thomas talked about available to our customers in SaaS, all the tools that many of our customers and ISVs use today to write their applications in the most popular programming language in the world and the most popular database in the world, you can now run and extend our applications, but extend them in the same way as I described your phone, where you can still do that upgrade without having to worry about losing any of that information or that it will block the upgrade going forward. And that's what we call our SaaS and our SaaS with PaaS combinations. And then, we're in a somewhat of a unique position in that we have not only our cloud based applications, but our on premise applications. And remember I described to you that though we have a complete suite, most customers will migrate to our cloud based applications in a spot that makes best sense for them at the beginning and move over time.
So, for example, we have many PeopleSoft customers who run HCM and Financials. Their first step to the cloud has been to move HCM to the cloud and we have a prebuilt connector back to the existing PeopleSoft Financial System, so they can run Oracle in the cloud for HRR and PeopleSoft on premise for finance and we pre integrate that for them. And then over time, they upgrade the financials. Similarly for our CRM customers in Siebel, you can move digital marketing to the cloud, while still keeping your Siebel order management on premise. We have pre built integration for that.
And now those customers are moving. And what we're starting to see is not only movement around the edges, but now customers moving the core of their ERP systems to the cloud and integrating to 3rd parties, which they've always integrated in the past going forward. And the final fundamental tenet is security. And this has really changed in my mind over the last year for customers really starting to understand, instead of security being a concern or an impediment, I think it was the earlier question a gentleman asked as far as move to the cloud, but frankly, one of the key drivers to move to the cloud. And at the base level, what customers are starting to understand is security is not security in terms of the data, in terms of your software standpoint, it's not a one and done exercise.
Oracle from its very beginning and continues today, invest in security to make sure every part of the stack is secure, from our data centers to our hardware, to our database, to our application tools and middleware on up to the applications. And at every single layer, there's innovation and security, which has to be kept up to date with the latest security threats that are out and available. When we combine all of this and that investment level on an ongoing basis, is frankly something that the vast majority, if not all of our customers, can't do in a cost effective way in their own cloud. And most customers, if not all, are more secure in the Oracle Cloud. And therefore, it's starting to become a push to the move to our cloud for our SaaS based applications.
So that's what we mean by complete, data driven, personalized, connected and secure. And all of those driving tenants apply to all the product pillars. But now let me get into the individual product pillars and detail some of the new investments and new product features that we've had. And some of this will explain when Mark heard in the past and I think on the call talked about how we're expanding into new markets. I'll get into a little bit of what that means specifically with the applications investment.
And then I'll get into how we're seeing the most common customer use cases and adoptions within each of the product pillars and product families. And the first one I'm going to start with is our CX Cloud. So just as a reminder, CX or customer experience is inclusive of marketing, sales, CPQ or configure price quote, basically the quote and order process for your sales, e commerce, so a cloud based e commerce platform the service platform and service module and social and really social and data which underpins all of the CX applications, which again, I'll talk about more in just a moment. Huge investment that we made in the verticals because most of these applications were pretty well built out versus either what we've had in the cloud in the past, frankly, well beyond capability that Siebel or any other on premise system used to have and beyond what our largest competitors in CX Cloud had. What you'll see over the last year is increased investments in the more and more industry specific functionality in automotive, telecommunications, financial services, high technology and CPG and retail, kind of consumer type of applications, really geared towards having customers in those industries having now best in place best in class capability within service, sales, marketing, etcetera.
And this is a sampling, which at this stage, as I mentioned before, this conference is really a celebration of our customers, really a who's who of any of the best brands in the world using our CX solutions. Now, some of the most common adoption patterns, I sort of alluded to this a little bit at the beginning. In CX, more often than not, customers start CX with one particular product pillar. Many times they already have a Siebel or some other legacy back end system doing their customer management or order management. The number one area we're seeing uptake is in marketing.
And the single biggest driver is marketing today is much different than marketing was even 2 or 3 years ago. There's multichannel marketing, the need to market to customers not only in the traditional fashion, but in email, in social, in mobile. And there's digital marketing along that, the ability to personalize that marketing, not just to broad segments of the audience, but to very, very specific segments of the audience. And I'll detail that more in a moment. The other very popular case and we're seeing returns, for example, like Micro Focus with 200% increases in their sales pipeline by using digital, multichannel targeted marketing from the Oracle Marketing Cloud.
The other very popular one is the Service Cloud in the lower right. Once again, service, the dynamic is changing and the push is really from a consumer driven push for service. So service used to be call centers, which again many of our existing customers had, but it's migrating very, very quickly to dial call centers, plus what's called knowledge management. So, if any of you had called up on the phone for service and they directed you, please go to our website and you could find the following answers. That's usually driven by our knowledge management application, helping you answer it.
But more and more service is not only phone, it's not only knowledge management on premise web, but is now digital and social. So, Twitter and you pick just about any airline, any cable company, any consumer, more and more of their traffic, their call centers are becoming a combination of call centers, traditional, and listening centers, meaning monitoring social activity and responding in that social medium, Twitter, etcetera. And then more and more these days, the next channel is through chat or SMS. And so, a modern service application has not only the traditional channels, but all of the new channels. And because of the dynamic nature of those channels and that media form, to do this outside of a cloud based environment where you're able to consume updates every 6 months is really impossible in on premise model.
Because again, if you think back to an on premise type of service and you need to consume changes every 6 months because there's a new channel, really impossible for you to do because you can't even get your upgrades done more than once every 2 years at best, again, in the traditional model. We're seeing tremendous traction in our sales cloud from sales force automation, territory planning, incentive compensation and tremendous progress in our brand new introduced Commerce Cloud, which we just introduced last year for online e commerce. I'm going to get into more in the Commerce and sales in just a moment with some of our new apps. And now, for the first time, you'll see on the panel, as customers have adopted one part of CX, starting to see them adopt a second, the third, the fourth until they get a complete replacement of their on premise CRM systems. The second product module I'll talk about is HR, which again, as a reminder, includes global HR, talent management, workforce management, including payroll benefits, but also some brand new innovative applications we call work life applications, which significantly differentiate HR, there's a sort of a limited amount of functionality.
However, if you deal with multinational and large corporations, if you deal with companies who have at scale, like L Brands, the parent company of Limited, who has to run payroll for over 80,000 retail employees with sophisticated retail for payroll requirements, that's where we significantly differentiate from competition. But also in what we call work life applications. So, we've introduced 2 that are unique and differentiated from any competitor. The first is what we call employee wellness. So, it's an add on to your benefits module to track and encourage employee activity and however have contests or gamifications around employees, integrates with Fitbit, so you can kind of drive employees for better employee health and internal competition and promotion of that.
The second is for corporate giving application. So, at Oracle, for example, we have sort of corporate giving program where if we donate to certain charities, we get a matching program. Corporate giving tied to your HR system allows you to register those, allows you to submit and or request a new charity to be part of that and allows you to organize broad events. So again, at Oracle, this month or next month, we're going to host a heart walk for the American Heart Association where the entire campus gets together and does this walk, it's kind of internal promotion. We allow you now to register that in your HR system, collect teams of people, get sponsorships for it, corporate giving, all of it's driving HR adoption.
All of it's extremely popular, especially as the global workforce and the demographics of the global workforce change to give you a more comprehensive look at HR, none of the solutions come from even the new HR competitors that are in the cloud. Again, what you see in HR is large and small companies, big brand companies, US specific or North America specific, and then many, many, many global companies. Just top of my head running our core HR of over 70,000, 80,000 employees, of course, Oracle ourselves with over 100,000 employees, UBS, British Telecom, you'll hear from AXA on the panel in just a moment, Siemens North America, L Brands, Macy's, Kaisers to name a few in our cloud HCM. The HCM adoptions are starting to become, they used to be much more a start with talent management, either recruiting or performance management or compensation, and that is still some what we're having. So CSX has increased their cycle time and hires by using our social recruiting by 38%.
But much more common today, as both the breadth of the cloud has solidified and customer confidence in cloud has solidified, we're seeing more and more and more customers go completely to HR and the cloud in one full swoop. So, taking PeopleSoft, core HR, payroll, talent management, recruiting, and moving that entirely to our HR cloud. And you have companies like Pearson who've seen 3 months payback by moving their entire HR system to the cloud. The next area to cover and our fastest growing area now is our ERP cloud, Financials, Risk Management, Project Portfolio and Procurement. We have over 2,800 customers in the cloud with over 400 go lives just in the last 6 months alone.
So we're seeing speed and we're seeing depth and breadth across the financials. The 77 countries, that's 77 countries for which we have prepackaged legislative localizations to operate on behalf of our global companies. That does not mean we only operate in those 77 because you can configure the system and write reports to comply for every country in the world. Those are 77 countries where we pre delivered it, where our customers don't need to do anything to run-in terms of those global localizations. The reason we were able to get there so quickly is not only the investment we have in the software, but the experts who live around the world, who understand the nuances of accounting and tax and warehouse management rules and documents you need in all of these different countries have built these applications before.
The same experts who built them for the E Business Suite, for JD Edwards, for PeopleSoft, who understand not only today's but the ongoing investment. And we have many people from our accounting team who are on governance boards like IFRS, who help define and shape what the new rules and regulations are. That's what helps us stay compliant all up to date and in a broad basis, by far the largest, most complete financial set in
the world.
Here's where you'll probably see the biggest change. So if you talk to us last year, we were seeing much more smaller, medium business and or companies who were starting to move pieces. Over the last year, we have more and more large enterprises like HSBC, and you'll hear from Orange in just a moment, who are moving their financials core to our cloud based applications, not just the smaller and not just the acquisitions or different lines of business. In Financials, really a few types of adoption methods that we see. One is sort of what used to be the e business sweet spot, the no pun intended, the EBITDA sweet, sweet spot.
These just now pre IPO or now post IPO company moving to their first financial system. Those are now moving directly to the cloud. People like Pandora Music, people like Boingo Wireless, people like LendingClub, starting in our cloud based financials. 2nd, you're seeing companies who are large, like GE, moving either lines of business or lines of business and geography over. So GE has moved GE Healthcare starting first in Canada and Latin America, and they've now migrated since last year to over a dozen countries across Europe live with ERP.
They're also live with GE Digital. And live with GE Digital, not only for the newly formed GE Digital, but for any acquired company going forward. And then again, the third flavor is having companies do more whole sale migration to the cloud, large or small, across their financial fleet. Last year, we introduced our supply chain manufacturing products from planning, core manufacturing, order management, logistics, PLM and procurement. And just in the last year, we've had over 6 40 customers to our manufacturing supply chain cloud.
Again, you'll hear from one of them today, We're just starting to have the go live. And the go live, given that we introduced the application last year at this conference, and actually this year it's earlier in the year, so it's less than a year, is quite remarkable compared to the pace that you used to have seen in a manufacturing type of product. Over $10,000,000,000 management of freight in our cloud, over $18,000,000 dollars 10,000,000,000 pardon me, and $18,000,000 product management and large manufacturing customers. The manufacturing adoptions, you're seeing really sort of a surround strategy, companies moving logistics first or customers moving PLM, their product lifecycle management or innovation management, or as an example you hear about today, a complete data complete supply chain manufacturing move to the cloud. And then the final category I want to talk about is our data cloud, which many of you probably aren't as familiar with a newer offering to the cloud, which is really a collection of investments and acquisitions we've made and organic investment.
So, formerly Bluekai, Datalogix, AddThis and CrossWise. And that collection we have through collections of data partners, cookies, mobile device information and then connections we are able to make with the aggregation of all that data, we have over 5,000,000,000 cross channel profiles. A cross channel profile being defined as an activity that you may have done on your mobile device, on your laptop, on your phone. And on that profile, we have information about purchase you may have made, things you may have researched, demographic information. And this is what today we use to drive our digital marketing.
So I said in the marketing, there's digital marketing that's much, much different. And all of you have probably been personal examples of this. And frankly, you've probably been personal examples of this over the last 2 days. If you booked your trip to come to San Francisco for this conference on your laptop, almost immediately thereafter, you probably started to see on your Facebook page, on any other page you went to, or on your Google's page or Google plus or on your mobile device or on your Twitter stream, advertisements for activities in San Francisco, hotels in San Francisco, mobile or pardon me, hotels in San Francisco, events in San Francisco, rental cars in San Francisco. If you also happen to be a loyalty member at, say, Hilton or Hyatt or Marriott or pick any, I don't want to insult any of our customers or partner hotel chains, a loyalty card member at one of those, you probably also received an email from that hotel chain with offers you may have had for San Francisco.
Or if you're a loyalty card member at Avis or a rental car capability, an email with that going forward. That is very, very likely you being one of the 5,000,000,000 profiles that we have, collecting that data, doing the data mapping, which allows us to with high level of certainty understand that that profile is this email address, is this Twitter handle, combine that with our customers, who's really a who's who of corporate brands, their first party data, so they know so all we know is the anonymous activities you're doing. We don't know your name. We don't know your email. We know what activity you're doing in an anonymous source.
However, we can combine that and connect that with our customers' first party data to allow them to do targeted marketing. And we have by far the latest largest data cloud in the world and combined this both with ours and third party marketing to drive real time digital marketing today. And announcing at this conference is we want to extend that into a whole host of applications we call adaptive intelligent applications and make adaptive intelligent applications available across CX, HCM, supply chain and ERP. So what is it? And I guess my simplest example, I'm going to give you on premise to cloud, now to data driven applications.
I'm going to give it an example that all of you are probably familiar with. If you came to this conference 10 years ago and you needed to work your way around San Francisco and you weren't familiar with it, you probably had a map. I'm not sure how many people remember those, but I'm talking about the old fashioned paper maps and that's what you did. You bought it, you owned it. If something changed, you didn't get updates.
If you needed to have an update, you need to go buy another one, that's more or less your on premise applications going forward. And maybe you customize it, meaning you scribbled out street names and things on your own, didn't work on your new one because you had to redo that customization. Now, a few years after that, you got Google Maps on your mobile device or some other way. It was great. It updated itself.
It was always current or reasonably always current. It had new UIs. It worked on mobile devices. And that's our SaaS based applications, much the way I just described. You can personalize it, put your favorite locations, your home, your work address, etcetera.
All of ours were different, upgrades came in. It was great. That's more or less SaaS based application. Taking data driven applications and adaptive intelligence is now like Waze, which Waze has all those same characteristics, except it has data, not just your data, data from, I'll say, everybody in the world, obviously not everybody, data from all data is available out there on the web and aggregates that and uses it to make better decisions on where you should go and how you should get there. In addition to that, based on feedback, it improves those algorithms.
So that exact same concept, we have the applications, in this case, e commerce applications, we have the data and what we've applied with adaptive intelligence is we've written the machine learning algorithms, in this case for a next best offer, to surface the offer in our commerce application, see how effective that offer is and then improve that algorithm going forward. So, what would the example here is, meet Taylor, we have demographic information, 32 lives in San Francisco, coffee drinker, she likes hiking the outdoors, maybe we know where she lives. And what you would typically see today is, okay, I've got that information, so I'm going to put some offers together, buy 6, get one free, some prediction on what a person of that sort of demographic information might do and have those offers. What we're going to do at Adaptive Intelligence is take that, let's take everything else that we know is going on with the data that we collect. We know it's been hot lately the last few days.
We probably know she's been traveling because she's been again, she clicked on that website to go forward, so we know where she is. Maybe she lives in a different place, went to Southern California, it's even hotter. And we're going to adjust and tune those algorithms to offer an iced coffee with a different upsell because it's not static information, it's updated information and updated real time across all the data. And we're going to take that because we have our data assets and we have hundreds of data scientists who've been doing this analysis on behalf of those name brands in marketing for years already. So by adaptive, we mean application to surface the recommendation, data both internal from our customers and external from our data cloud, data scientists who have not only expertise in the data, but domain expertise in CRM, supply chain for transportation planning, ERP for next best discount offer taking, HR for finding the most comfortable the best fit and the most available hire person and drive adaptive intelligence apps that learn and get better over time.
Significantly different from our competitors who don't have the external data that we have to supplement the data and don't have the years and the hundreds of data scientists to analyze the data and in most cases don't have the breadth of the functional experts. So the same functional experts who helped us drive the 77 enhancements and localizations, apply them to applying digital intelligence across the applications. Significant ongoing differentiator for us in SaaS applications, which we just launched at this conference. And we have a list of some of the most examples I just talked through, adaptive intelligence to improve your offers, for supply chain to build stronger portfolio, for HR for better candidate fit, etcetera, etcetera. So with that, let me I don't think we're running a video right.
So please welcome our customers on stage to have you hear directly firsthand from SaaS customers about our applications.
And just a note for those of you
on the webcast, we'll be breaking shortly and please join us here at 12:30. We look forward to speaking to you then.
Ladies and gentlemen, please welcome to the stage Oracle Executive Vice President, Doug Kering.
A little surprised that they're letting me up here. I've been at Oracle for 16 years and not once have they allowed me to come up here. Now it might be because I run the mergers and acquisitions program, but sometimes I'm not sure. Actually, the reason I'm up here is a little over a year ago, I expanded my role to include stewarding our cloud transformation from an internal operation standpoint. So what I thought I would do today is give you a little bit of insight into what we're doing across the organization and a little bit about what the impact has been for customers.
So the safe harbor language as usual. So no, everyone knows this. We've spent all morning talking about technology and it comes as no shock that I think we believe now we have the broadest and most best and most complete set of cloud technologies in the industry. But it's been more than that. It's way beyond engineering.
It's really required a transformation across our entire company. Because if you go back and look at the series of technology transformations as we move from mainframe to client server, client server to the Internet architecture, While the technology has changed, the business model underlying it didn't change. The reality is kind of what our sales force sold, how they got commissioned, what the contracts look like, how the support model worked, it was still the same thing. It was just wrapped in a different type of technology. Now as the cloud came along, that's all obviously changed dramatically.
Whereas the company moving from delivering products to delivering services, when we think about the deliver of customers that were up here on the panel. The way I look at it is we really move from being an antagonistic type of relationship with the customer to being a strategic partnership type of arrangement. Because when I say antagonistic, the notion is as we went through and once you'd selected the technology, all of a sudden we were at odds with each other. The whole contracting practice was about trying to get the best terms possible for each of our companies as we thought about the sale of this multimillion dollar type of license. And then when it got to again to the support notion, we oftentimes had no idea what the customer had done with the technology.
When you think about it, we sell a perpetual license, the customer takes the software, goes back to their internal operations of the company and they connect it to who knows what, right? It's the different hardware, different storage, different servers, different implementer. And oftentimes, they actually change the software itself. So that when they had a problem they call us and be like, hey, something's wrong with Oracle's technology, fix it. And of course, our reaction is, well, what the hell did you do to it?
And so that got to this notion of you got to recreate the problem. And so as a result, it's really hard to be in a great partnership versus now with the cloud, it's all on us, right? To the degree that something goes wrong and they call us, hopefully, we already proactively called them and said, hey, something came up, we fixed it for you, right? Because the reality is we're running it all on their behalf. What that's really meant for us as a company is that we've had to change our whole way of thinking, really from a cultural standpoint, starting with Larry, Saffron, Mark all the way down through the organization to really move from a risk management type culture to one in which it's all about a service oriented culture.
So as I like to say, the old oracle is the just say no policy, which is as I went around internally to all the organizations, a lot of the response to change management was no. We're like, why don't we change? Well, that's not how we do it here. I know that's not how we do it, but why don't we think about doing it differently? And sort of there was the old idea that nobody got fired at Oracle for just saying no if you're in finance or legal, etcetera.
Versus now, our notion and orientation is this idea of saying, even if the answer is no, kind of like a genius bar, if you will, within Oracle from an internal organizational standpoint, the answer has to be how can I help make it right for you and for your customer? So we've got a real different philosophy going on from that standpoint. So this thing carries out across the organization. So when I think when I thought about it as we went in and had these discussions about what does it mean to be a cloud provider, the first thing I'd tell you is that as a result of doing all of these acquisitions, every cloud company that we purchased along the way had a different business model. So whether it's a customer success manager, you got paid as a hunter versus a farmer, all of these intricate notions of how should we run were all different in the cloud.
Now that's very different from when I was doing integrations for on premise type companies because in the on premise world, the business models were very, very similar to each other. And the reality is it's easy for us to just move this company in and run it at Oracle the way we've always run Oracle. But in the cloud, that wasn't the case. We had all kinds of different business models to think about. So we took the opportunity to step back and say, how do we think the business model should operate?
So beyond again the technology, now we get to the business model, how do we want that to be? And we first said that we want to change how we think about engaging with and caring for our customers. And it fell along 3 main pillars: how do we market to them, how do we sell to them, and how do we service them. And internally, it was around this notion of what are the organizations that need to be in place, what are the processes that need to be in place and then what are the systems that need to be in place. So we use some nice words, if you will, that have helped everybody internally really understand what are we talking about.
And we use the connected customer experience on the marketing side. So that's a notion especially around using Eloqua and a lot of our marketing cloud services where the idea of tracking business customers throughout their journey and lifecycle. When they touch oracle.com, what are they looking for, right? What is their profile using the Oracle Data Cloud? Is it likely to be an is this an HR person versus is this an IT person?
So that then we can tailor the content and tailor the information and start to understand their body language to get to the point that we know when we should engage them in the selling experience. For me, the way I always looked at that cloud is versus on premises, in the old world, the first call you made was the sales rep. In the new world, it's often the last call you make. So we've got to do a and a part of that is doing a very good job all on that front end from the contact of the opportunity. Now once of course now we've identified them and this is a buying opportunity, we looked at this and this is going to be history again at Oracle is one of those things where a lot of The history again at Oracle is one of those things where a lot of customers come to us and say, you've got the best technology, but man, you're hard to do business with, right?
And that sort of philosophy when I go back to being in a service oriented culture, that's not what we want. So along that lines is kind of how do we now sell to you to make it very quick and easy to purchase from Oracle. And then finally, the superior ownership experience. So when we think about, okay, now that you've purchased the cloud service, we've got to be on top of you understanding the deployment, the upgrades, the downtime planned or unplanned, the statistics about your usage and adoption, the entire notion of trying to drive their success in the deployment of that cloud service and really again get to the point where as we saw from these panelists, every one of our customers is an advocate, right, gets up there and holds the mantra for why Oracle is great. And in fact, on this service side of it, around the Spire ownership experience, again, the notion where they're engaging with our development teams, our support teams, that sense of bonding that's going on with our customers is really where we're focused.
So now the beauty is this is also a way for us to then leverage our own cloud services. So everything that we've built around this entire journey and its life cycle utilizes our cloud services in some way. And it's also been amazing, and again, you heard it from the customers that our ability to uptake more and more features as we think about how to craft this journey can be done faster because each new upgrade of the software enables us to take advantage of additional features that we need versus you're stuck in this world where it's going to be years before you get to a new release of the software. So as we get through here, I'll talk a little bit more about how we've leveraged some of these cloud services.
So I mentioned I will
go through the accelerated buying experience. And in a nutshell, the notion is to make the ordering process at Oracle flexible, friendly, easy, fast and with lots of help. I'm going to go through each of these things in a second. But our target after we spent a lot of time analyzing all of the historical cloud transactions that we had done at Oracle to look at if we change this, we change the contract, we change how people buy, we change how our internal organizations work by using what we ended up with customers based upon actual transactions completed, we realized that this entire process could easily satisfy 90% of all of the cloud transactions at Oracle, and that's been our target. So what does it mean to buy Oracle Cloud Services through the accelerated buying experience?
It really is as easy as 1, 2, 3. The notion is that the sales rep through our CPQ cloud is working with our customer. And oftentimes, in many cases, the customer is just doing it on the Oracle Store themselves without intervention with the route. It's just determining their cloud needs. So what would you like to order?
So oftentimes just crafting what the ordering is going to be include in terms of which cloud services, how many users, that sort of thing. That gets all done in CPQ. The rep has all of it right in front of them. They click all the different options they need from that perspective in conjunction with discussing with the customer. And then it's done and it gets the order gets sent to the customer through a landing page.
They open it up, look at it, hey, is this what I want to order, verify that's the case, and all they have to do is click to accept and they're on their way to deploying the cloud service, okay? So I'm going to go through a little bit more of what that means in a second. But again, I want you to think about simple, fast. I mean, this is the type of transaction processing that we want to do because it's what customers want to do with us. And obviously, it's an advantage for us because it dramatically simplifies the ordering process internally.
So when I say when we say about revamping kind of the ordering process, it started with the terms, right? So when we get back to that how has that antagonistic relationship worked in the past, the notion is the buyer decides what they want, the seller, our sales rep verifies what they want to sell to them and then historically turn it over to lawyers and to contract people. And months months would go by. Well, we beat the crap out of each other because some lawyer somewhere wants to prove that they can get the best term possible against our customer, who happens to be the person we're trying to sell to, right? But that's their job.
That's their entire role. And you get done and we finally get that in place and the taste left in the customer's mouth is, God, that sucked, right? Which is the opposite of what we want to have happening. So we did is we looked at all these contracts again in the cloud space. And after analyzing, we said, listen, a lot of this stuff, it's all belts and suspenders.
It's to take care of the most obscure possible outcome, right, which just meant, again, another opportunity for everyone to sit around and try to figure out how to handle that obscure outcome. And reality is, as Larry would often would tell us when we were architecting this, he's
like, how many times are we really suing
contract? It just doesn't happen. It doesn't happen. Mainly, it doesn't happen because it's a business relationship and we work it out anyway. So we spend, again, months with this entire process to take care of the most obscure possibilities that are in there for an outcome in which we'll never use, right?
That only leaves customers with a horrible taste in their mouth. So we sort of said, okay, take off the belts and suspenders. Let's move to taking a risk management risk acceptance posture in these contracts because we already know we've completed contracts with these terms. So we know we accept this, right? We're okay with these type of terms.
So why go through the process of trying to just get a little bit extra from the customer? Again, through that process, it dramatically shortened our document and it made it dramatically easier for the customer to understand and read and look at it from a plain English standpoint. Then we had this idea of how do we create options for flexibility where a customer may need a little something different in each contract. And again, looking back through all the contracts we had, we've tried to figure out what are all the options that everybody has been looking for. And then we had our IT team put all that stuff into CPQ Cloud.
So that, again, when the salesperson is in there, they're empowered to take a lot of the stuff themselves without any further approvals. They can select on all the options. So there's a lot of sales rep empowered options. And then there's a notion of a bunch of other options where it might need an approval, okay? But in each case, they can select it.
And after the requisite approvals are received, the contract and the terms are automatically generated. We no longer have to have this big group of deal management people who are simply rewriting a contract each and every time. Lots of manual labor, lots of extra time in the process versus now it automatically can be spit out, which means now we have rapid ordering. So once that's all done, gets sent over to the customer as we said, they can open it up, They can verify it. The ordering page is 1 to 2 pages long.
It's just validating what's there. And of course, the lawyers are welcome to read it. The associated terms and conditions are in a link there. So it's not like we're hiding anything, but it gives them the opportunity to validate what they care about and then move on with, again, that rapid process just clicking to accept. I mentioned the extensive support.
Extensive support is one of those notions where we took all these people that were just doing manual tasks with no actual added value and we reoriented to the process of being service first, right? So we started with in the actual cloud service applications, let's put more information right at the fingertips because a salesperson at the end of the day should be really good at understanding our products and services, understanding what the customer needs are and connecting the 2 together. That's really it. They shouldn't be experts around limits of liability and obscure contracting terms. And that's really what they had become because the better you were at that, the more likely you were to get your contract through faster, which is totally ironic in terms of where you'd want to spend your energy.
So in this case, it actually has a journey right there in it. The information is available, pops up to help them be able to complete the order quickly. Then there's a knowledge base, which is, hey, maybe in some instances, I need to have a little bit more detail about some of these things because I do have to explain it to my customer at the time. Huge knowledge repository that's available to them at the click of a button. And then finally, there are instances in which the customer says, hey, I got you, but I'd like to get on the phone with somebody who has a who is an expert in this stuff.
So we took a lot of those resources that we're doing, again, this manual repetitive behavior and we redeployed them in the service mentality so that they're now there and available to engage with our salespeople and our customers to give them more of the hands on help. So lots of support that then comes with this. In terms of the rollout, it's been amazing. Q3 is really when we went through and said, okay, let's deploy this. And we launched the project.
In Q4, we already had the application changed and up and running, right? And part of that, we had revamped and simplified the ordering process. And we did some training. Now it's Q4, not a great quarter for us to do a lot of training. We'd like to close more businesses, I'm sure all of our investors would agree.
So we held off on doing too much until Q1 where, again, we used another opportunity to add some more of these capabilities. And then we did a full on training with our usual beginning of the year training processes. Already through 2 quarters, 2 full quarters of closed transactions, we've gotten 2 thirds of these cloud contracts that go through the accelerated buying experience. And when I say accelerated buying experience, I mean this is where there is no manual intervention. Okay?
There's no lawyers that are going off and writing obscure terms and things like that. This is all online through the process I just described with the target of getting to 90%. Now, how we do it? We'll continue to look at improvements, ways to tweak things, etcetera, as well as education of not only our internal folks, but also our customers. They also need to be educated about how to rethink buying of enterprise technologies.
And then the other thing we're working on is moving this to non cloud transactions. So we're looking at this for our hardware business, for our license business, etcetera, because again we see huge amounts of value and benefit from for both parties through this process. These are some quotes that have come from our field, from our sales teams. I mean, again, these are words we're not so familiar with in the support organizations at Oracle, things like that was awesome, that was very efficient, that was very effective. I mean these are great things.
The sales teams internally love this. They love it because it helps them do their job better. It gives them more opportunity to go out and sell more. And again, in the service mentality, we're spending a lot of time doing interviews. We do case studies with our sales teams to get to other sales teams.
We do best practices around what have we learned. They help us tweak the model, etcetera. So again, it's a much more engaged process. And our customers are ecstatic. So here's two quotes that I put up here.
I'm going to roll a video in just one second. But this notion of being delighted with buying Oracle Technology, I honest, I've been here again 16 years. I don't remember anyone using that word to discuss to describe Oracle buying processes. So anyway, that's the type of transformation. But let's oh, sorry, let me go back.
Let's roll the video now just to give you a little sense from the customers directly. Video? Maybe. Are we in charge of the video? Slight problem?
Okay. I'll just talk a little bit more before the video because I think it's one of the most powerful things we have. So let me just summarize kind of what the benefits of that buying experience is. So for our customers, it's that notion of being simple, fast, rapid access to the cloud technologies. Anything that stands in the way from the moment they decide they'd like to take Oracle Cloud Services and the moment they're live and having their users on it, that's all wasted time for us, right?
So anything we can do to eliminate that is good for the customer because they want to get access to those technologies as is good to us. I mean, how many of you as you think about your iPhone or your Android and you said, I'd really like to listen to I saw the Sting concert, I'd love to listen to another song from STING. And the response was, no problem, we'll have it available for you in 3 weeks. Probably wouldn't be that satisfying. It's the same thing from an enterprise technology standpoint.
Then for our sales teams, the reality is for them, that's external time on internal processes about how to get a deal through than external processes. It was almost like if you wanted to, you could have built a small business around how to help a salesperson get a contract through within Oracle and you probably make a lot of money. Now all of a sudden, instead of doing all that, they're out selling more. It means they can make more money because they can go out and sell more opportunities to sell the cloud services. And then for us, I think we look at it as a, okay, just one second, leapfrog from a competitive standpoint, which is at the end of the day, we're trying to not just evolve, we're trying to completely revolutionize how we again think about the business model as we go through this cloud deployment process.
So with that, let's skip to customers. Yes, can we we don't have the video? Okay. Okay. Oh my gosh.
Now that I'm so bummed. All right. So let me just my last slide before our questions is kind of the summary of what we're doing. This for me is my big statement, which is and this is what we do internally with all of the constituents to help them understand. We've got the best technologies in the cloud in our belief.
And now we've got a Marriott with being the best company to do business with in the cloud. And I've been here all week, been with customers talking to them about this. And the amount of enthusiasm with customers is overwhelming because they've all have been desiring this for so long. And you open this up to them and I mean it just unleashes the ability that has held us back for a long time. So with that being said, that gives you a little sense of what we're doing from an operational transformation standpoint.
And I think we got a couple of you said a couple of minutes for questions.
As we went through the Accelerate Buying Experience process, the entire process took a day and a half from start to finish. That was from the time that we decided to purchase the product and notify our Oracle rep till when we actually could log in to Planning Motion Cloud Service. I received an email from my Oracle rep. In that email, there was a link that allowed me to launch a browser that gave me access to the document. I clicked on the document link, reviewed it internally.
We approved that document and then we clicked the Accept button on the same webpage. And we were owners of Planning Budging Cloud Service. I was very satisfied with the fact that in very little bit of time, we were able to efficiently purchase the product. We also were able to use our company credit card. My experience was fast and secure.
It is a refreshing approach to purchasing software from Oracle. It's safe, secure, efficient. It's the way business should be done. I think the accelerated buying experience was excellent. I mean, the best testimony you can give is that I barely remember it.
That's how quick it was. I think it was, hey, I want to get a couple of environments, get on a quick call with sales and tech rep just to clarify what I need. They prepared the documentation and gave me a link. And when I went on, everything that we talked about was there and all I had to hit was accept. And next thing you know, I have access to a full Oracle environment with operating system and everything that I need.
I think the fact that it was so quick and easy that I kind of don't even remember it probably speaks volumes.
Now you know why I was so desirous of making sure we got that video up there. It's just that powerful. So, yes, I'll take questions if anybody has any before we move on to Mark and Zaffron.
Hi, Doug. Ed McGuire from CLSA. Have you been able to quantify in any way to what extent the accelerated buying process is actually reducing sales cycles? And also, whether in terms of full time worker hours, what savings you've been able to realize from processes that were previously manual?
Well, let me do the first part and then you can retry the second part because it got confusing for me. On the first part, the savings, yes, we've been tracking the notions of cycle times. Now the problem with some of these notions is they're not it doesn't fully encapsulate all the things that we care about. But the reality is we went back and looked at a year previous and looked at, okay, what were the transaction cycles for this type of deal? And then we looked at the transaction accelerated buying experience.
And you have to remember, customers can get involved where they just kind of go quiet for a bit where they're not actually doing the buying. But we saw over a 50% improvement and we see again it's dramatically more than that in other cases when we think about it on kind of an aggregated basis.
Process improvements And using the example of billable hours for lawyers, for instance, maybe your customers are their lawyers are billing them less or are you using fewer internal legal resources? But to that extent that that may be playing out in other parts of the organization, if you're able to measure some of those benefits?
Yes, we and Safra can talk to a lot more. We specifically decided that what we would be focused on is trying to increase the customer service as opposed to do operational efficiencies from it at this point in time. So he said we redeployed all the resources because the idea was rather than be in a position where we cut resources from it as a result of this, let's over deploy all these resources so that we are always looking to get make sure that the customer and the sales teams right now have the most unbelievable experience possible. So we're sort of taking that approach. But when you again, when you look at it from a customer standpoint and you look at customers like that, obviously, to be frank, the first contracts that we're doing obviously starting at the lower ARR values.
But we've already had $1,000,000 ARR transactions through the accelerated buying experience. So it's floating upward. But when you talk to like a Lyft, they would never have wanted to get a lawyer involved to begin with. So from that standpoint, it's different versus if we're talking about GE or Siemens, the reality is they do have these gigantic organizations that are built around this. And that's why I said it is a customer education process.
I do know within the customer, the buyer doesn't want any of that stuff, right? So they love it because the more they can disintermediate their support organizations who only slow it down, the better for them. But we'll get more as we go through this more and more, we're going to be able to quantify a lot more of the efficiencies. Okay. All right.
Sorry about that. I'll be available later if I hope to answer questions. So with that, I'll thank you.
A bit more involved. Part of what got this started was, you go to customers that have signed a deal, particularly with AWS. And what it will be interesting for you to do, and I won't do it here. I pulled the agreement up. I encourage you to pull it up and just read it.
It's a quick read. It's several pages. And I'll let you do your own interpretation. But part of what Doug was describing that I think is very interesting is these agreements that Doug was describing that people don't like, they're much more advantageous to the customer than this. But what really is done when you read it is at the bottom of it, there's a click.
There's no it doesn't say mark heard sign, just this click. And I always ask the customer, who clicked? Who clicked because what you committed to was far different than anything you've ever negotiated with us? So, this is actually an accelerated buying period experience with actually quite differentiated terms at the same time. So if you get time, please take a look at it, because I bet you it's a little bit different than you expect.
All right. Ken, you've gone through the Safe Harbor statements. I don't have to read this. Yes. Excellent.
You've gone through the non GAAP financial measures?
Thoroughly. Okay.
I don't need to
read this.
No. Thank you. All right. Here's what I'm going to do. I'm going to talk about SaaS.
I'm going to start talking about the current state of SaaS, where we are in the market. And I'll do that not just with SaaS, but actually the aggregated apps ecosystem, on premise both license and support. Secondly, I'm going to take you through based on what we have now, what the opportunity we think is in SaaS. And I'm going to do that really by taking you through details in one specific pillar and the magnitude of what we think is in front of us if we execute. And then I will talk to you about platform.
Now, just as an opening, we don't have nearly the amount of runtime in PaaS. Excuse me? Thank you very much. It's very helpful. This is very complicated technology up here.
And I'm going to try and catch up to it. So the learning experience, it's been a long week. This is the most exciting crowd I've been in front of always. So I'm so thrilled to be here. So in PaaS, I'm going to talk to you about the opportunity.
Now, we don't have the runtime on PaaS that we have on SaaS. So I'm going to tell you more than I ever could have told you last year, but not near as much as I can on SaaS given how much history we've got now and how much data we now have on the application business. So, I'll talk about that. That's just real market. Okay.
That's the plan. Somebody still got a microphone on. Okay. This is SaaS. This is a view of SaaS bookings, ARR.
I think we actually skipped the chart. Can I go back one? This again is yes, this is the revenue. So, 23% growth and you can see the acceleration of the 36% revenue growth to 42%. I think you've seen these numbers.
But the important part of this, as our revenue has gotten bigger, our growth rate has accelerated. This is something we talk about a lot in calls, but I wanted to make sure you saw it as it related to the past several years. This is what's happened to us as it relates to bookings, dollars 247,000,000 call it $250,000,000 in FY2013 to $861,000,000 in FY 2016. Now, I want to make sure I'm clear because I get several questions about what is a booking. And there seems to be some confusion that some companies have different definitions of a booking.
We count new logos and expansion. The definition of expansion to us is a customer had HR and had compensation benefits and then bought succession planning, that would be an expansion to us. If we were to renew the original compensation deal, that is not in these numbers. That is a renewal. So, we don't double count.
Anything in our booking is a net new logo or a net new module to us. Everything else would fall into a renewal. This is what's happened to our deferred revenue, obviously, 65% year on year growth in FY 'sixteen. Now, we've had some dialogue over the past couple of years about how we entered the market, how we promoted, how that related that we had deferred revenue and bookings and revenue that didn't align perfect. That's why we started giving these forward looking projections on bookings originally was to be a surrogate for what our future period revenue would be.
Most of that has flowed through the model now. So, if you ask the question, are there still promotions in our model in several products, the answer is yes. Are they material? Not really. So now we're in a pretty good position where the bookings deferred revenue and the revenue that shows up on the income statement will all roughly align.
I'm going to switch now and I'm going to take you through a couple of different ways to look at our numbers. So what this is, is transactional is code for license. So that's the license as a percent of a total. So the red plus the gray equals the total, 68% of the total in FY 'thirteen was license. That's how you read the chart.
The total of SaaS revenue and license in totality is growing. So we have crossed the model where we had apps declines in revenue that where we actually now have growth. And I'll take you through this in another dimension in a second. But in addition to that, the recurring revenue as a percent of the total is increasing dramatically. This is at the end of FY 'sixteen.
In FY 'seventeen, we will go over 70% as a percent of the recurring total. And we will get aggregate growth yet again. I've now changed the metric for you. I've now included support on prem and we'll redefine this for our horizontal applications. It's not GPU applications, these are horizontal apps, SaaS revenue and our support.
76%, 24%, moving to 85%, recurring now that includes support and you can now see the arrow that brings you aggregate growth. I believe that SaaS bookings this year, I want to make sure I say this to you, get it clear, SaaS bookings will exceed transactional revenue as it would have been defined on the previous chart. This is a very important year for us from an apps metric perspective, because obviously when we book $1 in bookings, the next year we get $1 If we were to book a license fee, the next year we would get $0.20 So, we now have bookings, aggregate growth in bookings against the base that's already bigger with a much bigger percentage of our total that is recurring. This is our pipeline. Now last year, well, I think it was 2 years ago.
I told you 2 years ago, I prognosticated that we would have a lot of bookings. And I'm sure there was lots of
I don't know if that's right,
and based on the behavior of our pipeline. This is what's happened to our pipeline. Our pipeline in apps is not 2,000,000,000 dollars it's not 3,000,000,000 I get a lot of coaching on what I can and can't say. So it's big, big, 2, 3,000,000,000 big, 1,000,000,000 Now, and it's come from nothing. I'm telling you nothing, growing 62%.
Let me explain how our pipeline works. Our pipeline scales into about mid November. So what I've done here is I've mix matched a couple of numbers. The 85% and the 68% are full year comparisons on how the pipeline behaved against the previous full year. The 62% is as of 10 days ago.
Likely, this will although I can't tell you for sure, likely you will see that the full year will surpass this 70% range, would be my guess. And then what we have during the year is we have a decline in pipeline as bookings close towards the end of the year, we rebuild the pipeline as we go to the next year. This chart in isolation is a big deal. This is the current state sort of in conclusion of where we are. Bookings, that's a 52% CAGR in ARR.
You see our performance in non GAAP revenue. The deferred obviously exceeds our bookings. Steve, I think touched on our go lives about our go lives. So go live and this has been a big deal because you sell something, we got to get it live and then when they go live, they become a reference. And that is one of the things if you ask other than fantastic leadership and all the other variables, I'm sure that you think is what's driving this.
I mean, the fact is we have great products and great references. And that's at the core of what drives this. We have good products and I'd tell you they work. Customers like them. At a conference, I hope you all got a chance to see customers.
Customers tell other customers. And this sort of conference builds on itself. We have now in all the things we've changed amongst our sales organization, we've also changed our marketing. I know many of you know this, but we now have actually customer events discrete to each pillar. Safra hosts a modern finance event.
What do we call it? Modern finance, yes. So what we did this year is something pretty interesting. Safran was hosting 1, I was hosting HCM and they were basically right next to each other. HCM, we have thousands of customers now who come to an HCM event.
We can do an
HCM event.
And now so we've actually changed this whole process, not just from a sales perspective, but now a market perspective. And at those events, it's basically customers talking to customers. And you get the echo effect of what's transpired. Pipeline, I've talked about as well. I'm going to shift now.
I'm going to talk a little bit about an opportunity. I'm going to focus on one pillar I'm going to focus on ERP. I'm going to tell you a little bit about the size of the opportunity. Now, I'm cautious to show you this chart because I had a lot of help with this chart. I had help from lawyers.
I had help from investment relations experts, all participated. And as you can see, it resulted in lots of question marks and lot of Xs. And so I badly I would recommend to you to listen to me as opposed to look at the chart, but you can decide to do as you choose. So, we have something like 15,000 on premise ERPEPM customers, okay, something like 15,000. You know we have 2,800 ERP, EPM, SaaS customers.
We report it pretty much every quarter. We talk about the incremental quarter to quarter. You know what we've got. We have roughly 8,000 in our pipeline. That is not a meant to be we're going to close all these.
This is a qualified part of our pipeline dedupped for the on prem customers. So that would tell you that in aggregator, we know of 25,000 names. The marketplace between the 2 leaders and on prem together do not have 50% of the marketplace. What I would also tell you is much as you think that there's a company in Germany and then us and together the 2 are the big bullies of the ERP on prem market, it doesn't add to more than 50% of the market. So it's still a very fragmented market.
Our pipeline is growing at something like triple in terms of the scale of people entering the pipe. This is the benefit of being ahead from a product perspective and now having 1,000 or in the process of going into 1,000 of go lives. We will get a lot of customers. You can insert and that's why it says question mark. You can start doing your math whether you think that's 30,000, 35,000, 40,000, 50,000, you can make up your own.
There's going to be a lot of customers. Now, let me tell you what's happened to us and we're going to have a lot of help with these charts. Our current ARR, I'm going to use that term and I'm going switch to a term called ACV. ARR is annual recurring revenue. The average contract we take is roughly $300,000 You sign up and you give us $300,000 in annual recurring revenue.
Let me explain who the profile of the customers are. Many of those customers are mid market, upper mid market, mostly as a percent of the total financials. ACV is the chance for us to sell those same customers more. You have financials, now you buy budget and planning. You now buy supply chain management.
You buy manufacturing. We have a whole by the way, we have a whole slew of large logos. You see them, but I'm not here to tell you we don't. I'm trying to tell you that's not the predominant part of the base. Many of the large logos that are in our pipeline and also in our existing on prem support business.
That ACV will go up materially from the ARR. I'm not here to tell you whether that's 50%, but I've thrown out a number. Okay? Could be north of that, could be south, but it's a number. And it's not immaterial or else obviously I wouldn't bring it up.
You have to multiply that ACV times the customer count to get a total. That's how the model works. And we know this model well. And one of the reasons you hear us talk about ERP as much as we do, and by the way, I'll make sure I'm clear, none of that includes HCM. The connect rate between ERP, by the way, HCM does not drag ERP.
It's not a phenomena we've seen. ERP drags HCM and the connect rate continues to increase, but I did not include that in the numbers I gave you nor did I include PaaS, Platform as a Service, Infrastructure, anything of that type. If that were to occur, the multiple of our support on our support would be very, very large. Our support is nothing close to the multiply of those customer base times that ACV. This is sort of what conclude on the SaaS side.
Strong growth in FY 2017, we will have a good bookings year. This is not meant to include any numbers other than organic growth plus the acquisitions that we closed in the early part of the year. Revenue will accelerate in FY2017. I'll stick on the pipeline, there's bigger base in FY 2017 and my guess is we'll be in this 70% plus pipeline growth rate as we enter the Q3, Q4 timeframe. Doesn't mean we'll grow revenue, just where the pipeline is and then we'll obviously have to convert from there.
That's where we are in SaaS. This current state and the mega opportunity we have, if we can just execute in ERP. By the way, the drag effect, even though I didn't quantify it, we believe to be material if we can get that base as I've described. All right. I'm going to talk a little bit about PaaS.
First, I'm going to start on database support. And if the bars look if you're trying to figure out if the bars are the same and you're trying to get up here and measure them, if they look the same, it's because they are. They just we just haven't had any change of consequence in renewal rates. So the renewal rates on database are frankly virtually identical across the last 4 fiscal years. This is a view of new software license in database combined with database as a service revenue that would be a segment of the PaaS revenue.
Okay, so I've now extracted database as a service from PaaS. I've added it to the database license revenue and you see this decline. You're going to see a chart in a second on bookings. And if I were to replace that gray of revenue with bookings, you would see a different result. And the reason because of the way we booked, whether it be metered or subscription and the mix of those 2, we have a similar phenomena to what you saw in SaaS.
You have a bookings number, the license doesn't flow through the P and L the way a booking flows through the P and L because the bookings doesn't go through the P and L, it goes through ratably and you get the revenue outage that you get. Our FY 2017, as we look at it today, shows overall growth in the combination of database as a service revenue added to new software license revenue in database. The mix now 11% recurring, 89% transactional. This is a prognostication. If customer moves faster from a bookings perspective, you could see a change in the mix.
This is the bookings. You can see $500,000,000 if I was technically able to, yes, that's great. You can see what would have happened. This number is material, but this was a booking. It's what's driving this booking is what's driving this year's revenue, this FY 'sixteen booking.
You can see what happens as it relates to each quarter. And this is a look at FY 2015 compared to FY 2016, almost a $250,000,000 in Q4 bookings. Within it, we have seen a mix shift from metered to subscription. Customers buying more subscription and less metered. That mix is now roughly 3 quarters subscription, 1 quarter metered.
And that is almost flip from 75 to 25 the other way when we started. This is a view of PAS revenue that actually trails the bookings breakout. So you really have to again, this flows, if you follow the flow, the bookings ahead of the revenue. And this is just listen, this is the way customers want to buy. And so, we have this issue of the mix, what becomes important, the mix of the bookings in relationship to the mix of the new software license.
But once you get to the other side of aggregate bookings growth, which is what we're now at, you get a better performance on the P and L. So number we've not given you before, this is average platform as a service ARR. Now, we have a couple of phenomena going on at the same time. This is a PaaS view of it, but I could have just as easily given you a SaaS view of it. Let me explain what's happening here.
So, at a show like this week, we have released a blizzard of new services. And so what happens now is as our portfolio grows, our ability to now cross sell grows. And so we have customers that were buying database as a service, now also by Exadata as a service. So they will add to the service suite as they go. That's point 1.
0.2, when we tell you we release a service, we usually mean that we are releasing that service in the United States. Same thing is true for SaaS. So over the course of a release or 2, that service suite moves its way across the world. So just for an example, in ERP, we released financials, Steve, or 2 back and we just went to Brazil this last release. So, 2 releases and even though we would have said financials was available, we released that manufacturing supply chain in the U.
S. Manufacturing supply chain is not available yet in Brazil. So there's about a couple of release lag as you work your way. So in some ways, we have new services coming in services that you might think are already available, but they work their way across the globe as we localize them and get them available data center by data center as we go across the plan. Does that make sense to you?
So that's some of the reason isn't just growth, it's also the fact there are more services available and they get released to more countries. So, we get more services on one dimension and then more countries at the same time. And we're going through that process right now. So, this 57% increase, while a fantastic looking number, it's driven to some degree by both the dynamics that I've described. So, this is really the same view of pipeline.
And we have lots of nearlys and greater thans and all of this. This is roughly this is a $2,000,000,000 pipeline. This has come from 0, 8 to 9 quarters ago. So, this is material about a growth. Now, the market is bigger.
We have a stronger market position in this part of the business than we did in apps. And obviously, we've had this revenue you've seen is coming off not coming off the backs of any material amount of support. As you can see, it's wide open with the chart that I did. Strong growth in FY 'seventeen, I've told you, I think all about this. I talked to you about deferred revenue, I talked to you about the pipeline.
And so that's sort of what's happening to us as we speak. And I would love we will I will continue to give you more and more transparency on PAS as I have it and feel like I can represent it with clarity. The pipeline is $2,000,000,000 but clearly the opportunity is materially bigger. Our pipeline in SaaS is bigger than our pipeline in PaaS. And the opportunity in PaaS is materially bigger than the opportunity in SaaS.
Now that said, this is what it's delivered. And I know it's been a while getting from a booking to revenue, but this is how it's matured to the 80% that we've talked about for last quarter, 82%, 68 in Q4. And I would tell you that with all of that said, we're still hitting our stride. We don't have all of our services yet available and certainly yet available in all markets. Okay.
I think we're going to do Q and A now. Safra is going to come up and we'll take any questions you got. I hate to pick. Ken, you want to this is such a big decision.
Sorry, Mark, I got kicked right here. Brent Thill and I were talking earlier today. This could be our 20th Oracle Analyst Day, right Brent? 20 years or so. Congrats Brent.
What a great opening.
Yes. Is this the best Oracle Analyst Day? Of course. Yes, of course. With a $2,000,000,000 PaaS pipeline, we never had PaaS back.
The reason I brought it up was back in the late '90s, the questions that we used to ask was, as you as Oracle became a big player in ERP, how did you approach the sales specialization? Because the skills that you needed for a CRM sales rep were considerably different than somebody selling ERP? So as your product breadth has gotten wider, we're tempted to ask the same question we asked back in the late '90s. How are you approaching this from a sales deployment methodology? How does it not complicate sales cycles, so you can still continue to close a lot of SaaS and PaaS business?
Thank you.
Sure. I mean, this really goes back to 4 to 5 years ago. We didn't start this year, Keshav. I mean, we made the decision historically, we had sold a bag of apps to the CIO. The CIO had the control point of the architecture and the data center and all of those things that really put the CIO in the center of any decision.
As certainly the cloud SaaS became the norm, it democratized the decision making process. So now you had Chief Marketing Officers, Chief Sales Officers and all with that control point gone had a lot more vote in what get bought. And we made that decision way back then to change our sales force and to be very blunt with you, it was painful for us. We have a sales force that really in aggregate is organized by product, by buyer, by competitor. We have a sales force that goes to market that sells sales automation into the sales organization, typically into sales operations and competes with salesforce.com.
We have a sales organization focused on Chief Marketing Officers selling marketing automation, competing against Adobe and others. We have a sales force that goes to market in ERP. Now inside the context of ERP question, our sales force sells ERP and EPM together. We have some presale specialists who are expert in supply chain manufacturing and they're brought in by that team. So, it is a specialized sales force, specialized in the three dimensions that I described and that's not new.
That's been in 4 years now? 4 years, yes. And we're
getting better at it.
But we also just so that I know you all know this and Mark has talked about it extensively is we hired a lot of salespeople.
Some remember that, don't you? There's a lot of guys.
Right. We hired and we hired a lot of younger kids out of college to really change the entire engagement and to make sure we had the coverage. And we started in the U. S. And then spanned out across the world.
I mean, I know you all keep track of our employee numbers. And I'm sure you've seen that it's grown massively because we knew that we had to have more coverage for all of these product lines because that's what follows after the years of development effort. Once we had the products or we had line of sight, we had to get set up to distribute them broadly. And that's been a big effort. And though some of you asked about our real estate and why we're buying and all of that, we've completely changed our strategy and the way we've worked with our different sales teams and training.
We're moving to large campuses and coordinated training. I mean, you saw Doug up here before talking about the buying experience and all of that. But the flip side of it is the selling experience and the productivity you have to have when you have a lot of less experienced salespeople, but who know their product line very, very well. So all of these pieces, I hope, are starting to draw a picture for you about what we've been doing kind of under the covers in this massive operation. And it pops its little head up in different areas like real estate or things like that or employee numbers.
But this is the biggest change in our distribution of our company is how much more sales distribution we have than 4 or 5 years ago.
And it is true. I mean, what Sanford says is a lot of points to this. I mean, we bought big hubs. We're building big hubs. We're building a big hub in Austin, a big hub in Santa Monica.
We've built a big one in Burlington. And it really is different selling. Our cost per seat, if you will, is declining. But we're putting these people in hubs. We've implemented a brand new training organization ground up.
We didn't have one. We now have a sales training organization that brings we bring talented people from the college campus, we train them ground up, their productivity doubles roughly every year. We get them in, we train them, they double their productivity every year and we put them in these fantastic hubs that Safra was describing, all with the most modern technology, so they can actually demo across they actually they don't just inside sell, they demo and they travel a little bit as opposed to the old model of the field rep who was always on the road. Now, we still have a mix of both. But our primary go to market organization in that mid market we've talked about, we've had so much success is exactly what Safra is describing.
Big change for us.
Hi, great. Thank you. I mean, Mark and Safra, clearly, your cloud strategy seems to be working and you emphasized again that the absolute dollar growth in SaaS and PaaS is going to more than offset the decline in license revenue this year. I guess with that being said and with gross margins steadily improving for cloud, how do you think about the potential for earnings growth for Oracle as you look past fiscal 'seventeen?
We think it's going to expand dramatically. I mean, our whole goal here in getting through this period of last year and now our move through this year, we believe that we will end up with significant earnings growth. That's what this is about. That's our job here. And we appreciate that some of you have been bearing with us through last year and a little bit of this year.
But our goal is significant earnings growth. And we and I give really full credit to Larry Ellison. He has dragged our sales force and our whole company through this transition as quickly as possible, which has caused us to give up a little bit of earnings in because of license. But as a result, there'll be a lot of earnings because simultaneously not only are SaaS and PAV and now IAS revenues going, but you also have a situation where our gross margins are starting to improve very dramatically. And we told you last year that they were bottoming out last year and that is turning out to be exactly true.
I don't think anyone would have believed they would have been up so dramatically quarter on quarter this past quarter. And really and we expect that to continue as we get to leverage our economies of scale and we also get the revenues to match some pretty fairly massive investments we were making.
It's John DiFucci from Jefferies. Mark, you had a slide up there where you had, I think, a horizontal lapse for SAPS and you added license. And I'm just it was actually I couldn't see the tiny footnote at the bottom of the Zach next to me is 20 years younger, so he could read it. And then it said it didn't include vertical apps. And I'm just curious, just roughly even like how much is vertical apps relative to horizontal apps in the SaaS business?
You said the question. Yes, we'd never say. But it's now it's interesting. It's not been as it's not been a really relevant metric because they're sort of in their own unique markets with their own unique behavior. So when you get into retail and communications, they have sort of different dynamics in the horizontal market for a lot of reasons.
But it's
The vertical apps, the amount that the staff and pads, if that's what you're asking, I mean, they're moving in this direction, but they are behind where we are in HCM and ERP, and they're smaller anyway. So the impact is this is not what you should be really focusing on, because I do expect it, but we are they are further back behind the fusion world.
Got it.
And they have fewer competitors, John. So the reason we don't do it analytically is it would be it's just apples and oranges. So, we'd be taking a combination of a retail market and a communications market. They have their dynamics. For obvious reasons, less people go into those vertical markets, they have less competition.
They're going to go through it. They're just going to go through it at a slower pace across a much lower pace.
And it's also different between the different verticals like the Primavera folks have quite a bit of SaaS and PaaS and PaaS, while a couple of the others are further behind.
If I could, just a follow-up to that. And
I think
it's probably this is a 2 part question. Direct, well, it's not 8 like cash is that sorry, cash. And I think this one is for Safra, but it may be more too. And I realize it's small, but you made a couple of acquisitions. I get this question a lot, so I'd like to hear you address it publicly.
And it happens to do with how you define ARR, one more clarification there? Sure.
It was I haven't disclosed this summer. I think it's like 3 points out of the 82. I mean, when I say insignificant, I mean insignificant.
I appreciate that. But we would have
had let me say that we would be clear, we would have had significant organic quarter to quarter growth without
the acquisition.
Understood. But when you give an ARR, let's say you're buying another company that is bigger than some of the others assuming it goes through like NetSuite. And when you give that ARR number, you said renewals aren't included. But when some renewals of some of your acquisitions come through, they're new to you, but that's not included in
ARR. John, listen, I want to make sure I'm clear this. We don't gain the system. So we're not there is no renewals from anybody in that ARR number, okay? There was not an anticipation of something in that ARR number.
So, there is no renewals in that number nor the anticipation of somebody else's renewals in that number. Those are new. I tried to define what's new. It's a new logo. We've never had them before.
And an expansion is a net new module we didn't have before. That's what's called booking in error.
Safra, Mark, it's Brentville, UBS. You've outlined a very aggressive push to IAS and that's a really big departure from what Larry had outlined saying that you didn't want to go to that layer, you wanted to move up to that stack. And I'm just curious if you could outline what tipped the decision for you to make the move? And then I think we're all Yes. And I would encourage you, by the way, to ask Larry this question, because
Yes. And I would encourage you, by the way, to ask Larry this question because he's coming here next. You know that, right? But I want to make sure we are really clear on what IaaS and why IaaS for our customers, because is the, what I would call, the completely undifferentiated compute world. And if that was never our whole mission on its own, just sort of rolling around in that world.
However, as we started to create it and build it up to help our own customers, our SaaS customers, what we saw as they were deploying and we expected was that they would need PaaS for their other Oracle applications. What we hadn't foreseen, frankly, sufficiently was how much straight compute they would want, how much non one to our cloud because of speed of light and just wanting to have everything together and securing it together and reducing the handoffs and all of that. And while we were really experiencing that, our ability to execute in this area technically and it sounds like by your question that you heard Larry maybe on Sunday and Tuesday, which I encourage all of you to do as Ken did, it became clear that we could bring a totally differentiated offering that was significantly more competitive than frankly, probably we even realized we could do. As Larry talked about, and I'm sure I hope one of you has the sense to ask him about generation 2 in IaaS. It is now a truly compelling offering.
And as we were benchmarking it, testing it and working with our customers, we realized the demand is significantly larger, standalone for that service from Oracle and that we could be so competitive and also profitable that we decided to really sort of sorry, Sheryl Sandberg, lean in to that offering even more so. And so we're really meeting our customer demand. Was that a 2 part question? Was there a part for Mark on that? No.
No? Profitability Okay. So in the database profitability, that was your question. There we go. So the database has always been very, very profitable for us, because we are at scale.
We have a large development team and we have a very, very large installed base of customers. We have for the 30 plus years of the Oracle database continued to invest in R and D. We've never sort of leaned back on our laurels. New features come out all the time. I'm sure you heard about the excitement around Release 2.
That is a cloud release that has features that other companies not even considered. So the question is, do we want to stop selling licenses and sell only platform as a service? No, we want to do whatever our customers want. Our job is to fulfill their requirements and meet their needs and offer for them whatever they want. The platform as a service and all the different levels, whether it's database or other parts, because we end up providing a much larger service than just a license and because we can do it at scale, it can be very profitable for us.
As Mark said, instead of just selling a license and then getting $0.20 a year, we sell a complete offering where the customer actually pays us more and yet spends considerably less him or herself. And so it's just you heard some customers, it's just very, very compelling. And for us, the issue is to be at scale. At scale, the marginal cost for us is not very large. And as a result, we can be extremely profitable doing it and yet benefit our customers and having them spend so much less than they spend on their own.
And by the way, you see it in the numbers already, Brent. I mean, look at the D BaaS, there's no chance those margins went from 39% to 62% with the D BaaS contribution to the total being either unprofitable or 10 or 12 or something like that. So again, as opposed to just what we say, because I know it's a question, look at what it says on the numbers. And so we've known this for a long time. Now, to Safra's point, it gets yet better as we get more scale.
And it's what we said from the beginning, we're pulling more revenue on the top, most of the cost stays relatively fixed. We have some scales, we go to new countries and new pods within existing SaaS places where we open up PaaS, so there'll be some more. But you see it perform exactly as we described and D VaaS is now a material part of the SaaS PaaS revenue that she's flowing through the P and L as we sit today.
Kirk Materne with Evercore ISI. Along those lines on database as a service, Mark, I was wondering if you could talk a little bit about the wins you're seeing in that. Are those new workloads that your customers are deploying? Are they expansions of existing workloads? And I guess somewhat relatedly, when you think about the maintenance and the ability for support around database to keep growing at a modest level, I assume as long as renewal rates stay at the level that you showed earlier, that sort of low single digit support growth, you expect that to continue?
Okay.
So, a lot of questions in there. First on DBaaS, most of the use case we see today still sits in DevTest. DevTest is by far the fastest of the movement of the infrastructure to the cloud. It's low risk to the CIO. It's DevTest on average is probably 20% utilized in most of our customers.
It's roughly 30% of their IT spend. So the opportunity for pretty quick arbitrage from their budget is high, their risk is low, you see them move. Now, there still is a, I would say, a weakness of standards in most of our customers about the standard dev test environment that they're moving to. I think you will see more and more rigor from IT around that, about how we go to do dev test and what the standard is, but that is the primary use case. That plus sort of the movement of some on prem apps that are moving and they run on some sort of database as a service as you go.
To one more point, you didn't ask this, I will, I do not see when we're out there, Redshift or Aurora in competitive deals for any sort of production type application that I see out there as well. So, that's what we see. The second part of your question was? The support is a direct correlation to the license fee part of the business. So it will be about the transition.
We have a very high connect rate, attach rate, as you would imagine, and that drives growth in our database. Once we get more subscribers, it's simply a subscriber model. We have very few subscribers leave and we add subscribers every year and it's just simple math. Now that will be back to that point I've made earlier about the conversion of pipeline moving to bookings as opposed to transactional. So it's simply a case of math.
But right now, renewal rates are what I described.
This is the Chief Weiss for Morgan Stanley. Thank you guys for hosting us. We've been running around Oracle Open World talking to a lot of partners and definitely sensing a lot of excitement about our own platform as a service. One of the elements the partners were talking to us about was starting to build out vertical solutions on top of that platform. Can you talk to us a little bit about that ecosystem effect of do you have ISVs building to the platform?
Do you have other partners building the platform? Where are we in building that ecosystem to start to get some flywheel effects going?
Yes. We
have a team dedicated that only does that. And they do exactly what you described. They go from partners basically moving the Oracle sort of non Oracle apps, partner apps built on the Oracle architecture, moving that from today's on prem to our cloud. And you can go down ISV by ISV. We have a path to move typically a part of the app and then all the way to the full app suite over time.
Hi, Sanford. Michael Turits from Raymond James. Hi, Mark. I think it's a follow-up to Brent's question on profitability. But on the Infrastructure as a Service side, and I know you've been asked this in past years, but obviously it's been more of a focus as a product area this year.
So what can you tell us about how you think the infrastructure margins evolve over time and impact the whole? And also the same on CapEx, which your efficiencies have kept very low so far?
Yes. Well, this is going to very much depend on how successful we are as far as how much capital expenditure we've got to use. We will spend more in capital on IaaS than we did in previous years. But depending on how much uptake there is will affect it. What we'll have benefiting is the fact that we'll have some significant revenue coming from it.
And so on the margin side, I think we'll be in good shape. The I don't know, there were was there a third question in there? In the scale in the scope of profitability, obviously, IAS is less profitable than PAS. However, it also kind of depends what's deployed, etcetera, and what's the scale. PAS is more profitable for obvious reasons.
I don't know, I think I covered did I answer all three questions?
We know what the infrastructure as a service margins are now.
No, they will they should improve dramatically. Oh, yes. No, no, because you see, we have what you see in our infrastructure as the service margins now is dominated by our generation 1, which is Oracle Managed Cloud Services. In IaaS Gen 2, what Larry spoke about and what will take over and dwarf the current IAS numbers is significantly more profitable than GEN It's a fully automated software defined operation. It's very, very cookie cutter managed in a very, very specific highly automated and generally inexpensive way for us.
And as we scale there, the margins increase. So it really does depend on what the mix is over this next year as we transition from really Gen 1 to Gen 2?
It might be interesting for you to know we have a team of people at Oracle who try very hard to convince us that infrastructure as a service is going to be just as profitable as PaaS. And we sit here today telling you, we'll see.
We'll see.
But we have by the way, that's what we tell them. So, we have a lot of technical reasons, Larry will probably get into them if you want to get him down that path, that tell us that can be the case. We're not OEMing a lot of part. Remember, we have a different model than everybody else that approaches this market because of our technical position. And I will say on a spreadsheet, on a piece of paper, as you play this out, what they say is true.
We want to see that in practice before we make any statements like that in a meeting like this.
That would be why I didn't say that to you.
Yes. I just want you to get a feeling though that we're not going to this thinking this is a 2% business.
Yes.
Hi, Ross MacMillan, I'm at the back.
Hi. Ross MacMillan, RBC.
Thanks for
taking my question. So Mark, you had a slide looking at the database business where you had both new software licenses and database as a service revenue. And in 'sixteen, license declined and you started to get some growth in D BaaS. And then in 'seventeen, it looked like you expected a flattening of that database license, while still getting nice D BaaS incremental growth. And that's a little bit different than what we saw with the application transition where the licenses on horizontal apps.
It's probably a bit the way the size of the base because the total is big when you look at it. I mean, there is some decline in the license number. The bigger phenomena to watch, we've got that factored in, is really the turning of the booking into revenue. Now, let me what I was trying to say is that you could see an increase in more bookings in 2017, which could be a trade off from license. What we see right now is what I showed.
But and we would not mind taking that trade off. If that occurs, we'll take it.
Is there
a structural reason though, I guess, was
really my question as to why it might be a different transition on database relative to
applications? Sure. Yes. Let me try to explain. In the apps market, most of our customers that have an app, let's say I've got an HR app and it's an on prem app and I use it and I say I'm moving to the cloud, That app will at some time after transition period that app will go away and now I have the subscription for the cloud.
Most of our customers have what's called a ULA. They have an unlimited right to database. I may have 100 units of database that I've committed to over several years. I may move 2 units, 3 units, 4 units, but I still have 96 units left. I still run the bulk of my applications on prem.
And so you don't get quite the you don't get the relationship of the purity of this goes from here to there. You still have a premise based on a material size. And that's where you see agreement to agreement. Most of our customers operate on a different type of agreement for database, so utility type of agreement as opposed to the application environment of scrub. So it's different.
Walter Pritchard from Citi. So I guess one of the things we hear frequently, we saw a lot of your customers that were cloud customers, existing customers, not necessarily new Oracle customers. I'm wondering as you think about the PaaS and the infrastructure as a service adoption that you'll see, how are you thinking about your share of the new applications that are being built versus being able to migrate your base? I think one thing we see when we look at what's going on at Amazon, they obviously don't have an installed base. It's mostly capturing new customers.
And so trying to get a sense as to how successful you need to be with the new customers and the new apps to achieve the goals that you're talking about.
Well, let me make
sure I understand. You're talking about the apps market, app to app?
Yes. So I guess what I'm thinking is, if I look at what's being built on Amazon, people are building IoT and they're building engagement apps, social mobile this and that. And what we heard a lot of your customers in the past in IaaS space and what you see over in the exhibit being shown is more sort of existing stuff migrating to the cloud. And so I'm wondering, do you think you need to get the kind of share that you've had historically of new apps? Or can the new stuff go to Amazon?
I know you're not going to say that's going to happen. But then could the new stuff go to Amazon, you migrate what you have and this is how it plays out.
Of course, the answer is we'd love to do both, but it starts with
I'm just trying to figure out what you're thinking will happen.
We've got a huge workload to move, a huge workload to move. That isn't today. If you look at our workload on prem, we'd love to push a button and move it over, if that's your question. If that's big enough share, certainly, if we just did that alone, our revenue would scale dramatically. We would gain enormous amounts of market share, because we now do all the work just for our ecosystem alone.
If we just move the Oracle ecosystem from how it sits today on prem to how it would then look in the cloud, our revenue would go through the roof and so would our gross profit dollars and our
net income
as well.
Yes. But interestingly, when you look even at our SaaS business, you'd say, well, you must just be moving over E Business Suite customers, J. B. Edwards and PeopleSoft customers. And yet, somewhat half of our customers
More than half.
More than half of our SaaS customers are new to Oracle. So that should just tell you right this is in the app side alone. And so even though we would be thrilled to just get our own installed base, which is a 35, 40 year old base, all the way over.
First of
all, not everyone will move and all that, but let's say we could push that button. As Mark said, our business will be enormous. But what's actually interesting is not only are those guys moving, but then they're also taking paths, which you even heard here or we've been at this for a week as customers talk about what they're building next to it, all new stuff. And yet, as Mark mentioned, more than half of our customers are brand new to us. So, I think we're going to get it all.
And ultimately, it is just about being so compelling that they just go with Oracle. And a number of customers, that's kind of what they're talking about.
I'd have to bet 3 or 4 years ago, nobody thought that 60% of our application SaaS customers will be net new to Oracle. So, the conversation would be just you're going to move your base from here to there. And by the way, we're still going to do that. But it's we're going to move our base from here to there. That was the purpose of my E and P chart plus.
Now, you may say, well, that's not a surrogate for what's going to happen in the infrastructure or the platform market. We'll see. We sit here with a better my point is, again, I've said it multiple times, I'll say it again, we have a better position in that part of the market, a stronger position than we did in the applications market. We have more experience, more user base, to be blunt with you, more differentiation than we had in the applications market. And that doesn't I think our applications team has done a fantastic job.
But that's how strong I believe our position is in this part of the market.
Brian Molinschow from Barclays. Mark, the last few years, we talked about the journey you guys were on, especially on SaaS now with
get the product right, get
the sales force right, get the sales commission right, get the reference customers, that was a big focus last year. Now the last leg of the story to me seems to be the SI market. And those guys are always the guys that they come when they see the money and smell the money. And what do you see in terms of that bigger ecosystem evolving? We saw Keybase getting fired by Cognizant because they didn't have anything.
I think Deloitte is doing a good job. But where do you see the others in their journey towards the Oracle apps? Thanks.
Well, I don't want to get into it SI by SI. But I always felt like you're really popular with the SIs once you're popular. And as a result, you have to do it sort of pillar by pillar, geography by geography. And while you mentioned brand names, it's not really about just the brands. It's about the individual partners and the teams inside those SIs.
And I agree with you that the bigger SIs have probably been more attached to their legacy business than the smaller SIs. The smaller SIs that have invested early, they've done a fantastic job. You can imagine, we are extremely popular with the SIs and ERP. We get lots of people that want to meet and invest. But of course, now we're almost 3,000 customers deep into the process.
And a lot of the repeatable processes have been built. There's a lot now we do as implementation and interfacing. A lot of those boutique SIs have built a lot of IP around that process as well. So, it's a little different SI by SI and a little different geography by geography. You mentioned one big SI, but they all have sort of frankly different stories.
Right now for us, our SI portfolio has broadened, mainly with a lot of boutique SIs that have become really strong, really fast. I have two questions, one for
Mark and one for Safra. Mark, has Pass reached the maturation level where it is selling more as a standalone sale, I guess, the database customers versus attached to SaaS? And how do you think that changes over time?
More is going to non application customers than it is to application customers. And that trend obviously continues, you figure? Obviously, the market is materially bigger in that part of the market than in our application customers. Now, our application customers do use our PaaS. But remember, most of our application over as Sampras said like 2 or 3 times, I probably said 4, most of application customers are net new to Oracle and are just going live.
So they will get bigger over time as they want to add capabilities using our past. Both markets will grow, but it's hard to argue with the enormity of the non application side of the market.
Makes sense.
Safra, knowing database as a service is much more revenue than the traditional on premise database sale, as Mark discussed earlier, which will in turn drive more earnings. And understanding database as a service is still subscale. How should we think about the long term margins that database business database as a service business?
I'm going to stand up even on my sprained ankle to tell you this. So, I think what will be amazing, because we are as you can imagine, we run these models like 500 flavors of this. And profitability is one of those things that we are very, very focused on. And just because we're in the cloud and no one else in the cloud makes money, we don't agree with that concept. And all of the old Oracle rules still apply here.
We believe that in the PaaS business, we can be more profitable than we were in the database license business, okay? I am not kidding. I know it seems impossible. And yet so many other things we've been saying that seemed impossible are playing out exactly as we said. Our margins in running a PaaS, especially on the database side, more profitable than the software business.
Thank you.
And bigger. More models. I'm sitting down.
All right, great. Sarah Helene from Macquarie. Just a couple of questions. I'll be quick and painless. It looks like we had a couple we have a couple of difficult tax rate comps coming up and we got dinged in the quarter on that.
Deborah, when does that start to normalize for us? Is it just a nice setup for 2018? Or should we get a little better when what are you seeing in bookings to help with that?
Very fair question. Obviously, Q2, which is what my guidance was, it's very hard to match the tax rate we had last year in Q2. Many of you see it's it was 20.4%. Yes. So that was an unusual tax rate for us, because and I don't know, maybe there'll be another tax rate question.
So do you mind if I go a little long on tax rate and what's going on in particular? Okay. And we tried to explain it on the call, but I'm a couple of things. There are two things going on related to tax rate. First of all, just last year was unusual in Q2.
That's an unusually low rate for us. Q1 was 25.5% basically. And I had originally thought it would be about 25%, maybe a little bit less because historically been a little bit better than that. Two things. 1, the easy one, which is just a currency change, which means that money coming in from abroad is worthless.
So when I have my mix of earnings, my U. S. Amount is more than my foreign, which is often at a lower rate. So that's one piece. That actually was not the biggest piece.
It was equal to the fact that in especially in Europe, new licenses were lower because there were significantly more cloud bookings. So new license, which would have been a number I would have recognized immediately at the end of the quarter, did not fall to the bottom line, because in fact, they booked a lot of cloud, which will not translate into revenue until as it's going to play out. By next year, so we're going to finish this year, I feel like that will flow all the way through again and we'll get back to the tax rates we were at. Now again, assuming currencies don't do more than they have and I heard Shannon yell in the other day also. So who knows what's happening.
But assuming that we should have we should normalize back into normal tax rates in about 3 quarters, unless of course there's a tax rate change and you guys can guess that better than I can. Okay? Thank you.
Mark, over here. Over where?
Right there. Okay. Yes.
Over here doesn't really help. Hi.
Derek Wood at Cowen. I had a question on the we've talked to some partners and it sounds like there's a lot of excitement in what you're doing in manufacturing within the cloud ERP suite. Can you just give us a sense where you are with this release? When you think adoption is going to start to kick in? And maybe what your customers, your JD Edwards, EBS customers are saying in terms of interest in moving to the cloud?
Can I start? Yes. Okay. So, we ourselves are moving to the supply chain products. We've been we originally my manufacturing team and supply chain team, as you can imagine, we're very, very happy with the E Business Suite.
And many Oracle customers are actually E Business Suite customers actually are very happy with their supply chain planning and all of that. And so I initially thought that in reviewing it that we would have a lot of gaps because our supply chain is so full featured. But it turned out that our cloud offering is actually phenomenal. And customer after customer are extremely enthusiastic about moving to it. And I think that it's in my view, it's one of the last things holding back some e biz customers, JD Edwards customers too, but e biz customers for moving full out into the cloud.
They have been waiting for supply chain. And also, we I don't know if we've announced this. Warehouse?
It's always dangerous if you don't know.
We also acquired a warehouse management product, which was that last little box that had to be filled. And we did that by acquisition. And that's LogFire. Yes. Okay.
And so I think that's going to be fantastic. The initial views are very, very, very positive. And I can tell you as what I consider myself usually customer 0, which we look at it and we work it out first, very, very excited about it.
I'd add to it that I don't think it's just about the business suites. We're going to those guys are going to move. The bigger question is our ability to go gain share from other providers. And as we mature this product, we now have I'm surprised Steve wouldn't have described it, but we have some competitor big, big accounts that are now moving thinking about moving. And we needed this release to be able to go do it.
So if we can begin to get the a couple of those to move, that's about all it would take to hit a tipping point. These are named companies. Now, I say, I want to move to the cloud. We waited on this release to have a full feature set. We're now ready to
go. Are we done?
Meaning, we're
handing it out to you. You are more
than welcome to take more if you'd like.
Would you
want to
take a
few more questions? Okay.
We'll do one question, John. We'll do one question.
We'll go to break and then Larry will be here.
And then Larry will be here. Correct.
You. Is this John you were talking about? I think
it's John Fauci from Mikey Park.
Yes. He gets a second shot.
I raised my hand really quick. Thank you, Sabra.
Mark, Doug was up. Thanks, Safra, then you're going to ask me.
She's much better looking. Anyway, Doug was up before you guys and he's talking about the accelerating buying experience, which I think is really interesting and he acknowledged that that's been a sort of a complaint or an issue for customers for a long time in dealing with not just Oracle, but any enterprise software company. I'm just curious and Saffer just made a point about seeing even better margins on PaaS over time scale presumably. But one way you can actually do that is if you could sell everything that way, right, even on premise.
So that's the plan.
So what's the point? Everything is pushing that.
Yes, yes, yes. Imagine. So just to be clear, I think Doug said this, but it's just probably it's like one of the things we want to keep repeating. We started this in March, the beginning of Q4. So on the of the times to have great ideas to implement, this was not it.
So, we really did this with a minimal amount of training and yet we got about 40% of our transaction volume, not dollars, but transaction volume, mostly deals $200,000 and below cloud specific. We then raised that. We did more training in Q1. We actually raised the bar in Q1 and we got up yet even higher, closer to high 60s or something like that in transaction volume. And our strategy is to do this across everything we do,
including license plus maintenance. Definitely.
Yes, sir. We want to turn this into frictionless because this is not only good for the customer, it's great for us. Okay? And so this is clearly the direction that we're going to and we've loaded. I know Doug described this.
We've taken the terms that we we have a set of terms that we'd always give on, but you had to ask.
Got it.
Okay. And now we've loaded those in and we just we want to move through this as quickly as we possibly can. Okay, great. And by the way, you're not a
bad looking guy. She's
Well, we
can compare you and me as opposed to being Safra. You really gave me a better thing for me.
Thank you. And I do actually want to say one last thing about this, because I am amazed that none of you want to talk about NetSuite today. Okay. So let me just take a moment to talk about I'm going to stay seated. My ankle is just killing me.
So if you don't mind, can you see me? Yes. Okay. So as part of this transition, the accelerated buying experience, Mirror Image is the accelerated selling experience, by the way, okay? The massive expansion in our sales force has given us the confidence to go down market worldwide, okay?
Now because and one of the questions Doug got was what about lowering G and A expenses and all that? On its way, okay? Absolutely on its way, a more automated, simplified process. No one else is doing this in the enterprise software business. Expenses at scale from just operating expenses at scale from just providing the cloud services.
And as we benefit from G and A sort of per order going down, we can afford to go down market economically at scale and expand globally, which they have not been able to do before. So for us, we are going to be small to large, global, automated selling experience at scale providing it and at scale in an automated way in the back office. We're doing all of that top to bottom. We view this as our opportunity to become very, very popular in the applications market. We have been fighting with SAP for decades and we would like to be top to bottom, multiple industries, global and that's our plan here.
We have cleared from an antitrust point of view everywhere except the United States, which we hope to clear very soon. And we're looking forward to getting this done. So that's kind of it. I don't have really much else to say. Is that good?
Are we good?
Right. Yes, please. It's been a long road. We are in the home stretch. If we could please reconvene here at 315.
Larry is on route and we'll start right around 315. Thank you.
In
Moves. Yes, sir. Can we turn the lights down? I'm sure we're broadcasting this to Ukraine and everything like that, but those lights are ridiculous. I'm going to plunge, that's better.
Hi, Larry. It's John DiFucci from Jefferies. You had some really exciting announcements today and you talked about in your keynotes on Infrastructure as a Service. It's just trying to understand a little bit better because the way I've always looked at it in the past anyways, you've done infrastructure as a service because you sort of have I mean, it was there. If you're going to provide platform as a service, you're going to do infrastructure as a service too.
It just made some sense because you had you kind of had to as part of platform, so also offer it independently. And when I think of Infrastructure as a Service, I think of AWS sort of the foundational part in Azure and I think of commodity, which I don't normally ever think of when I think of Oracle. So, I guess, if you can talk to us a little bit more strategically on how now why it's such a big focus right now for Oracle?
Well, we have to do it. I mean, if someone wants to bring their existing workloads into the Oracle Cloud, they can't do it unless we have infrastructure as a service. I mean, every custom application runs on compute and storage. So most of the applications written on the Oracle if we want to capture most of the applications written on top of the Oracle database, In other words, if we want platform as a service to be successful, we have to move not just the database portion of the application, we have to move the application itself, whether it's written in Javi or Ruby or Python or Node. Js or whatever modern language or an older language, it doesn't make any difference what it's written in.
We've got to have the we've got to have infrastructure as a service. If we want to move an SAP application that runs on top of an Oracle database and almost all of them do to the Oracle Cloud, then we've got ahead and restructure as a service. SAP will not runs the SAP application runs on infrastructure as a service, the SAP database run the rest of SAP database runs on Oracle. So what is look at Oracle's foundation business, and I think I've said earlier, we haven't even begun to move our installed base. We're very different than Azure.
Azure has moved a lot of Office customers to the cloud. If Office, you can say, is really Microsoft had 2 franchises, 1 is Windows. I never thought it was Windows actually, I always thought it was Office. The big Office franchise is moving to the cloud and that's the bulk of what Azure does. I mean, Amazon is way ahead of Azure in infrastructure as a service.
But the bulk of what they've done is move their customers, office customers to Azure. They also do infrastructure as a service, but that's the focus. And so it makes sense at Oracle. The bulk of Oracle Cloud should be the Oracle database. But we can't really start moving those people.
We can't start moving those people until we have infrastructure as a service, because the application, the custom application runs on infrastructure as a service and the database portion of the application runs on platform as a service. Okay. So, we've done pretty well in platform as a service. How are we doing that without infrastructure as a service? Well, you also you buy platform as a service with infrastructure as a service for custom apps.
You also buy platform as a service with SaaS for cloud apps that we sell, ERP, HCM, marketing, so on and so forth. So, A, we had no choice if we want to move our customers to cloud. By the way, our big customers haven't really started moving much to the cloud yet. That's a huge opportunity for us. The next thing is we wanted to make sure that our infrastructure service had some significant competitive advantages over Amazon.
So we did version 1 of infrastructure as a service, we learned a lot. And now we've come out with Generation 2 of our Infrastructure as a Service, which we're going to now roll out. Now, rolling it why didn't we roll out infrastructure as a service version 1 broadly, because we didn't want to build a bunch of data centers based on what we currently had. We thought we could do way better than that. And once we had Gen 2 done and Gen 2 means you build a fundamentally simpler, cheaper, more reliable, more secure and more powerful data center.
We have significant advantages. In some cases, our costs are many multiple times lower than Amazon's, much lower cost in building our data centers. And we deliver better performance. Okay. So, why infrastructure as a service?
It's a commodity. Commodity isn't necessarily a bad thing. If you can generate electricity at half the cost of your competitors, being in the electric business is pretty good. We have a high margin platform business, we have an even higher margin SaaS business And we'll have a pretty high margin we'll have the highest margin infrastructure as a service business because the technologies inside of our data centers are technologies that we primarily build, which is not true of Amazon, not true of Microsoft, but it's just a much more modern architecture. It's a much simpler, flatter network.
And so, we think we not only get performance advantages, which are very important in the it makes it a little less of a commodity, but huge cost advantages. And by the cost advantages when you're in a commodity business is where you make all your money. So, we went into business because we had no choice. That's how we move our base to the cloud. We think even though it's a commodity business, I agree with you, we have better technology, significantly better technology, newer technology than Amazon and we could do it much more cheaply than they can.
And by the way, we have big advantages in security, which is going to be a very big deal and big advantages in reliability. Amazon's Amazon doesn't support what we call rack, that's where multiple computers running a database. So, if you're running on Amazon, you got to understand that Amazon server goes out, you're down hard. Now, maybe you don't care. A lot of applications, Oracle database doesn't go down for years, years, no downtime.
Those just we can do that in our cloud. They can't do that in their cloud. We can detect I'm not going to go into all of it, I've made presentations on this in the We can detect all sorts of intrusions they cannot detect because our technology is different than their technology. So we think, again, we can differentiate on reliability with RAC, we can differentiate on intrusion detection, all sorts of other kinds of security, we have a much more secure network. We can do all of those things and deliver a service where we make that we sell to our customers for less and we make more money than Amazon.
So, we're very excited. It's a huge business by the way and it's a huge new opportunity. I'll just stop there. Okay. Thanks.
Over here. Yes.
Hi, Larry. Kash from Gurdivay, Naram. On the NextGen 2.0, can you talk to us about how you view Amazon Web Services revenue, which is certainly massive $10 plus 1,000,000,000 I know Oracle is just getting started here. Historically, it's been tough to leapfrog that kind of revenue stream with just pure technology. But maybe you have some thoughts there.
What's your plan to leapfrog from a revenue perspective, technology perspective with your next gen 2.0?
Hold it. I mean, I'm not sure I understood the question. It's hard to leapfrog Amazon with technology.
I mean, I don't know if you said
From a revenue perspective, they have so much mindshare that their business is about
Oh, mind share. No, no. I mean, they have the advantage of being their 1st mover. But you know who uses these things? Computer programmers.
People are running existing database workloads. Let me just talk about doing what Microsoft did, which is just move, Let's say moving the Oracle database into the Oracle Cloud. Let's say we can just accomplish that. That's most of corporate data. That's most I mean, we won the database wars, what, a decade ago.
We haven't been you can argue Oracle hasn't been competing in database for at least 10 years. And as anyone talk about I mean, I know SAP said they're going to build this thing called HANA and it's going to put us in a business. And then the last thing was going to put us out of business was open source and there's Postgres and there's MySQL and there have been so many stories of the next thing that was putting us out of business. But our database customers really can't run their mission critical workloads at Amazon. They can't do it.
And now that we have a cloud so are they going to at least try the Oracle Cloud? I mean, these are engineers who are running on Exadata today or running real application clusters using the Oracle database. Where are they going to move the Oracle database to a single node? The most they can run is 1 small 4 socket server in Amazon. That's the biggest database load you can run.
It just doesn't work very well. So, when you try Oracle, the biggest workload we can run is multiple Exadatas, 100 times larger, 100 times faster. You think they're not going to try? These are Oracle customers running the Oracle database. I mean, the bulk of corporate information is stored in Oracle database.
Now, do you think Amazon's got so much mind share, they're not even in a try it in the Oracle Cloud? I don't think so. I'll tell you where Amazon has done very well is kind of the new generation of ISVs. So I think the new generation of ISVs, a lot of them went to MongoDB and Uber wrote or Netflix, but we would never got Netflix anyway. I mean, Netflix is downloading masses of movies and it's a very different application.
But most of the corporate world, most of enterprise, most of government, most of corporation, everything is stored in an Oracle database. That's going to end up in an Oracle cloud. Amazon just can't do it. Now, the alternative is they can say, well, I'll tell you what, I don't I'm paying too much for the Oracle database anyway. What I'll do is I'll move up off the Oracle database into Redshift.
Well, after spending a huge amount of money, you will run 100 of times slower. I mean, it just you got to tell your programmers to redevelop their applications, retest your applications, move it to Redshift and then run 100 times slower and less reliably? I think Amazon has as much chance of getting the Oracle database workload as they do of getting the Microsoft Office workload. People have Microsoft Office licenses. You can bring them to Amazon.
It just doesn't work as well as Microsoft's Office 65. Amazon is going to have a very hard time competing with Oracle against Oracle. What is Amazon's database that they're going to I grant you, they got Muncher, they got incredible Muncher. But what is the database they're going to sell to their customers to compete with Oracle? Tell me, anybody.
Microsoft got the Office workload. We're going to get the Oracle workload. These are early days yet. Again, I've heard this for as long as I've been here, I've always heard the next technology that was going to
put us out of business.
It was object data. There have been so many. But we run the Oracle workload in the cloud much, much, much better than they do. I tried I showed slides, OLTP about 10 times faster than they do, data query processing or what it's called analytics, 30 times faster than data. Why would a customer do that?
Mindshare. We have a lot of mindshare among Oracle customers. I mean, Amazon, as far as I know, they invented the name cloud. I thought it was called SaaS or something else or network computing and there was had many different names. But I grant you, they have great mindshare.
But amongst Oracle customers and Oracle DBAs, Oracle that's their title, Oracle DBA. We have great mind share among people whose title is the name of our company. Oracle DBAs will try the Oracle Cloud. And the Oracle Cloud is so much better than Amazon that it's not going to be a hard decision. It's also much cheaper.
So, we'll get a chance at that. I think we'll do as well as the Oracle with the Oracle workload as Microsoft did with the Office 65. It's an unfair fight. We control all the Oracle source code. We put what features into Oracle we want to put into Oracle.
Amazon doesn't do that. Amazon puts storage and a microprocessor up and say, you can use this, pay me rent. It's a great idea. I'm sure the guys who invented car rentals, a great idea, but it's a different idea than inventing the car. So, I guess that's my answer.
I think we got great mind share among our own customers. Moving that workload is the majority of corporate data. And I think the best years of Oracle are in front of it. And this is the reason I'm still here is this is next few years is going to be very, very exciting. You can say, well, I just don't believe you, but no one believed us when I said we're going to do well in SaaS.
I mean, you can argue, we're number 1 in database. We were only number 2 in applications when the SaaS wars began. SAP was number 1 when people started moving applications to the cloud. It's over. Already, even with our late start, we are selling more SaaS than anyone on the planet earth.
We will sell well in excess. We sold more last year, more SaaS than salesforce.com did last year. We'll sell a lot more SaaS than salesforce.com does this year. So, we're in 1st place. I mean, if you look at number that business of ours is growing the kind of combined the SaaS business and the associated PaaS business, because some PaaS goes with SaaS, some but the bulk of PaaS is going to end up going with infrastructure as a service.
But that business is now growing 82%. As we get larger in SaaS, our growth rate is getting higher. Who else is growing? Who else is scaled, growing 82% in SaaS? And we were the number we were not the incumbent leader in applications.
We were the number 2 player. SAP is the number 1 player. We will be the number 1 player in SaaS. I mean, no question. In fact, we just measure votes last year, customers who voted last year, customers who voted the year before, voted for us in greater numbers than any other SaaS provider.
And we were number 2, coming from number 2 to number 1. In database, we have a gigantic lead for anybody. In fact, it's interesting you're talking about Amazon as a competitor to our database because they're not a database company. I mean, it's fascinating. What database does Amazon have?
Surely not Azure oh, geez, surely not Redshift, surely not Aurora. I meant to say I said Azure, I meant to say Aurora. Know who develops Aurora? Us. It's MySQL.
All he took was open source. That was the last by the way, MySQL was the last thing that was supposed to kill us. Open source, MySQL. Redshift is Postgres, the UC Berkeley project. In the database business, we beat IBM and we beat Microsoft and we have more share than both of them put together, number 2 and number 3.
And Amazon doesn't make a database. They lifted Redshift Postgres, and they lifted Aurora. They don't make database. How can a non database company beat a database company a database? But it's an interesting idea.
No, but I'm serious. I mean, I hear this. And it's, okay, how are they going to do that? It is not it's the same question as Amazon is going to kill Microsoft in Office. I mean, Amazon is going to kill them in Office.
How? They don't make anything like Office. Google makes them stuff like Office.
Google has got its own
kind of suite of applications. Office is still doing just fine, thank you. But it's just peculiar. Again, most of corporate computing are applications that run on top of an Oracle database. We do that 100 times better than Amazon.
That's a workload we're going to get and that's going to drive incredible growth. And the margins we get will be the highest in SaaS, 2nd highest in PaaS, but we'll have very, very strong margins, better margins than Amazon has in Infrastructure as a Service because we have better technology. We also have a much more attractive mix that we have high margin SaaS and if you will, high margin PaaS to go with our middle margin Infrastructure as a Service. Next question. Surely someone wants to ask another question.
Right here.
Mark Mirdler, Bernstein. So, Larry, how should we think about the opportunity for analytics, AI, machine learning, whatever you want to
call it, in the Oracle Cloud?
I love that you asked that question. Thank you. I had analytics in the Oracle cloud. Do you know who the last big purchaser of our analytics software was? Really big.
Amazon. So how good is the opportunity for analytics? Well, Amazon is buying our analytics. Amazon runs most of their retail stuff on the Oracle database and they're buying our analytics. We think the opportunity for analytics is enormous.
And we're selling analytics to our big database customers. So we sell a lot of analytics. How big was the Amazon deal? Do we want to talk about it or we're not allowed to? Don't tell them, 1,000,000 and 1,000,000 of dollars.
On top of their much bigger purchase of Oracle Database. Now you would think if anyone's going to get off the Oracle Database and onto their own analytics, it would be Amazon, because you would think Amazon has great mindshare at Amazon, Because everyone's business card, even the security guard says Amazon, it's a phenomenal mind share. But Amazon bought our analytics, Amazon uses our database. Everyone uses our database. I'll keep going on.
I mean, I feel really good about our database. SAP, I mean, I know it was a couple of years ago, you guys people were talking about HANA. HANA is going to kill an in memory database. SAP is going to kill us. That was before Amazon was going to kill our database business, SAP was going to kill our database business with in memory HANA.
Let me tell you how I know that's not the case. What do you think SAP runs in their cloud underneath Ariba, their procurement system? Hannah? Anyone for Hannah? They run Oracle.
SAP runs Oracle, not their own you would think HANA would have incredible mind sharing inside of SAP, because they make it. It's on the front page of their website, incredible mindshare. But they don't run Ariba. And that's their biggest cloud app. But they also have SuccessFactors, another really big cloud app for them, very it's kind of the center of their HR their modern HR products.
Well, surely SuccessFactors runs on HANA. HANA. Oracle, SuccessFactors runs on Oracle and then they can concur. The 3rd party, they have 3 properties in the cloud, only 3 properties in the cloud, they all run Oracle, nothing runs HANA.
So you say,
am I overconfident? Maybe. But if SAP can't get SAP to use HANA and Amazon can't get Amazon to use Redshift and Aurora, there must be a reason. It's not like the guys at SAP love us. They don't love me personally, which is hard for me to deal with at times, but getting over it.
And they sure don't like they don't like Mark that much or Saphra. I mean, the lawsuit was really bad for them. They hate us. But their entire cloud is based on Oracle, their entire SAP cloud, not their own technology, because we're so much better than they are. So when your biggest competitors, when the people who are supposed to be putting you out of business or at least hurting you not hurting you out of business, hurting your business, really a big threat to your business, are among your biggest customers with their latest and greatest stuff, you should feel pretty safe.
We're really good at this database stuff. We've been doing it for a very long time. It would be amazing if Amazon could build database or for that matter even SAP building, it would be unbelievable. We beat IBM when IBM was IBM before. I don't know who they are now.
But when IBM was a great company, they built DB2, built Oracle and we won. And they had a lead, but we won. And we also beat Microsoft when they had they built SQL Server and we won. Then we beat a bunch of other people, Ingress and Formex, Sybase. You just survey customers and what are they running, what do they store their data in?
Just it's all Oracle. It's all Oracle. And that's going to gradually move to our cloud, not Amazon's because we do it so much better. Yes, ma'am?
Yes. Hi. Sarian Lian with Macquarie here. Two questions for you, Larry. One a little bit general and then one maybe a little technical.
We heard about the release of R2 this week and we've certainly been hearing of some pent up demand for that product. Would love to know how you see that impacting the business? And then number 2, if I read your infrastructure as a service architecture slides correctly, it looks like you're defining your cloud at the network layer as opposed to a lot of your peers that may be defining it or maybe using hypervisors. And so I'm wondering a little bit about the economies of scale you foresee there, in particular for data heavy workloads?
You're right. We have a truly virtualized network. And with off box virtualization, I think that the biggest difference between what we have with Gen 2 is a very different network. And the magic we have with our Gen 2 data centers or our Gen 2 IAS is really I mean, they're version of it is in the new data center. But the cool thing about this is you can pick up an existing workload, an existing corporate workload and move it intact into one of our Gen 2 data centers onto our Gen 2.
So, if you are using VMware and Red Hat, I mean, by the way, we'd love for you to move to our hypervisor. We much prefer that, because we can we wrote the code, we can support the actually it's open source, it's Zen, we've contributed to the community. Our operating system is Linux, Oracle Linux 6.7, it's open source, we contribute to the community. But we can support you more easily. It's one stop shopping if you use our hypervisor and our operating system.
But you can bring your own, which is really what these other guys can't do. So you can lift up an existing workload. In fact, you can lift up an existing data center, IP addresses and all, network and all, and plunk it down without changing anything and plunk it down in our cloud. That is a very big deal. Right now, people are moving kind of an application at the time and they have to partially rewrite, at least reconfigure the application, retest it on the new OS, change the IO.
They have to do a lot of things to move an existing application to a data center. They have to retrain your people over there's a bunch of things you have to do. Not so with our new bare metal experience. It's just take your existing network, your existing network definitions with your existing range of IP addresses, your existing operating system, your existing hypervisor, your existing database, your existing apps, your existing everything, move it over and it just runs. No one else can do that.
We think that's very, very important. We and I think you'll see a lot of emphasis on the network because in these cloud data centers, your limitations in performance are largely the network. Your risks and security are largely the network. So we've spent a lot of time re architecting this and building this virtualized network in our Gen 2 data centers. It allows us to give you much better security as messages move around the network.
Not only is everything encrypted in motions, encrypted at rest on in storage, it's encrypted in motion on the network, But because it's virtualized, each message is encapsulated with virtual addresses, it's almost impossible for people to interpret these messages as they're flying around. So even if they were to get into the network, which is by the way impossible, because our control plane, everyone else does their software defined networking on their computer servers. We do our software defined networking in these network processors off box, with no access to the public Internet. You can't break in. There's no door.
So, yes, we did it very, very differently than everyone else did it. And the big differentiator between us, because our storage is still SSDs. Now we think we have better software for storage and we're smarter about it, blah, blah, blah. But the big difference in our infrastructure as a service is our network and how we do virtualization. By the way, our storage virtualization is also completely off box.
So you can't get to a storage device. You can't remap any of our mapping tables through the public Internet. There is no public Internet connection. The way we establish public Internet connections even for users is through our is in a virtualized way. And we can turn those on and turn those off and control those a bit much better than anyone else in this cloud business.
So you're right, we spend a lot more time on the network. I don't think I think we spend more time talking about it because our network is so different from anything that came before. And when we decided to do it this way, it's kind of when we slowed down in Infrastructure as a Service, waited till we finished all the software, finished all the and there's custom hardware in there by the way. The custom hardwares are these this what we call the control plane, these network processors. We wanted to finish all that so we could deliver this much more secure, much more performant infrastructure platform.
And it took us a while to get all the software done, nontrivill, get it all tested. We've been in test for about a year and we're now rolling out in scale. So that's the big difference. And I forgot the first part of your question. Oh, Archie release.
Again, we think we developed this is back to how we're developing the Oracle database with lots and lots of powerful cloud features. So, the multi tenant release we think is very, very attractive. We're talking to big ISVs. ISV they shock you the name of these ISVs. We want to bring big ISVs into the Oracle Cloud.
And they were waiting again for our infrastructure to service, but also the new generation of our database, where we have these we went from 256 PDBs, pluggable databases, virtual databases, if you like, to over 4,000 per container database, which let's say you're a big SaaS company and you want to run-in the Oracle Cloud, you want these database efficiencies. And most SaaS companies run on top of the Oracle database. So we've been putting in lots and lots of SaaS features for ourselves, but also for this new generation of Jimmy, the largest ISVs out there. So they can move, lift what they have and move it into our data center. Our targets, we have a very large group of ISVs that haven't moved to the cloud yet or you think of them, they're already cloud companies.
They're already SaaS companies. It doesn't make sense to me for very many SaaS companies to run their own infrastructure or for them to run their own database. If we can do it, we should be able to do it much more securely than they can do it, much more reliably than they can do it, global presence and at a much lower cost. We should save them money, get a better performance, better security, better reliability, all of those things. So we've aimed 12.2, a release 12c Release 2, version 12c Release 2 at dramatically improving our capabilities in the cloud for serious cloud ISVs, serious SaaS companies.
So we think that's a I mean, these are big contracts and big deals. So we think I think that's one thing that no one is expecting. In addition, we take existing applications, existing ISVs. And because our multi tenancy is at the database layer And now at the Java container layer, we can take their existing applications and ISV that maybe you don't maybe they were doing more like hosting as distinguished being a SaaS company. We can move those ISVs and make all of your applications SaaS applications and move them into our cloud.
So we think the ISV business is just a gigantic new opportunity. And of course, we have a bunch of features, especially in the security area and the networking area that all of our end user customers have been waiting for and are very excited about. But we think more and more of those are going those customers will discover the features and the functions and the advantages of 12.2 not by loading on on prem, but by just logging on to the cloud. I mean, the Exadata service is now priced at $175 a month. I think it's extremely attractive from everything from an MIT graduate student who's starting her own company to a large company like General Electric with 1,000 and 1,000 developers who can develop on our cloud rather than develop in their data centers.
So, I think the opportunity for 12.2 is gigantic. But I think the opportunity for us right now is staggering. Again, you look at where we are in the cycle, I know I'm repeating myself, but we haven't started moving that Oracle workload out of big companies and into the cloud yet. I mean, we have started, but we're so early. The size of the opportunity is just stunning, ISVs and end users.
Yes?
Hi, Larry. Michael Turits from Raymond James. I think you began to partially answer this. But how aggressively do you go after the type of workloads that are non Oracle workloads that Amazon has been successful with? You mentioned ISVs, newer ISVs that they captured a while ago.
You just rolled out a container as a service offering. So, there are places that are non oracle that's been successful. How aggressively we will move in that direction?
Well, I think there's a natural cycle. I don't think you're going to see us going making an offer to Netflix that they can't refuse. If naturally we can charge less, I mean, if we really do have a performance advantage and a security advantage in our infrastructure as a service, here is where MindSphere is a big issue. You're a start up and we really have these advantages. Engineers, it's amazing how fast word-of-mouth, one engineer talks to another engineer and says, wow, this thing is much faster than Amazon or much cheaper or much better it's much more secure or this or that.
So I don't think you'll see us aggressively pursuing them other than the fact that we built infrastructure with significant differentiators. And engineers are engineers, engineers. Hey, engineers notoriously are difficult to sell to because they don't like to be sold, but they like to go on the web and investigate and look at features and function, spend $200 on their AmEx card and try exit it as a service and convince themselves one way or another whether this really is better than what they were using before. But I think you'll see our efforts around just I mean, I think this enormous software installed base around Oracle databases around the world, I mean, that is such a gigantic opportunity. That's clearly what we're going to focus on.
It's not we're going to pay no attention to these other guys. But the other guys, we hope the quality of our technology will attract them. But our focus is moving that Oracle database workload into the cloud. If we do that, we're by far the largest cloud. I mean, there's nothing remotely close.
Certainly, if you compare the size of the Oracle workload, the number of computers and the number of amount of storage associated with the Microsoft Office workload, I think we can I think it's enormous?
Yes. Hi, Kirk Materne with Evercore. Given that scale is somewhat of a prerequisite to compete at the infrastructure as a service level, there's a certain amount of capital expense that you have
to be
willing to spend to get into that market. Yet, there's also companies like yourself, like you mentioned, that have a competitive advantage around your own products and Microsoft around the productivity tools. How many big infrastructure as a service clouds do you think the market will support over the long term? Is it 2 or 3 I mean, in the apps market, it got down as review in SAP. I'm just kind of I realize we're early on, but longer term, how many do you think can
sort of succeed? Yes. It's a great question. So who do I think that can go into this business? I mean Amazon is obviously already in it.
Microsoft is obviously already in it. I'm very optimistic about again, we're in it. We're the leader in SaaS right now, which is depends how you count. But if you count Voatz last year and Voatz the year before, we're selling more than anybody else. I think we can just extrapolate on those curves and we win SaaS big time.
So I think we've already won in the process of winning in SaaS. I think our infrastructure leapfrogs everybody. Plus, we have this huge installed base. So I think we can play. So that's Amazon, Microsoft, us.
Google, if they want to, they print money. So they certainly can play. Technically, they're very capable company. Facebook, if they wanted to, again, they have a lot of data centers. One of their core competencies is data centers.
Another core competency is data. But so far, they've shown not a lot of interest. But let me tell you, as we look at the quality of their data centers, their data centers are a lot better Facebook data center is better than a Google data center and it's better than an Amazon data center. And let me tell you why, they're newer. They're just newer technology.
But they've got very high quality data centers, so they could play if they wanted to. I can't think of anybody else. So, we were the largest we still are the largest enterprise software company in the world. Microsoft is the largest software company in the world. Amazon is a very unusual company.
They're obviously pretty good at a lot of things. And they were the 1st mover in AWS. Again, those 4, I can think of, but I don't know who else can do it. It's a lot of technology to build these things. The cloud is not just I mean, people tend to think I mean, it's very funny.
You look at salesforce.com and you look at Amazon and they're both called big cloud companies and they have nothing to do with one another. They don't do the same thing at all. So my belief is to compete broadly in the cloud at the fast layer and the infrastructure layer and the PaaS layer, a) you have to be a pretty big software company. And I would argue Amazon's not a real big software company. Don't get me wrong, I have a lot of respect for Amazon.
I really do. I think they've done an incredible job. But I don't think of them as a really big software company. And the way I think of Microsoft is a big software company is the way I think of Oracle is a big software company. So, number 1 database company, number 2 applications company, Oracle number 1 in middleware, Oracle.
And Oracle has got not a lot of number 1 positions. So we're a very big software company. But there aren't a lot of those out there. And then you have to have a reason you have to either develop or have already a core competency in building data centers. Amazon had a core competency in building data centers for their retail business.
They were a huge consumer of IT technology and they were very good at rolling out these scaled data centers, as is Google. I mean, search requires real competency in building large scale data centers, plus they're a pretty good software company, Google is. So, I mean, those are the 2 competencies, right? You got to be good at software and you got to be good at building, managing, architecting, doing these hyperscale data centers. And I don't think there are a lot of companies that fall into that description.
And in terms of the cost of building these things, it's really not much. I mean, it's 1,000,000,000 of dollars, but the size of the prize is 100 of 1,000,000,000 of dollars. So the data centers are just not that expensive. I mean, if I look at how much we have historically spent on acquisitions And we can build these data centers. And the overall only cost of the data centers are the computers and the data centers.
And we can start a data center small and as we one of the things we've gotten very good at is just in time centers. And we build it in Hillsboro, Oregon. And I forgot what the early cycle was, but I think we're down to what 8 weeks, 7 weeks from order to shipment? We're down lower, okay. We keep on moving that down, but it used to be a long time.
But from the time an order is placed to the time the hardware is provisioned in a data center, I think is now under 7 weeks. And I think it's going to be I mean, I'm not talking about clearly, we have excess capacity. It doesn't mean when a customer orders 7 weeks later, they get their provision. When a customer orders 2 minutes later, they're provisioned in the data center. I'm saying when we decide to increase the capacity of 1 of our data centers or open a new data center, it takes us about 7 weeks to get the hardware there from the time we configure an order, from the time the hardware is going to ship.
So and we'll continue to get better at that. But those I mean, those are the core competencies of an IT utility that have good technology, good software and the ability to operationally to run these big data centers. And there aren't a lot of companies like that.
Hi, Larry Karl, Kierstead at Deutsche Bank. Larry, I listened to your keynote on Sunday when you were talking about your top competitors. And you've spoken a lot in this meeting about Amazon on the infrastructure side, but you identified Workday as your top competitor on the SaaS side. Now, I don't want to read too much into that, but I feel like in prior years you've been gunning a little bit more towards Salesforce. So I'm wondering if you could explain that.
Thank you.
Well, Salesforce is a company everyone's heard of. The problem with Workday is a lot of people I mean, I'm sure everyone in this room has heard of Workday, but a lot of places no one's heard of them. But yes, we have more competitions. We have more competitions against Workday in ERP and HCM than we do against Salesforce and sales. Now we have more we have competitions against Salesforce and marketing that we are the leader in marketing, we tend to win those.
And we think the size of the prize against Workday is just bigger. We think the ERP if you look at the size of the ERP market, don't take my word for it, SAP was the largest in the previous generation, SAP was the largest ERP company and Siebel was the largest CRM company. So the ERP business is an order of magnitude larger than the CRM business. Therefore, our focus is where the money is. So, we think it's very important that we win an ERP and win an HCM.
And by the way, in the mid market, we think by the way, I don't have a chance to talk about it, but we think we're leagues ahead of Workday. Workday, I think, made a fundamental mistake. I mean, just I know those guys don't like us, I have no idea why. Must have been something Mark said, I don't know. But they decided not only were they going to build an HCM suite, okay, which they did, they're going to also build an ERP suite, much bigger job, 10 times bigger job easily.
But they're going to build their own database. Everyone know the Workday built their own database? You kidding me? Sounds like you're talking to guys at SAP except you're a startup. So, Workday, splitting their resources between building database, HCM and ERP, I think that's impossible.
I don't think it can be done. Database is ungodly complicated. If you look at our database presentation, you look at Oracle release 12.2, version 12 release 2, and they're going to build something that competes with that, with PDVs and in memory database optimization, encryption at rest, encryption in motion. They're going to do all of this stuff, multiple real application clusters. It's impossible.
Salesforce didn't do that. NetSuite didn't do that. Concur didn't do that. SuccessFactors didn't do that. Ariba didn't do that.
Nobody did that but Workday. Thank God, they decided to do it that way. I mean, they'd be much better off if they were running on top of Oracle database in Middleware, but they chose to build it themselves. And therefore, they're our primary competitor in ERP, and we're doing very well. You just look at our ads.
We think when we say we're selling 10 times as much in terms of customers, I think we're understating it. So I think they count funny things as ERP like expenses and payroll as ERP. They're having a very hard time making ERP work because they got to have a database. I mean, making this database scale is very, very difficult. Just because you can get it work on HCM, which is a much simpler set of applications than ERP, they haven't gotten to supply chain yet.
They have procurement, they're purchasing. They don't have procurement, they don't have any of supply chain. They don't have any of manufacturing. We have all of manufacturing. We have all of supply Our footprint in terms of modules is in all the complex reporting and tax reporting and planning and budgeting, they say, well, you can use Anaplan.
We have Anaplan. We have one integrated suite for ERP. And they don't. And what they have doesn't work very well for a lot of reasons, not the least of which is it's their own database. They try to build their own database and their own middleware, it's crazy, and their own reporting, just about impossible.
Now, why do I talk about Workday? Because if we win the ERP war in SaaS, then we're 10 times larger than Salesforce.
I think that's about the
market differential ERP is about 10 times the size of sales automation. And Salesforce is still predominantly sales automation. In fact, salesforce.com is predominantly Salesforce Automation, most of which is in North America. The amazing thing is how successful salesforce.com has been with really one application. I mean, they've got I know they've got marketing.
They've made them a number of purchases in marketing and they've built some interesting stuff in service. I got it. But if you look at the bulk of their business, sales automation in North America, look how successful they've been, look at the size of that business, look at the size of a SaaS business and compare it with the size of an on premise the last generation on premise business. The SaaS business is much larger. Of course, it's much larger, customers getting
much more.
Of course, it's much larger. Customer is getting much more. They're getting a data center and a help desk and so on. So if Salesforce is that big with sales automation, how big is the ERP company that wins the SaaS war. Really big, really big prize.
And that's why I talk about Workday. Yes, sir.
Thanks very much. Ross MacMillan from RBC. 2 or 3 years ago, I think when we were talking originally about the cloud, you made some statements about data centers being real estate and power being 100 year old utilities and there was no value there. But when you look at the big players in infrastructure as a service like Amazon and Microsoft, they've spent 1,000,000,000 and 1,000,000,000 of dollars building out designated data centers and you talked about Facebook having more and more than data centers. I believe and I might be wrong, but I believe your strategy has been mostly co location with your technology in co located data centers.
Does that have to change as you get more serious about infrastructure as a service?
I think we're pretty serious now. No, I think it depends. I mean, again, that's also a very interesting question. Do you need to own the building that your computers are located in? It's an interesting question.
In general, I like the real estate business. We own most of our headquarters. We just bought a we're just building a huge supercenter in Austin, Texas right now. We bought all the real estate. We're building all the buildings.
But
I don't think it makes a lot of difference whether you own the real estate or you don't own the real estate. I don't want to go into the details of our strategy, but in terms of where we're going to put all of our data centers. But you can't say have one global strategy and say this is the way it is. In China, we're not allowed to own data centers. We've got to have a partner.
Networks are highly regulated. Maybe we're better off in some countries to partner with the telephone companies and use their data center. I mean, they already have an existing network. They have an existing relationship with the government. We might be better off in a highly regulated in an environment that may be highly regulated.
It's not highly regulated now, believe me, it's going to be highly regulated. It's a utility. It's a network. It's going to have huge influence on our not infrastructure in the Amazon sense, infrastructure in terms of like water and power and all of this. If the control systems run on nothing, this thing has to work all the time, you bring your economy down.
As you look forward as what this looks like in every country and how much it will be regulated, back to the question it's not unrelated to the question, well, who are going to who's going to run these things? Imagine we have 4 companies or let's okay, make it 10, doesn't matter, 10 companies running all the world's data and data centers. You think governments aren't going to get involved? These high grade I think The Economist I think it was this week, The Economist had an interesting article. It was their leader, the first leader on The Economist about hyper companies and some of the problems hyper companies are causing.
But they were looking at it quite differently. They were looking at it as just they make too much Google makes too much money, they have too much power, and it's creating really problems in society because you've got these rich IT people or rich people in Wall Street, whatever rich group you want to talk about, whether they're in San Francisco or New York, and then you have other people who are losing their jobs because manufacturing ain't ever coming back because automation is not the problem, not exporting the jobs. And these hyper companies don't have competitors. And that's really the huge problem, they think. So they buy their competitors before their competitors get scale.
Anyway, that was the article. So imagine companies getting even bigger. I mean, you can imagine the size of one of these cloud companies was quite breathtaking. It's just I'll go back to look how big Salesforce is and that's this one itty bitty little app. Imagine you're doing imagine what I said was true.
Imagine Oracle moved the Oracle database workload to the Oracle cloud. How big is that? A little spooky. It's big and it better not ever break. So it's not a matter, I don't think of, do we want to buy the real estate?
I mean, at Colo, I mean, we own the computers, we have access to high performance network, we specify all this stuff. If we don't own the building and we don't own the we're not supplying the electricity, I don't think it makes a big difference. And whether we spend we buy the buildings or don't buy the buildings, I mean, everything else being I'd rather own the buildings, we end up making more money if we own all the buildings, own all the real estate. McDonald's real estate has worked out well for McDonald's, real estate has worked out well for IBM. Anyone who buys all this stuff over a long period of time makes a lot of money.
But I think it's going to be very important for us to have good relationships with governments all over the world, good relationships with telecommunication companies, start to learn some of the regulatory ropes, so we can get around there and having the right partners might really help that. The most obvious place is in China, where we're simply not allowed. We're just been regulated out of the business. You can't start a data center. Google pulled out of China.
So that is not a simple question. It's really an interesting question. It is not a simple question. It has very little to do with the next pick a number, we build 50 data centers. The cost is the bulk of it, it's not the building.
I mean, and then the way we populate those data centers, we put in capacity for existing customers. And then as customers order more capacity, we just try to stay one step in front of them with our very, very with our supply chain, our very rapid supply chain. So we make money. We make money all in. I hope we have to build 200 data centers.
But whether we own the buildings or not, whether they're in partnership, again, we have to buy networks, right. When someone became a huge consumer, the cloud companies become huge consumers of network capacity. Therefore, partnering with the guys who own the network capacity in some way might not be a bad strategy. I think next round of build outs are going to be pretty easy, but I think you'll see us experimenting with certain partnerships obviously, in China and a few other countries, which I will not mention right now, but where we think we're better off with strong partners rather than trying to go it alone in those countries. Okay?
Over here.
Hi, Joel Fishbein from BTIG. I want to change subjects for a second on going to the SaaS business. Mark laid out a lot of really good metrics around the SaaS business. The one thing that sort of stood out though was the go lives. Do you think the company Oracle's optimized the ability to take customers live?
Is it efficient enough? Where are you with that? Because there seems to be a lag between signing the customers and having them go live. So that would be any information that would be helpful.
Yes. I think again, I think it's a great question. One of the things we do a little bit differently in Europe. In the United States, the United States, we relied heavily on boutique firms, new generation consulting firms to help get our customers live. A very we have an excuse for taking our time getting to the cloud.
We had to rewrite all of our applications. It took us a decade to write the fusion applications. But there has been tremendous resistance among the large consulting companies who are our partners in the last generation of application implementations. They have not been excited about the new generation of SaaS because the consulting engagements take oneten the time and cost oneten as much. So those traditional partners have been slow to adopt our SaaS applications, I'll say in North America, and we've been relying on boutiques.
I think you'll see us use now what's a pretty large scale university recruiting program to start building a very large our consulting business, if you monitor it, it's one of those businesses that we've let shrink and shrink and shrink some more. It's a business it's like part of our commodity certain parts of our hardware business we don't care much about. Of it we care a lot about like engineered systems, where it's real it's high value. But there are other parts where we're selling, if you will, commodities we don't care much about. We haven't invested a lot in our own consulting infrastructure.
And I think you're going to see that change because the demand now for the SaaS applications is becoming so great. 82% is just the beginning. I think you're going to see triple digit growth. And in order to meet the demand, we're going to see some
of these boutiques bought up by some
of the major consulting firms that will be good, because that will give us some scale on the implementation side. And then we're going to have to aggressively get in that business also, not so much to be the prime contractor, but to assist these other companies with engineers. So in the old days, the ideal situation was, let's say, Accenture was doing an implementation, but and they had 100 people on the project and we'd have 10. But the 10 people would be experts in the product they were implementing. The implementation projects might not have 100 people anymore.
They might have 20 people at RingCentral or 30 people at RingCentral and 4 from Oracle, but the same idea. You'll see us starting to grow our consulting business because of the demand around SaaS and we want to get people live faster than we've gotten them live. In Europe, we've done most of our own implementations, because there aren't a lot of boutiques in Europe to rely on. But we haven't moved even but in Europe, we haven't moved aggressively enough. You'll see us move much more aggressively.
We have no choice. You correctly identify one of the limitations to growth, which is our ability to implement our products, and we're making a bunch of changes there. And you'll see again a lot of we have a huge training program for we hire most of our engineers. Most of our engineers, we hire directly at a school by now. I mean, most of the guys at Oracle, we recruited out of school.
In fact, most of them who are running Oracle right now, I recruited out of school a long time ago.
So,
I used to interview every engineer. I do not do that anymore. But in the old days, I did. And there are people like Juan Loiza and Andy Mendelson who are running engineering at Oracle. It's Griffin, and it's a long list of people.
We're going to have I know Mark has put in a big recruiting program, university recruiting program for our next generation cloud salespeople, I mean, that are coming directly out of school. We have a huge training program. They tend to be more computer literate because than the generation that came before. And the consumers, the consumers are younger and more computer literate and the new we've got a new generation of people that are selling to them. So our distribution is changing radically.
It won't be so much that we'll have all of these field offices anymore. We'll be selling out of these huge centers like in Austin, Texas and in Santa Monica, California, rather than 1,001 field offices. So again, you'll see our consulting organization start to grow again.
Yes.
Thank you. Earlier, we heard from Doug about the accelerated buying experience and he talked about how that's a cultural change in the business. And when I hear businesses talk about cultural changes and observe them, it always has to start at the top, has started the Board of Directors, the Chairman and then has to filter down to the lowest level employees and come up. So can you talk about that, because it does seem like it's a change based on what we've heard from customers and partners about working with Oracle versus what you're talking about?
Yes. Well, I think I remember the meeting where we made the decision. It was an off-site meeting in the desert and we decided that we were going to be as easy to do business with as any company. We're going to be as easy as Amazon. So you could just take your credit card, click on this, click on that and you're up and live.
And why not for everything we sold? And that's what we decided to do. So, Amazon was the benchmark. I think it's one of the cleverest things they did. If you look at the original idea of renting cars, very, very clever.
Then how hard was it to rent the car? It was very easy. I was going, just walk up to the car and get in it and drive away just about. So, I think that was a huge that would have been a huge impediment to our growth if we didn't make it very, very easy for you to buy a SaaS application or buy infrastructure. But then we got so excited about it, why not everything?
Why not have every purchase experience, whether you're buying consulting services or hardware, why can't everything go through this accelerated buying experience? I mean, sometimes customers are wanting to negotiate T's and C's and they won't just click, click, they want to get 5 lawyers involved. I mean, sure, that will happen some of the time. But then that's a customer demanding that we change our terms and conditions. But we decided to redo our contracts to make them human readable, to make them easy, we think, to make them gracious in terms of fairness that you could read them.
So that's actually those terms and conditions are actually reasonable. Let's move forward. And it lowered our costs of sales dramatically. It eliminated a lot of the friction
and heat inside of
companies who wanted to Safra, what percentage of transactions last quarter went through on Safra, what percentage of transactions last quarter went through on the accelerated buying experience? How much was it? So we're at 70% of transactions. And I think that number is going to go much, much, much higher. I think it's the way customers want to buy.
Again, I give credit to Amazon. I mean, the company that we were looking at, the company that we were studying was Amazon. And we had knew that this was a different bar and we had to transact business. We had to sell infrastructure as a service as easily as Amazon sold a DVD or a download or a DVD stream or for that matter infrastructure as a service. We had to make it that same painless instantaneous gratification without a lot of bureaucracy slowing things down and costing more money.
So I think we accomplished that and we'll continue to make it better and better. Thank you all very much.
Thank you, Larry. Thank you, everybody, for attending today. If I could just make a parting suggestion for you all. I was on the last hour here with Larry, by far the most educational time. And what I do personally, I'm just sharing my personal experience, is I take these transcripts of the session you just heard here for an hour.
And I've been stitching together a running dialogue over the 7 years I've been here. And before we come in every year, I reread it. I'd encourage you to do the same. And I think this is when you really start to get a sense of the vision that Larry has. You start to get a sense of things that we're talking about 2, 3 years ago.
You start to see the importance of them now. He's usually ahead of the curve. If you don't do it, I'd really encourage you to do it. In closing, just want to say thank you all very much for coming.
We know you come from far and wide. Thank you
for being here. If you
have any questions, please let
us know and safe travels home. Take care, everybody. Bye bye.