Ladies and gentlemen, please welcome to the stage Oracle Senior Vice President, Ken Bond.
Hello and good afternoon. I never get tired watching those videos. I don't know if any of you noticed, that's from Bermuda. It's the competition has already started for the defense of the company in 2017. But just
out of curiosity, curiosity, show
of hands, who was here 2 years ago in 2013 when America won the America's Cup, Team Oracle?
Yes, a
lot of you. And most of you were here for open world in that week. Many of you may not have been here the weeks or 2 leading up to that. And I remember moments in time when you would read all the press coverage about Team Oracle USA was out. They were down 1.8.
The Kiwis were so much better, game over. And then we had actually the very good fortune, the America's Cup, the race 19, which was the deciding race won by Oracle. That took place the day before our meeting. And I remember we had Larry here and I was telling people he's probably going to talk about the America's Cup. So I'd advise one of you to just ask about the America's Cup and try to weave in an Oracle business question.
And he did. And one of the things that he talked about was that we knew he knew, I should say, and Team Oracle USA knew they had designed the superior boat. They had the technology. The real question was, would they be able to catch up? They knew they had the faster boat and it was just a question of hanging in there, but they were going to win.
Well, history told how that played itself out. Team Oracle USA defended the America's Cup after the win in Europe and is now looking for a 3 peat as we go to Bermuda. And I can't help but think of the comparison between the world's most regarded boat race and why we're here today. I'm not going to say it's 1.8% like it was with the America's Cup, but I think certainly I've spoken with many of you many times and understand that the answer is not as clear as it relates to the business as it now is with the America's Cup. I think that settles itself over time.
So we're very happy to be here with you today. What I'm hoping to do is basically walk you through some of the most exciting slides of the day because I know you always love these. So first of all, welcome. Thank you for being here. Obviously, it's been a very busy week with a tremendous number of announcements.
We're very exciting. It seems like you mostly have found yourselves to the food. Thank you. The bathrooms, as usual, are as what they always are. We have Wi Fi and a lot of cords and cables.
The last thing we want to make sure is nobody kills themselves tripping over. We have mic runners when we get to the Q and A portion of the meeting that will be running up and down, bringing microphones to you. Their request is anybody in the aisles, please keep your bags out of the aisles. So let me talk through our safe harbor slide. Okay.
We have a little bit of a sinking issue. So I'm going to be speaking to the last slide you just saw. But as a reminder, today's discussion will include forward looking statements, including judgment on what the future holds, the statements are also subject to risks and uncertainties that may cause our actual results to differ materially from those statements being made today. And throughout the discussion today, we're going to attempt to present some important factors relating to our business, which may potentially affect these forward looking statements. As a result, we caution you from placing undue reliance on these forward looking statements, which reflect our opinions only as of today.
As a reminder, we're not obligating ourselves to revise these forward looking statements in light of new information or future events. We would encourage you to review our most recent reports on Forms 10Q and 10 ks and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price for our stock. And just for quick reference, that slide, okay? Also want to make sure everybody understands the presentation that we're making today is being made for informational purposes. There's a little bit of syncing issue with my speaker notes in the slides.
We'll also be using non GAAP financial measures, as you can see. In terms of the presentation and the agenda for the day, so it's going to be structured as follow. I'll be stepping down in a moment. Mark will come up here and speak with you a little about why cloud. We'll then from there, we'll go to a video.
We basically recognize that a lot of you don't get the chance to come in for the full week. We know it's a big commitment of time. We did a mash up between Larry's presentation of what he talked about on Sunday, talking about cloud. Larry also talked about security on Tuesday. And then Thomas spoke on Tuesday as well, talking about a lot of our platform things.
So it's a short 12 minute video talking about the elements of what's going on in a lot of part of our business. Then following that, we're going to have 3 of our key executives come up and speak with you a little bit more detail. Steve Miranda will be talking about the SaaS layer. That's the applications that are now in the cloud. Following that, Inderjit Singh will speak with you on the platform.
And then lastly, Edward Screven will come up and speak with you about security, which is a very key theme in Larry's discussion on Tuesday. And we think this is ultimately a differentiator that separates Oracle from many of its competitors and a lot of the ones that you talk about with us. We'll get to break. That'll be around 1:45, we'll go to break. Coming back from break around 2, we'll bring Mark back up to the stage.
Mark will then spend some time talking about a lot of the experiences that we've seen from this application to the SaaS transition. He'll talk a lot about the experience that we've seen and how we find the what we think we see here will give you a lot of sense of how we expect the business will continue to go in the future and the prospects that we have not only for that transition as well as technology to PaaS. At that point, Mark will invite Safford to come up on stage. They'll take some of your questions. We'll do a Q and A for a bit.
We'll have another break around 3 o'clock. Following that, we'll have Larry here where we'll do a Q and A. And that will conclude the day somewhere around 4, 4:15, and that's essentially the breakout of the day. So with that, let me bring up to the stage Mark Hurd, Chief Executive Officer.
Thank you.
Well, I'd see the left side was clapping more than the middle. So let's get started. So to Ken's point, just in flow, we're going to talk a little bit about what we see in the market. When we open up, I'm going to talk to you a little bit about what I did in my opening keynote, really directed at the customers, what our customers are seeing, what our customers are feeling. And then we're going to have the discussion that Ken raised.
We'll have Larry and Thomas talk about sort of how our portfolio has evolved. And then you'll hear from the presenters, Ken, describe. When we do get back up after break, just to supplement a bit of what Ken said, we're going to talk a fair amount about numbers. We're going to talk a fair amount about numbers as it relates to our applications business, both on premise, our support business and what's happened from a SaaS perspective relative to that. So that's sort of the flow we'll go.
And then Safran, I will take whatever questions you have. Okay. My gosh, I have a Safe Harbor statement too. I'm actually not going to read it. Doreen, are you okay if I don't read it?
Thank you very much. All right. First, should I get a second Safe Harbor statement? I'm going to tell you a little bit about not just what I care about, but what the CEOs care about from a customer perspective, our customers, the customers that we have that are running companies. And our customers are under a lot of pressure.
And I'm going to try to explain to you sort of the context of what we hear from our customers and the issues that they're dealing with. First, numbers that probably should be familiar with you to you. Over the last several years, look at the S and P 500, revenue growth is basically flat, little less than 1% revenue growth on a compounded basis. Earnings growth roughly 5%. So that's the backdrop that we sell into.
Our customers' earnings are going up, revenue really not. What's happening? Cost is coming out. That's how most of our customers are actually making their earnings numbers. Some of that cost is coming out of IT.
So you have a situation where IT budgets and you can see these numbers and these are analyst estimates of IT and you can see they range from flattish sort of performance, 1% growth, this year even down 5%. By the way, you guys see this in some of the companies you follow or some of the people you own stock in. You see these revenue numbers that are put up by our competitors. I'll talk about that in a second. But as it relates to our customers, they're putting a lot of pressure on the overall spending and IT is feeling that.
And in the end, I'm going to talk a little bit more about asking CIOs do more, but do more with less. And you see it show up. I always love the estimates that you'll see from analysts. But at the end of the day, when you just start adding up companies in IT, you can see here $16,500,000,000 has come out of and I only put up 6 companies. And I don't do that to take a shot at any company.
It's no other than just to give you some context of the amount of revenue that's coming out of the industry. Oracle, as you can see, last quarter grew 7% in constant currency. But at $40,000,000,000 annualized, we get $2,800,000,000 It's certainly not making up for the climate's coming from some of what you might think of as our traditional big cap. Peers. A lot of change.
Here's what's happening to our customers and this is based on us doing this is a lot of customer contact, a lot of research. You can imagine how many customers we have coming in through our CVC, our customer visit center, how many customers we talk to and what the pressures they're facing. First of all, applications as a set. Think of applications, on prem applications as an industry. Average application today, 21, 22 years old.
Very old applications, 22, many of you enumerate, maybe not all, many, 22 from 2015, 1993. You've got applications that are built pre search, pre Internet, pre mobile, pre social, pre cloud. And the ability to get those applications from where they are today to where they need to be very, very difficult. Many of those applications again, remember, when you think of the applications market, you may think of that market as Oracle, think of that market as SAP. 40% of all applications that are in use today, these old applications are homegrown.
They're not commercial applications. So you have homegrown applications, very old, very difficult to maintain, keep up. Many of the people who wrote the applications are gone from the company. At the same time, when you look at IT infrastructure, IT infrastructure has been aged. You've heard this term sweating out the assets.
You've got a 15% to 30%, depending on what industry, what geography, elongation of the lifespan of existing IT infrastructure. So you've got an elongating life of infrastructure, system failures. And by the way, I did not because we had a lot of customers there, I didn't go into detail about some of the systems failures that you all see get reported. And there's a reason for some of those. Some of it, frankly, is there's a lot of creaky infrastructure that's still out or that's out in the market today.
You have the additional problem in several industries that flat spend. So think of that flat spend that I talked about and now a bigger percent of that flat spend has to be spent on compliance. You all see that and some of you that are in Financial Services Companies. Security, money that perhaps could go to innovation, modernization that now has to be spent on something else. So against the backdrop of our customers, our customers are under pressure then complicated by the fact that their market is changing.
Our customers that are B2C business to consumer are under a level of pressure they haven't been seen before. You all have heard of this change in the demographic. If you're at the conference and you're in customer meetings, this drives our customers' thinking. It's about 2 things, the change in the employee and the change in the consumer, the change in the customer, the change in the buyer. When you survey millennials by the way, millennials, 50% of the U.
S. Economy by the time you get to 20 20, they buy differently, they work differently, they're much more likely to complain. And you see that, right? You see that through technology just in this city alone. A millennials desire to jump on Yelp, to jump on TripAdvisor and make a clear description that I don't like this and communicate that broadly is a level none of us, at least probably said this way, in my generation, as suppliers, we never had to deal with this.
Same way from a hiring perspective. In the old days, when I used to hire somebody, most of what they would know about Oracle would be from me. I would tell them what a great place to work. So exciting. We're doing so many great things.
5 minutes after that, now they're on the web thinking, I don't know if that was true. But they're going to find out from 500 people now instead of just me. So we're now entering a level of transparency or an era of transparency that none of our customers have had to deal with before. They now have customers who want to deal with their customers the way they want to be dealt with, either through a personal device, they want immediate gratification to whatever question they've got to. So I could go on about this and usually I do.
Let me give you one other point. Have you all heard about this now, this issue with the gig economy? It's a familiar term to you. Let me try to explain if you haven't heard. This is really I use the example up here of Uber.
But this is where people really aren't taking jobs. They take a gig. And the gig might only be 2 or 3 months. And then I leave and then I go into another gig. The implication IT is extreme though, because most of the companies, when you come on to onboard to a company, I know it's hard for you all to believe, but not all of their processes are perfect.
Most of their processes have fragilities. How are those made up for? By managers, tribal knowledge. I learn as I go, and I learn how to get things done. That doesn't work in a gig economy.
You have to be able to onboard an employee in something measured in minutes and hours. They have to be productive right away because they're gone in 2 or 3 months. Most companies, it takes 2 or 3 months just to learn how to get things done in the company. By that time, this employee has come to the company and now left. The pressure that puts on IT is extreme.
Remember, when you talk to a millennial by the way, we hire a lot of millennials at Oracle. We have pretty good data. They tell us the number one thing that drives them is flexibility in job, to which, of course, I don't even know exactly what that means. The answer isn't pay. Pay comes out for I'm sure they'd rather have flexibility and more pay.
But the reality is, I tell you this because this is what our customer deals with. Our customer deals with a whole set of dynamism going on in the employee experience, the ability to retain employees, train employees, motivate, prepare, and they don't have the tools to get it done today because they've got 23 year old apps. At the same time, the customer is changing. Their ability to deal with that customer has become more challenging than ever before. And you've got to do that against this backdrop that I described to you.
So now you have to be able to come to the customer and help the customer get through these issues. And I could have taken you through a lot more detail with all of it, but that is what drives this phenomena called cloud computing. I remember back several years ago, somebody told me the most important thing about cloud computing was you could now turn CapEx into OpEx. I think that like has nothing to do with it. What has to do with it is this.
The fact is it simply costs less. It is less complicated. It is actually more reliable. It's more secure and it drives much faster innovation. The ability to have to feature strength and modernize 23 year old applications to deal with the dynamism I described is virtually impossible.
You can't modernize that infrastructure. It is simply too old. The best approach is to leapfrog it. When Steve gets up and Steve talks about sort of what goes on in today's applications world, Steve's team is probably releasing 2 to 3 releases of applications per year, 300, 400 features per release. That whole programming stuff, I mean, Steve, I think we have what, probably 2,000 people, engineers in HCM alone?
HCM alone. So imagine that. We have 2,000 engineers in HCM who are building features for HCM application every day. If you're a customer, that's your that is your IT staff. There is no possible way to compete with that for our individual customers.
The speed of innovation is unparalleled. At the same time is, to be very frank, you do no work. We do the hardware. We do the operating system. We do the database.
We do the middleware. It's in our physical location, in our data center, managed by our people. No heating, no air conditioning. We do the upgrades, we do the patching. All the work is transferred to our R and D budget away from their IT budget and they get the innovation that I just described.
There is no chance to compete with that from today's status quo and that's what drives this. When Edward gets up and you'll hear about this, you'll talk about security too. This is one of the other big things that I think is getting better understood in the industry. Our cloud is funded is encrypted. It's more secure than it would be running your application on premise.
And Edward will talk a lot more about all that. But when you look at these attributes, this is a fundamental shift in the industry. Listen, I'm not going to see it again. I know in my career, this is going to be a fundamental this is a fundamental shift and we're in the very beginning of this. And it's driven not just by OpEx to CapEx.
It's driven by macro and microeconomics and driven in the end by the speed of innovation to be able to deal with the dynamism that our customers feel. Us. So what I've told you so far is really about the industry in general and it could have been come from really several companies. Although I think there are many companies that wouldn't want this to be a reality, frankly, because the only company that's in a position to deal with today is and I think it's an important thing to take away. We'll talk about this a bit later.
There is virtually no other company in a position with the depth of on premise knowledge that we have at the same time as the thorough and complete portfolio that we have in the cloud. And I did not do this I had I could not do my whole keynote here because of time. But when you look at the amount of workload that will move to the cloud, while we predict it will be an extreme amount of workload, we'll move to cloud over the next 5, 6, 7, 8, 10 years. For a very long time, there will be an on premise space. And the need for those two environments to work together is critical.
Most of the people you see in the market are cloud companies or they're on prem companies. The ability to bridge those two worlds is a unique differentiator. And we're in a class alone. This is this week was a big week for Oracle. We have talked about our vision for the cloud for the last several years.
Larry is going to do it when you see Larry's video about our vision for what we were going to do in SaaS, our vision for what we're going to do in PaaS, infrastructure. I think we released 42 or so energy I know 42 PaaS services this week. We had almost over 100 releases of SaaS apps and or PaaS services and or infrastructure services during the week. This is really the culmination of years of work to get our now what is now our complete portfolio, roughly complete portfolio, is now available in the cloud that's available on premise. I want to say that again, Complete portfolio that's been rewritten, reengineered and modernized to work in the cloud that is available on premise.
And no one else has done that work. Our strategy is to be best of breed in each individual SaaS application, but also to be a suite. Both. Each app to be best of breed, best of breed in ERP, best of breed in HCM, etcetera, but a suite built on standards. A platform designed for extensibility, not only just to do dev test, development and testing of applications, but the ability to extend an application.
When you talk to any SaaS application provider, ask the question, how would I possibly extend this application? And I
think
you're going to get a lot of answers like, you're not. With Oracle, you can. A platform designed for extensibility. I talked about IT company capable of coexisting on premise around the cloud. And we're in a position now with the work we've done to lead this transition over the next decade.
Okay. So what I'm going to do is stop there. And then we're going to have Larry and Thomas. We're going to we pulled out pieces of each of their keynotes to get you a deeper flavor for the technical direction, the releases this week, and then we'll come back after that. Okay?
Here's starting off with Larry and then Thomas.
We are in the middle and I really do mean in the middle of a generational shift in computing that is no less important than our shift to personal computing when mainframes and mini computers dominated our industry. Low and behold, after giving it a bit more thought, we eventually came to realize and understand that if we were going to be in the past business, we also had to be in the infrastructure of the service business because if we wanted people to use our database in the cloud, they weren't going to use our database in the cloud with just our applications, just our SaaS applications. They had a lot of existing applications. They wanted to write applications of their own. They wanted to write them not all in Java, but in Java and new programming languages, Python, Ruby scripting languages, programming languages, whatever you like to call them.
Here's the irony of it all. We went into the SaaS business and came to understand
we that required us to
be in the platform business. And we went into That's
how
we got to where we are today. That's how we got to where we are today. Now, in this new world of cloud computing everything has changed and almost all of our competitors are new. This is how much our world has changed. Our 2 biggest competitors, the 2 companies we watched most closely over the last 2 decades have been IBM and SAP and we no longer pay any attention to either one of them.
It is quite a shock. I mean this was I can make the case that IBM was the greatest company in the history of companies. But they're just nowhere in the Cloud. SAP was certainly the largest application company that has ever existed. They are nowhere in the cloud.
We are, as I explained earlier, in every layer of the cloud. Most cloud companies are not. We are the leader in database and with the world's most popular programming language, Java. And as I said, we are now starting to compete aggressively in Infrastructure as a Service as well as in the Platform as a Service and applications. In order to be successful in SaaS and PaaS, we have to do infrastructure and we're doing it.
Okay. When we as we look at our cloud business, we have certain parameters, certain design goals that we focus on regardless of whether we're building an application, whether we're building a platform service or whether we're building an infrastructure service. And these design goals again permeate the stack in the cloud. Low price, in every business you want to be a low price provider. You want but in computing it's a bit tricky because there is the acquisition price, how much you pay for it and then what is the cost to own, how much labor is associated with owning it, where are there a lot of hidden costs.
Reliability, as we migrate to the cloud, this is now a compute utility just like telephone service is a utility or electricity or water is a utility. People get very upset when their utility goes off. These things have to be continuously available. Performance, performance in a way is the other side of cost. The faster you run, the fewer resources you use to get something done.
Performance and cost sometimes called cost performance are closely related. But on the other hand, peak performance is sometimes a requirement on certain kinds of applications. Standards, in the early days of the cloud, the early SaaS providers didn't worry a lot about standards. The cloud was brand new. They built a lot of stuff that was proprietary.
They were pioneers and really didn't
there weren't a lot
of standards around the Cloud. Security, I think if I had to order these design goals, I would put security on the top. Security, which might be something we ignore, not ignore, ignore is too strong a word, Pay some attention, some but not enough attention to now. This will become a bigger and bigger risk as we move vast amounts of data to the cloud.
Here are
a couple of rules of thumb for you on security. Database security is better than application security. What I mean by that, you should always push your security features as low in the stack as possible. If the bottom of the stack is silicon and the top of the stack is applications and an application runs on a database, a database runs on an operating system, an operating system runs on a virtual machine, which runs on a server, which has a silicon based microprocessor. You should always be pushing your security as low in the stack as possible.
Silicon security is better than OS security. And the last time I checked, even the best hackers have not figured out a way to download changes to your microprocessor. You can't alter the silicon. That's really tricky. We've speeded up encryption and decompression, which is kind of related to encryption.
We've speeded that up in hardware where there's basically zero cost. It runs at memory speed. There's basically zero cost in doing that. You can encrypt everything all the time, turn it on, leave it on. In fact, we turn it on, you can't turn it off, it's on all the time.
And it's all built into this new microprocessor called the M7. Oracle is very is really focused on engineering, cost, performance, reliability, compatibility, security, standards into all three layers of the Cloud. And along with Microsoft, we're the only ones that are working in 3 layers of the Cloud. The oldest business that we're in, again the one started by NetSuite and salesforce.com more than 15 years ago is software as a service. And right now, we have many more applications than anybody many more cloud applications than any other cloud service provider by a huge margin.
And we're always adding more. And I'm not talking about little itty bitty feature applications, I think major applications. We are announcing here today 2 major new applications, manufacturing and e commerce in the cloud. I believe we're the only ones with a comprehensive suite, discrete manufacturing in the cloud period. We're the 1st and only one to offer this in the cloud.
This current year, the year we're in right now, Salesforce has a plan where they expect to sell about $1,000,000,000 worth of new business this year. And we expect to sell 50 at least 50% more than that. And this is surprising number. So we expect to sell more new business, more new business in SaaS than any other company
around. We've had a really busy year. We've introduced major new releases of our applications product lines. We have a brand new release of Fusion Middleware. We're in beta now with a new release of the database.
And we have a lot of capability. But what we want to show you is how we're making that capability reachable by any person, anywhere in the world with just a browser. Any person, any place in the world with just a browser can access our cloud and get access to all these amazing new product innovations we've delivered. How do you build applications? 1st, from a programming language point of view, last opened world, we showed you Java EE.
This year, we've introduced multiple language support, Java SE, JavaScript, Node. Js, Ruby, Python, PHP, and we'll show you that in just a minute. The combined stack is vastly more productive. So we did an wrap database, a 2 node middle tier cluster and a web tier in front of it. We counted how many keystrokes and how much time it took to do it on an on premise system, on another cloud, and using our PaaS.
I think you see the productivity benefits and the speed advantages. And not only do you get these advantages once during the install and config process, but from a management point of view, you don't have to patch, you don't have to back up, you don't have to do any of these things that you do day to day if you use our PaaS. For analytics, this year we introduced 3 new capabilities in the cloud. 1st, for data scientists, we introduced Oracle Big Data Cloud Service, a high performance Hadoop 2.0 service where you can simply load your data into a Hadoop cluster, you can spin up multiple Hadoop clusters and you can use all the familiar tools that you use with Hadoop. To integrate your applications to the cloud, we introduced a variety of integration cloud services.
We have an integration cloud service that provides the ability to connect 2 different systems, route data between them and map and transform your data from one system to another. You can also add orchestration and API Management, all delivered to you in the cloud. In Application Software as a Service, we introduced 183 new modules and new services between the last day of Last Open World and last Friday. Not only do we do ERP, EPM, Human Capital Management, Talent Management, Marketing, Sales, Service, E Commerce, Configur, Price Port and Order Management, We now offer supply chain and manufacturing in the cloud. So it's the only full suite of cloud services.
Ladies and gentlemen, please welcome to the stage Oracle Executive President, Steve Miranda.
Safe Harbor.
Okay, so we're going to go through a series of discussion around the different layers of the platform. I'm going to start off and cover the applications or the SaaS portion as well as the data as a service portion. And what I'm going to try to focus on is not only give you maybe a reminder of what we have in the application suite, an update of what's been added this year, but I'm going to especially focus on the customer adoption. And I'm going to try to give you some examples of why it's critical that we have the breadth of suite. And I'll give you 3 different examples.
1st, obviously, it gives us both the combination of the breadth of the suite and the cloud deployment, the ease of deployment, the lower costs, the lack of IT necessity, etcetera, has allowed us to go after markets and particularly middle market customers that we never could reach before. 2nd, the fact that we have a complete suite of SaaS applications allows our customers to move to the cloud in the spot that makes most sense for them as a business, either on the business refresh cycle or their particular pain point or opportunity is, meaning you can start off in CRM if you need to have a brand new marketing campaign. If you're a heavy retail customer, you need recruiting as a primary example, you could move to recruiting online. If you're a small and medium business, you need to start off with an enterprise class ERP system, you can move your financials to the cloud. By having the breadth of choice, you can choose what makes most sense to you in the cloud and move that first.
And then 3rd, once you start off with our cloud based applications, you're able to extend. So you're going to see I'm going to give you examples of customers who started in one component of the cloud or one pillar and expand beyond that, not only within a section. So if you're in marketing to add sales, if you're in sales to add service, but also if you're running HCM first, the ability to add financials. And so the ability to have a complete suite and best of breed, as Mark pointed out, allows us to have customers the choice and flexibility on where to start and then gives us a better opportunity how to expand within those same customer base. So let me first start off by covering ERP.
So we have a complete set of ERP applications from planning and budgeting, financial consolidation and reporting, procurement, sourcing, project management and GRC. So the typical apps that you might think of, these are your general ledgers, accounts payables, accounts receivable, consolidations, the statutory reporting, the management reporting. This is what allows companies to really run their business. And in this year, at this same time last year, I probably announced a number somewhere around 100, 200, 300 customers in ERP. This year, we've grown to over 1300 customers in ERP alone, a tremendous growth.
And we're seeing the speed of go lives on this. So we've got over in that growth, over 300 of those customers have gone live, which in and of itself, if you just think of roughly 1,000 customers added, roughly 300 live, that means less than a year, 30% have gone live, which is probably fastest story for an ERP, but it's actually better than that. Because if you think about the ramp throughout the year, we added customers in increasing fashion quarter by quarter. So most of those customers or many of those customers just bought in the last 3 months aren't live yet. So it's actually a much closer to 40%, 50% of the customers that are live in less than a year.
And we're starting it's not uncommon for us to see customers go live in financials in 4 months, 6 months, 7 months increments. A couple different classes of the uptake that we're seeing, and again, this is an illustration of what I said at the beginning, the type of customers we can address. The one class in Financials is where you have the ERP refresh cycle. So an older version of Financials needs to modernize, needing better reporting, Even the largest companies in the world, so HSBC, the 4th largest bank, moving to centralize all their operations, picked the complete suite of Oracle Cloud Financials to go live in the cloud. Now a second approach taken by so that's a big bang, everything included, Global Corporation go live in our cloud financials.
A second flavor that we commonly see for the largest enterprises, was the largest multinational manufacturing, and now they are changing from manufacturing to, I think, they're calling it digital manufacturing company in the world. And they've spoken our behalf many times here, you can guess what they're called. They are choosing a different flavor because they're transforming their business. They are actually going live by line of business and by country. So they're already live by a line of business in Canada and Mexico.
And they are now using that cloud ERP or cloud financials as the template, so that when they do future acquisitions, instead of moving acquisitions into their corporate instance on premise, which was typically their practice, an Oracle customer are now going to move those acquisitions into that template. And simultaneously adding country by country, line of business by line of business as they move to the cloud, a combination of a technical transformation to the cloud as well as a business transformation to the cloud. And the last two companies is probably what's really the big growth of a lot of the transactions, not necessarily the dollar volume, is companies like Boingo and Pandora, which are smaller pre IPO or when they started with us and now post IPO companies that are looking to get on that enterprise class financial applications, ERP, for statutory reporting, process controls as they plan for growth in the public market. And those companies are choosing, instead of traditionally they've gone to E Business Suite, are going directly to the cloud. And these companies especially are receiving tremendous where they have brand new processes starting really with us to the process and don't have that change management exercise, tremendous benefits to the cloud and speed.
So there's a couple of classes, both on ways they're getting to the cloud and some new type of customers or smaller customers that we see examples of. Next area is HR. So with HR, complete global HR, so this is kind of your statutory record keeping, keeping org charts and transfers and titles and responsibilities workforce rewards and payroll, so different types of payroll compensation workforce optimization, so things like succession planning recruiting and onboarding talent management, which includes things like performance reviews and ratings, goals and succession and then a brand new module introduced this year, which is learning, which is at least a year ahead of what our top competitor announced they're coming out with next year. And this is modern learning, so not only kind of compliance type learning. So when you come on to a job, there's certain statutory learning, but it's also real time learning or just in time learning, where we're able to surface video content of the learning capability within our applications or within another application to help train your employees.
So for example, you have a sales force, you need to train the sales force on a new application or a new promotion or new pricing, you can then create the video within our learning application, surface that anywhere within our applications and track that so you understand who in your staff has been trained, either from a statutory or from a go to market perspective. Again, tremendous growth. We announced here at this conference over 1,000 core HCM customers. So that's our core HCM, meaning that does not include our Taleo customers from acquisitions, which was just well north of 5,000 customers in the cloud today, again, tremendous growth. Some examples, global examples, mostly large multinationals.
AXA, very similar approach to the U. S. Manufacturer, started in a regional towards a go live country by country, region by region, actually probably more appropriate, towards a global unified HR, over 80,000 employees. British Telecom, another one, over 50,000 employees gone from a heavily customized HR system to a vanilla cloud based HR system as they centralize their capabilities. I'll skip down to Schneider Electric, another core HR, another centralization of process, another customer greater than 80,000 employees
gone live in
the last year with us on our HCM Cloud. And I skipped over Macy's because Macy's is not only core HR, but where their real sweet spot is or their real business challenge is recruiting. So Macy's recruits 80,000, that's actually understated, because that's how many people they hire for their seasonal employees. So they actually have to recruit and interview much more than 80,000 people, but they hire 80,000 people within an 8 week period and they do this every year seasonally, both onboarding and then offboarding for their Christmas season for the holidays. So it's not only live on a 100000 person size of scale of company, we have the recruiting capability to recruit on the scale of 80,000 in 8 week period annually, which is clearly like the stress case for any company anywhere in the world for recruiting all cloud based, all vanilla.
Next in customer experience. So here we have a wide portfolio of applications and it really takes you everything from content or personalization, which I'll describe in a minute, into data as a service, multi channel marketing, so modern marketing, not only email, web advertisements, social advertisements, be it Facebook, Twitter, ability to help our customers purchase AdWords and targeted AdWords. So if you go onto Google, you can actually bid higher on words for people that you know about or care about, right on through the Salesforce automation, if you're a business to business type of approach, or to e commerce, if you're more of a business to consumer type approach. And at this open world, we announced our cloud based e commerce system really completing the suite across CX. Configure price quote to actually take the order.
And then once you have the order, service, including this year field service in the cloud, if you have to schedule remote repairs and that sort of thing. A host of customers here, again, if you just include the SFA that we built internally, none of the acquisitions, over 800 customers in the cloud announced this year. Some examples, a large multinational retailer, you can see the flag has a very similar logo and colors to the flag that you see there, Implemented the CX suite of applications in a multichannel for Commerce Anywhere. It's a traditional B2C type of company. So not only the advertising and marketing, but also right on through to e commerce capabilities.
KPN, both a B2B and B2C, giving you a complete multi channel both online and offline. Avaya was a development partner of ours. They are actually more of a B2B and they do a lot of indirect selling. So here we added to our Salesforce automation a capability called Partner Relationship Management. So basically, their sales reps are not only employees of Avaya, but in fact they sell through partners and channels.
So you have to add and treat the partners and the channels in a similar way that you treat your internal employees, a whole set of capability around partner relationship management for Avaya and go live. And then Southwest Airlines uses our social capabilities for social listening, which is both for service and for marketing. So if you have a Southwest flight, you have an issue with your flight, you tweet to Southwest Airlines, they have social listening, which takes that to their call center to be able to respond, reschedule your flight, answer your questions online real time, huge customer satisfaction benefit to Southwest. What we talked about previously and just announced and Larry said the first supply chain manufacturing set of products available in the cloud, full stop. So in previous discussions, I've talked about how we have a nearly complete suite for service customers.
Now we've added it for supply chain manufacturing customers, sourcing, procurement, product lifecycle management or product design, planning, the core manufacturing and quality, order management and logistics or transportation management. And though we just launched part of that at this conference, 6 months ago we launched Transportation Management early. And in the 1st 6 months, we already have over 45 customers that have picked our supply chain management or transportation management in the cloud. So you kind of see this pent up demand for customers waiting to move even supply chain and manufacturing to the cloud going forward. And you see for these examples, some of the largest customers in the world, Dell, GE Appliances, to some of the smaller companies.
So Ainsworth Pet Nutrition was actually here. It's a family owned 80 year old privately held company using our supply chain in the cloud today. Again, as an example, not only Kevin has choice of where to move to the cloud for companies like Dell and GE, but markets that we couldn't really get to before because of the speed and cost of the cloud based deployment, like the Ainsworth pet nutrition or pet food. And so with this now, we are able to cover the complete set of business flows. I gave you examples of if a customer has a pain point in recruiting like Macy's, if they are a pre IPO customer like Pandora or now post IPO who need a robust financial system, if you have a core HR refresh like AXA, if you have a supply chain transportation problem like Dell or GE.
But in addition to that, we can cover cross flows. So from your CRM order taking to actually taking an order and booking that in ERP, or once you're live on HCM, moving forward to HCM and Financials integrated. And here are some examples of our customers who started in one pillar or one product family and have expanded. Here's a slightly different view. So we're seeing flavors of customers who start in CRM with our configure price quote or sales force automation and actually add the accounting piece for that once the orders are created.
We have folks who have ERP, who are using our budget planning area or supply chain. Other customers are using CRM and HCM, so innovating around their core ERP systems as they're going to move to the cloud ERP later, or very commonly having ERP joined with HCM. So giving you a number of different ways to the breadth and the best of breed allows us to not only tackle the hardest problems in the world in each area, but to broaden the addressable market in many different directions. Now the last part I want to cover is our data as a service, which is, I think, probably the least understood of our applications. But I'll try to put it in a way, I think all of you actually see this as a consumer today, and it's likely powered by our data as a service, very likely.
And quite simply, it allows us to enable marketing to target messages to customers, personalize those messages and then measure the outcomes of marketing. And this is just the beginning area where it's starting in marketing, but I think it will have an effect and be the long term differentiator for our SaaS suite. So first, what do we do? So we collect in an anonymous fashion, a tremendous amount of data in a centralized way, and then we partition that data in a number of ways. So let me give you an example.
As I go online, and if I was going to go visit a customer in New York, and I booked my trip to New York, there's a cookie that gets created in that activity. Now, I've also maybe went shopping for a Dell computer, and maybe I went online and searched for a movie ticket or a play. So we develop a profile. And that profile includes online and offline data that we gather and aggregate and use a matching capability. So while we don't collect Steve Miranda or my email address or my Twitter account, we collect my profile information, age and demographic, male over 35 years old, over 40 years old, certain income levels, certain credit rating, interested in automobiles and technology and certain sports teams and going to New York today.
And what that allows us to do is then combine that or not with our customers' first party data. So say I'm a loyalty member to a hotel in New York or hotel chain where they can target advertising, again, not necessarily to Steve Miranda, but to this category of person who's traveling today, allows them to much more accurately and personalize the message. And then you combine that with our marketing cloud that I talked about before, the multi channel, really address that in a multi channel way, email, social, web. And when I said many of you probably see this today, if you visit some of these websites, or if you ever bought anything online or searched for anything online, or maybe you actually booked your trip here to San Francisco from out of town, and you started to see on your Facebook page or your Twitter stream or frankly any website you went to, advertisements for hotels, rental cars, plays in San Francisco, etcetera, is very likely our data cloud and our marketing cloud behind the scenes that's actually servicing those advertisements directly to you in a favor that's targeted directly to you. And marketing is the first example of data as a service really underlying our complete set of cloud applications.
So why SaaS? The first and only complete suite of applications from financial accounting all the way through to the CRM applications. The deepest or as Mark put it, the best of breed applications in core ERP, serving the largest companies in the world and some of the smaller companies who are small and growing and new and innovative companies. Deep HCM, not only in core HCM, but talent management recruiting, again, best in class towards the hardest problems there. Deep in CRM, not only complete e commerce, marketing, salesforce automation,
but when
you combine that with data as a service, capabilities that nobody else has in CRM, and introducing what is the only and first marketing supply chain manufacturing suite available in the cloud. Thank you very much.
Ladies and gentlemen, please welcome to the stage Oracle Executive President, Inderjit Singh.
Thank you. I'd like to start with something quite simple. It's quite an exciting time to be at Oracle. From an engineering point of view, you'll see the halls buzz with excitement. There's a lot of innovation coming out of Oracle these days.
And in this open world, you will see all of our engineers actually can't wait to share the excitement, can't wait to share the innovations that they've developed. Of course, we start with our safe harbor statement. I will cover the platform as a service part of our offering. One of the most strategic things that we are doing, one of the most innovative things that we're doing at Oracle are at PaaS. It's a complete suite broken up into 8 major categories, and I'll go over each one of them.
Starts with data management, our database infrastructure, application development, business intelligence, big data, mobility, a very new area for us, mobility development and analytics, content and social, enterprise integration, which is becoming a huge issue as the application footprint for most of our customers gets fragmented and systems management. The pattern for the presentation is going to be very simple. We're going to tell you about the innovations done in each area, the traction that we've seen and the customer examples, real usage of these services that we've seen. Last year, we started with database in the cloud. Huge adoption for this.
But this year, we've actually taken it far further. We have Data Guard, real application cluster in the cloud, in memory database, NoSQL, and of course, Enterprise Manager to be able to manage all of this database infrastructure on prem or on the cloud. Tremendous amount of traction that we've seen in our database. Overall, from a customer count perspective, on our PaaS, we have over 5,000 customers using our PaaS already. Last year, at this point in time, we had about 2 or 3 cloud services live and ready.
This year, we have over 40. So tremendous amount of traction and tremendous amount of usage as well. Let's take a look at some examples. Cerner, this is an example of a company that's in ISV, in fact, they're health care software provider, and they're using development and test infrastructure, one of the most popular usage and easy for most of our customers to do, entirely done in the cloud. It's a large consumer packaged goods company in the U.
S. There's only a few of them that are using consumer insight and business intelligence with database as a service and big data as a service running entirely in our cloud. Application Development. Last year, we introduced Java EE in the cloud. In fact, later in the presentation, I'll share with you the cost benefit analysis of why it makes sense to have Java EE in the cloud.
But this year, we've taken it far further. We've introduced Java SEs. So a lot of our customers are experimenting with microservices running on containers like Comcast. You can use our cloud for that. Node.
Js, Ruby, Python, what we call a polyglot development environment. In fact, the demos that we did on stage were specific to Node. Js development. Mobile, we've introduced mobile cloud service, one of the coolest things that we've done. A lot of our customers are experimenting with mobile projects, some internal to the organization, some to the consumers.
Mobile Cloud Service allows you to do both back end development, expose APIs and have a single all you need is a browser to be able to do development for iOS, Android and Windows. Brand new this year, we've introduced Application Builder Cloud Service. Some of our competition have introduced products like this. We've actually taken it far further. Application Builder allows you to extend our SaaS applications.
I'll share with you some examples in a minute, but also do custom objects in the same infrastructure. Unlike our competition, this is not just about creating single page extensions, simple things. This is about creating sophisticated extensions and a lot of our customers have done that as well. Tremendous traction in the application development. Let's take a look at some examples.
The first one comes to mind is Burger King. In fact, Marcelo, the IT lead for Burger King actually spoke with me at my keynote. They were able to get a key project that was about if they did the analysis first, about 2 months of work. They were to get it done entirely in 2 weeks. Regulatory requirement, very quickly, nothing to install, entirely done in the cloud.
JDS Uniphase consolidated the entire applications footprint to the Oracle Cloud using our PaaS. Real usage. Big data. We have the world's most comprehensive big data platform. Starts with the infrastructure, that's Big Data Cloud Service.
That's what it takes to run the Big Data jobs. HDFS, Kafka, HBase, Spark, all of them are supported natively. But a lot of our customers that have actually used big data also realize it's garbage in, garbage out. The cleanness of this the data that you store in the big data infrastructure is quite important. And the level of expertise involved in cleaning the information needs to be brought much closer to the business user.
That's big data preparation, brand new offering this year. It's a new space that we call data wrangling, where all the consumer needs is a browser. They're able to create and modify the data that's sitting inside without bringing it out of the cluster. So let's say you want to do a deduping job. Internally, it's producing a MapReduce or Spark job to do it without the business user requiring the skill sets to code those things.
We do it for you. And the last one is to do with big data discovery. Most of our customers are quite intimidated by the alphabet soup of technologies in the open source here. What the market is looking for is a discovery tool, a visualization tool. You simply look at a catalog of data sets.
You bring up BDD, Big Data Discovery, and you start analysis. It's an iterative way to look at a data set, perhaps find a pattern, perhaps find some anomalies, fix the data set, share it with others. That's Big Data Discovery. By far, the most comprehensive big data cloud services in the market today. And all you need, as Thomas said, a browser.
Analytics, we've been very strong in data integration. BI has been a core business of ours, but this year we've introduced something brand new and very exciting. It's called Data Visualization Cloud Service. A lot of our customers are no longer waiting for IT to produce a curated data set or a cube. Gone are the days where somebody a business user calls IT and 6 weeks later a cube shows up and they start doing their analysis.
They would like to get the spreadsheet or a data set, load it up into a tool and immediately start analyzing and deriving insight. We've actually taken even one step further instead of installing this tool on your desktop, you can simply do it in our cloud. In fact, Larry demoed it himself. I use it myself. In fact, Mark's staff uses it to manage their pipelines.
Very, very easy to do. Tremendous traction in Business Analytics Cloud. I'd like to talk to you about an example of Skanska. This was a customer here at OpenWorld as well, real usage. It's a construction company.
They built their first analytic application from scratch in 7 days. 1000 of pages of PDFs are replaced with an analysis and insight entirely done in the Oracle Cloud. Identity, integration and monitoring. Identity Management in the cloud is a giant opportunity for us, a brand new offering from us as well and we are quite comprehensive in this. It starts with a directory.
Imagine not even having your directory on prem. With access management, this is commonly known as single sign on across your on prem applications, your cloud applications from a single place. Imagine a salesperson that leaves your organization, but without single sign on, you might have an ID on your CRM application in the cloud that remains active for the next 3 days, how big of a risk that is. That's the opportunity for access. But we've taken it even more towards governance, permissions and the governance and onboarding processes associated with identity entirely done in the cloud.
With federation, this is not a rip and replace. Perhaps you want to keep your directory on prem. We can federate your access through that, so you don't have to rip and replace your existing investments. Integration, platform as a service. One of the most exciting things that we've done, like it or not, IT is losing control over their applications.
It's getting fragmented. Some are in the cloud, some are on prem, some are controlled by corporate IT, some are controlled by line of business. The integration between these applications is where a lot of the value lies. And instead of having a Java skill set to do integration, we've taken it to a level of a business user, what we call a citizen developer. All you need is a browser.
And the last one, very exciting, monitoring. The market for monitoring has been fragmented, right? There's application monitoring and then there's log management. So you figure out what's happening with your application in one infrastructure. And when you diagnose, you go to something else, which does your log parsing.
Usually both are on prem, usually very hard to parse and very technical skill sets. If combined both into one service, brand new service entirely developed entirely delivered in the cloud. This was a very exciting announcement Larry made as well, which is a private cloud machine. What we've tried to do is not just having an infrastructure layer, but we're delivering our PaaS innovations on prem and on appliance. Now why is that important?
It's actually direct impact to our target addressable market. You might be in a geography in Europe or in Asia, where you have data residency concerns. You might be in a particular vertical that you might have some data privacy concerns. But you yet you want the benefit of the innovation that we've done in the cloud. This is not simply taking an on prem product and installing it onto a VM.
This is the actual service, JCS and ICF, Java Cloud Service, Integration Cloud Service and so on and so forth, delivered on prem. Tremendous amount of traction for integration and identity service as well. Let's take a look at an example that Steve mentioned, Avaya. Why is that important and exciting, right? Avaya was a partner relationship management application.
In fact, they were a customer of a competitor of ours for CRM. But CRM is different than partners, because if you look at their business, it's a 2 or 3 tier distribution system to be able to manage their partners is a completely different set of functionality. Now they found about 80% to 90% of what they needed within our SaaS portfolio. But they needed some extensions, they needed some customizations. Now what are you going to do with that, right, do with that?
One option with our competition is custom scripting, custom skill sets, more expensive, very hard to find. With us, it's point and click and very easy to do. So the gap between what they need and what they already have from us is done with out of the box point and click tools on our cloud. Calix is a provider of unified access for broadband communications. They've built 26 integrations in 3 weeks.
I have a lot of background in integration guys. These projects would take years to do. Point and click, ease of use entirely done in the browser is a monumental achievement. Most of our competition still has downloads, download an IDE, start with coding, bring in custom programmers, none of that. We've taken almost to the level of an Excel macro.
That's how we call a citizen developer. That's what we mean by extending a SaaS application. And there's multiple dimensions to extending a SaaS application, not just a simple web page. It's mobility, it's analytics, it's social, integration to other SaaS applications or on prem applications, creating an API catalog that is consumed internally and outside the enterprise. An example, Generali is an insurance company in Italy that consolidated data from multiple on premise workforce systems into Oracle HCM, entirely done using Oracle Ipass, Integration Platform as a Service.
Now this was a very interesting comparison of where the value generation comes from. If you look at what it takes to run our PaaS on premise products. We did a study. In fact, we know this because we have our own hosting business. It's about $1200 per core per month.
And we broke it down by what is the facilities cost, which is your real estate, your power, your hardware cost, you're still paying for the software licenses. But the interesting point is the majority of the effort is in operations. The people that our customers hire to watch the software, to patch it, to maintain it. And if you look at the same graph on our PaaS running in the cloud, you'll see that's the value creation opportunity. We've invested so much in automation that it takes less effort to maintain.
I'd like to just go over why it makes why Oracle Infrastructure and PaaS is such a compelling value proposition. In my own teams, I'd like to call it the sum of parts is compelling and the part itself is competitive. By far, this is the broadest and complete infrastructure and PaaS available in the market today, all engineered to work together. But each one of these parts can be consumed by itself. And that's what we mean by a best of breed and that can be competitive to their own market.
And Larry is right, we don't compete with even in individual parts, we're not competing with SAP or IBM anymore. It's a far more fragmented market, so we are competitive. Automation is the name of the game. We can reduce cost by 30%, the total cost of ownership by simply moving to PaaS running in the cloud. And you saw our strategy to do private and public, seamless portability.
And a huge advantage, just like our customers like Avaya did, it's pre integrated with our SaaS applications. In fact, when you log on and try to create an integration on our Ipads, because we know from our identity that you have access to HCM and you have to have access to supply chain management, by default you already see the integration drag and drop capabilities right there on the browser. Easy to use. Just to give you an operational summary of our progress. More than 50,000 devices, 800 petabytes of storage, 19 Tier 4 data centers, new ones in Toronto, Frankfurt, Calgary and Munich, and over 36,000,000,000 transactions per day.
That's a median number. And just to give you a sense of usage, we've thought about what's the metric for usage, right? We could give you customer usage, customer counts all day long. This is a graph of actual transactions occurring on our cloud. And you see from Q1 FY 2014, it was about 17%, it's grown over 2 10%.
This is the power of the Oracle Cloud. Security and compliance, a lot of our customers ask about particular certifications. And we've spent a lot of effort in making sure our cloud is certified in all these particular regulations. Just in summary, I think I'd like to just make that point again. It's an exciting time to be here because of the innovation that we are doing.
We are extremely competitive on each one of these services. But
Ladies and gentlemen, please welcome to the stage Oracle Executive Vice President, Edward Screben.
Thank you. Okay. All right. So I'm going to talk to you this afternoon a little about security and the way Oracle thinks about security and why we think security is a very important driver pulling customers into the Oracle Cloud and how it is that Oracle's cloud is more secure than what our competitors can hope to create. Now, first, I think it's very important to understand that the threat environment has changed significantly over time.
It used to be 10 years ago, 15 years ago, mostly what you faced were persistent doorknob rattlers. I mean, what they tried to do is they tried to rattle a doorknob, see if they could find a lock that was loose, right, come in through the front door, right, and access systems. It's very different today. Attackers are highly skilled, often much more skilled than the IT staff of our customers. They're well financed.
They're very organized. They can overwhelm the capacity easily of our customers. Many of these attackers are associated with states, with governments. The IT infrastructure of our customers is turning into a battleground between nations, right? And some of the folks who one day come in as criminals, trying to steal information, trying to steal financial data, trying to modify systems for financial gain.
The next day they are working for the government. And so that means that the amount of focus that we have to put on security, both in terms of processes and technology, has to go up. The attacks today bypass firewalls and other border security mechanisms. The favorite way to gain entry to sensitive information is to actually do things like phishing or social engineering or more subtly come in through affiliated networks. You may have read about an incredible credit card breach of 1 of a company in the United States, a retailer.
The attackers actually came in through a network attached to that retailer's network, but because they were a contractor, right? There was a company providing refrigeration maintenance services, right? And so they had a connection between their 2 networks, didn't go through the normal order protection mechanisms. That's how the attackers got in. The attackers are patient and persistent.
The very first thing they want to do is they want to establish a kind of command and control island within the target network. And then they very slowly explore the network. And then once they find the interesting sensitive data, they begin slowly exfiltrating it, slowly pulling it out. And they act slowly and judiciously because they're trying to avoid and actually very often successfully avoiding things like IDS, Intrusion Detection Systems. At Oracle, we have 2 very important principles that we apply when we think about the security that we're engineering into our products and especially the security that we're engineering into our cloud.
The first is security features need to be pushed down the stack. Now, I think the traditional way that a lot of folks built applications and the way many of our competitors build their SaaS applications today is to try to put security at the application level. Of course, you need security features at the application level, but it is a gigantic mistake to rely on security at the application level. Because if you are implementing security at the application level, that means you're relying on 100, maybe 1000 of programmers to do the right thing as they code the application. And I guarantee you, they will not all do the right thing.
You have to push security features down through the stack, down into the middleware, down into the database where that sensitive data needs to be protected. And we'll show you later, down further, down into the hardware. The second most important thing here maybe not the second thing, not actually not less important in any way, is security features have to be always on. You have to always use the security tools that you have at your fingertips. Now that sounds like a kind of a strange idea, of course.
Why wouldn't you always use security? Well, the truth is our customers don't. If you go and look at companies out there, they've acquired some collection of security capabilities. Many times they've bought security options from Oracle. If you go and take a look at these systems where they're running those applications that have suffered breaches and we've gotten the opportunity to see many of them because Oracle customers, they suffer a breach.
They often bring us in to try to help them pick up the pieces. What we find is those customers had not turned on security features that they had bought from us, that they owned, security features that would have actually stopped the breach. And I can tell you, it's not only private companies where this happens. It also happens at governments. The United States government has suffered severe, awful breaches that would have been prevented if they had just turned on security features they owned.
And you see the results. You see the result of this changing threat. You see the results of failing to apply and use the tools that you have at your availability. It seems like every week you read about yet another major credit card breach. I have one credit card I've had to replace 3 times, right?
Because one large retailer after another has their credit card database breach and so I get a new one. You see really large scale vulnerabilities, really large scale because they are vulnerabilities in open source software that is just deployed in millions of servers around the world. You see Heartbleed, which was a vulnerability in OpenSSL. You see Venom, which was a vulnerability in something called QMU, which is a part of Zen. And the result of these vulnerabilities is that, of course, data is taken, data is stolen, but actually even worse, right, even worse is that data can be changed.
And you think about that, a lot of critical systems, I mean, they control real world processes. They control things like power plants. They control things like refineries. They control things like air traffic control systems. So if I am an attacker and my goal is not financial gain, my goal is destruction and disruption, the ability to change data in these systems is actually pretty terrifying.
Now, it's not like Oracle just turned its attention to security. We've been focused on security for many years. We've built a large set of very compelling, very effective security mechanisms at every level of our stack. I mean, this idea of, Hey, you should push security down through the stack, I mean, it's not a new one, right? I mean, we've been pursuing this for years.
But the thing that's different now than, say, a few years ago is the Cloud. Because we're bringing more and more of our customers into the Oracle Cloud, we can make sure that this broad set of security features that we've had for a long time are always on and are always used to protect our customers' sensitive critical data. Now, if you were at OpenWorld, you heard an announcement of something called M7, the next version of our Spark microprocessor. Now M7, it's got a lot of very compelling features. I mean, it's much faster.
It has really interesting silicon features for running database really quickly. It has some excellent capabilities for doing encryption. It has the most important feature though, the most compelling thing is something which is security in silicon, silicon secured memory. What silicon secured memory is, is a feature to detect when programs attempt to read or write memory they're not supposed to. Now that sounds like a sort of a simplistic thing.
I mean, it sounds like something which, of course, you imagine computers must already do. In fact, they do not. They do not. A very large portion of security vulnerabilities in software have the following form: An application and I use the term application broadly could be database, could be it could be operating system is tricked into reading or writing a memory address space that the application that program was not expecting to read or write. And thereby, causing data at that memory location to be pulled out, sent to an attacker or changed, modified.
You often hear that kind of vulnerability referred to something as a buffer overflow. So what that means is the attacker has convinced the program to read or write memory, it's not supposed to. Silicon Secured Memory stops those kinds of attacks. Silicon Secured Memory is always on in the Spark Microprocessor. You cannot turn it off.
It has 0 performance impact. It's just the way the Spark microprocessor works. It doesn't slow you down. It's not something which is like the program has So memory on a Spark M7 based system has bits which don't store data. They're alongside the bits of memory that actually store data.
And what those bits do is they tag the memory. In this diagram, those tags are illustrated by colors. So when a program goes to allocate a piece of memory, that memory is assigned a tag, a color. The pointer to that memory, the address of that memory, also has a tag. That tag on the pointer, the address, matches at allocation time the color, the tag of the memory.
Now, as long as the program is reading and writing the bytes in that memory through a pointer, through an address, with a tag that matches. In other words, the reference to the memory has the same color as the memory that's being referenced. The Spark processor is happy to carry out the operation, read the data, write the data. But if the color of the memory does not match the color of the address, then the Spark processor signals a fault. Now why does that result in increased memory?
Well, remember, buffer overflows, one of the just most basic kinds of security vulnerabilities that get exploited. The way it works is I read or write data bytes through a pointer of memory that it's not supposed to point to. And so the processor recognizes the tags don't match, signals a fault, does not carry out the operation. This is an incredibly powerful feature that stops one of the most fundamental kinds of program errors that result in very significant security vulnerabilities. And I should say at this point too, I mean, if you're a programmer, then you'll realize right away this has another benefit, which is when I'm developing software, when I'm testing software, one of the very hardest kinds of bugs ever to find is the very occasional memory corruption.
So every once in a while, because I made a mistake in my program, I write data I shouldn't have written. So I subtly corrupt memory. And 99.9% of the time that results in no incorrect behavior by the program, so my testing doesn't catch it. But that 0.01% of the time, I get a terrible problem, a terrible bug. So what this feature does, in addition to catching and stopping security vulnerabilities, it also lets me find bugs much, much faster.
The way the venom vulnerability works, one of those widespread vulnerabilities in open source software was that there was installed in a typical Linux distribution, if you can believe it, a floppy disk driver. No one uses floppy disks anymore, but the drivers are still there. They exploited a buffer overflow in the floppy disk driver, which caused and allowed the attacker to write memory. In this case, they actually wrote memory down into the hypervisor. In other words, they actually were able to inject code into the core thing, which is actually providing the execution environment on the physical server.
And that meant that the attackers gained control of the physical server, thereby gained control of all the virtual machines that are running on the server. M7, silicon secured memory, would have detected venom in real time at 0 cost. Heartbleed, another really wide scale security vulnerability. By the way, this was a vulnerability that had to be fixed on 1,000,000 and 1,000,000 of servers around the world. And I bet, I would bet, you could probably go out there and still find 100 of 1000 or maybe still millions of servers where it has not been fixed, It would have detected this vulnerability in a way very similar to Heartbleed.
The way this thing worked is that there was a bug in OpenSSL that caused a certain message, a heartbeat message. The heartbeat message does the following: I send the message from the client side to the server side, I give a and I expect some data back, okay? So it turns out that there's a link parameter on that heartbeat message that the client sends. And if the link parameter was actually longer than the data that it's actually referencing, OpenSSL was happy to send the excess data back. Now that excess data might have things like the private keys of the server.
So, what an attacker could do is basically pull the server, 'Show me some other interesting piece of your memory. Show me some other interesting piece of your memory.' On a Spark M7, this vulnerability would have been detected immediately because the pointer into the buffer on the server side, the tag on that pointer would not have matched the tag of the memory containing the private keys. Now, you might be wondering, hey, okay, so that sounds good, but most processors out there in the world are not SPARC processors, at
least not yet.
Now, even if I have only some subset of my server estate installed with M7, I am still protected. Because the way these attackers work is, of course, they try them over the vast sea of servers I've got installed in my infrastructure. And so, if you have some M7, at least, deployed in your cloud environments, like Oracle soon will have, then you notice these kinds of attacks. And once you notice these kinds of attacks, you can then go patch the rest of your estate. Now, one other major problem that customers have, of course, is that it's very hard for them to go out and patch thousands and thousands of servers.
Cloud providers have tens of thousands of servers like Oracle does. It's very hard to patch all of those things. Very hard to patch all of them in a timely fashion. Because many of these vulnerabilities, when they're discovered, they're discovered when they're being exploited, which means you have to patch them right now. But then, what do you do?
Do you take down tens of thousands of servers for some gigantic patch window? No, that can't happen. That's not realistic. So what Oracle has done is we have developed something called Case Splice. Ksplice for Linux lets us patch running Linux systems without taking them down.
Now we've been able to do this with the kernel of the operating system for a few years. We now can do that on the user space side. So for example, I mean, a test case for us is, could we have patched Heartbleed in running Linux servers, patch runtime open SSL without taking down the applications? The answer is yes. So using ksplice, Oracle in our cloud and our customers who have Oracle Linux can patch and repair vulnerabilities without taking the applications down.
Now, Oracle has been developing security facilities for a long time. Many of them are particularly relevant to the cloud and particularly relevant to the way that Oracle and our customers jointly manage their data in Oracle's cloud. One very important feature is something called transparent data encryption. So it is a way to simply declare at the database level what I want to have encrypted. I don't need to change my application.
I don't need to change my queries. I don't need to change anything about my programs. All I had to do is say, I want it encrypted and it just happens. And encryption, of course, using Spark M7 is incredibly fast. And the reason is that we have worked hard to put extremely high performance encryption subunits within the Spark M7 Processor.
Now when you encrypt data, of course, you have to be worried about keys. Where do I store the keys? And that's actually something where customers actually have a lot of trouble managing that. If I don't do a good job managing the keys, there's essentially no point in having encryption, right? Because the first thing attackers are going to try to do is get the key.
We have a product that we call Oracle Key Vault. Oracle Key Vault manages your encryption keys, stores it, of course, in a very secure way. Our customers use Oracle Key Vault today. But the most interesting thing about Oracle Key Vault is that we have arranged so that customers can run Oracle Key Vault on premises in their own environments and store keys which encrypt data which is in the Oracle Cloud. So Oracle does not persist the keys.
We have access to the keys at runtime because we have to run queries, but we do not persist the keys. Customers have full control of their encrypted data. We also have mechanisms, something called Oracle Database Vault, which ensures that database administrators can do database administration operations, but they cannot access the application data. And that's very important, again, for the joint management of data in Oracle's cloud. Using Oracle Database Vault, Oracle can have access to administration of your data without having access to your data.
We have mask and subset features. Of course, I think it's pretty well understood that one of the first use cases of cloud for customers is development and test. Well, all right. So, I'm going to use Oracle Cloud for development and test. But the problem is the test data often is really based on production data.
So, I'm going to upload my production data to Oracle. I mean, a lot of customers will trust us to do that. A lot of our customers will just run their production systems right in Oracle's cloud. And they can use encryption, they can use key vault. But if they don't want to upload that production data to the Oracle cloud just so they can test, They can use masking and subsetting, so that you have a representative data set to test against, which actually does not reflect real world values.
Now, you have all of those mechanisms that prevent Oracle from getting to the data, but how do you know Oracle is really doing the right thing? Our products have comprehensive logging built into them for all kinds of security administration related events. Now, if Oracle collected all those logs and we stored all those logs for you, how do you know that we're not changing the logs? How do you know that some bad actor inside Oracle isn't stealing your data and then deleting the log records to show it? Well, what we have arranged is for a product that Oracle calls Oracle Audit Vault that securely stores logs.
We've arranged that Oracle Audit Vault can run on your premises in your data center, collecting log records generated by the Oracle applications and Oracle Database and Oracle Middleware. So you can go review that data. You can verify that Oracle is acting in your best interest, that there's not some bad actor inside Oracle accessing data where you shouldn't. Finally, one of the key technologies that we have developed over time is something called database firewall. So database firewall monitors the SQL queries that are running against your Oracle database, the update operations and other actions to filter out things that look suspicious.
In SQL, there's an analog to buffer overflow, which is something called SQL injection. You trick the database into running the wrong query and database firewall can actually filter that out. So I think the fundamental takeaway here for Oracle Cloud and Security is that Oracle Cloud makes security easy. The data that customers put in Oracle Cloud can be secured from Oracle itself. I mean, you can keep the keys yourself, you can audit what we do.
But I think for many, many of our customers, the most fundamentally valuable thing is that we are providing the security pushed down through the stack, secured at every level, but most fundamentally important at the lowest levels, and it is always on. It is always on. Thank you very much.
Ladies and gentlemen, we will now take a short break and resume at 2 pm. Thank you. Ladies and gentlemen, the meeting will resume shortly. Please take your seats.
In a perfect world, the whole would be greater than the parts. Business would be better because all the parts work together seamlessly. And in a perfect world, that's how your business would work. Every part of your business would have intelligence from every other part, enabling you to find and identify your customers. Your workforce would be empowered to innovate.
Business would function faster, smarter. Security would no longer be a challenge. It wouldn't matter where you were or what device you used, your data would be there. And it would be standards based, helping you make the most of your existing investment while still priming you for the future. And all of this would be simple to make happen.
It would be flexible, expandable, predictable, unifying your applications, platform and infrastructure, driving your business further and faster. In a perfect world, the whole would be greater than the parts. This is the integrated cloud. This is Oracle.
Ladies and gentlemen, please welcome back to the stage, Mark Heard.
Okay. Thank you. I really appreciate that side of the room. Thank you. Okay.
So we're building up here. So what I'm going to do is take you through some material. I'm actually going to show you a fair amount of numbers. And then Safra is going to come up and we'll do Q and A for whatever time we have available, okay? So that's the plan.
Dorian, do I have to go through this again? Okay. Thank you. Non GAAP. Okay.
Let's talk about cloud. And I'm going to focus a lot on SaaS. We've been in the SaaS business a while. We've made some significant changes. If you went back to 2013 fiscal 2013, we made some significant changes in how we went to market.
Steve, I think, did a great job telling you what's happened to the evolution of our portfolio. And we've been in the business a while. So I'm going to talk to you about our SaaS business, which is big, it's growing, it's accelerating. I'm then going to tell you a little bit about our on premise apps business, both in the context of our new software license business and talk to you a little bit about our support business. I'm then going to combine it all together.
So you look at the entire apps ecosystem and how that's evolving at Oracle. PaaS, we're still in early days. Indergy talked about the number of PaaS services we released. We basically have had 2. We released 40 over 40 this week.
So we now have our portfolio, as I talked about, from on premise now available. Now our PaaS bookings have been superb in terms of quantity of PaaS bookings. Our usage has been very strong. Our pipeline is very big. So that's the current state of our PaaS business.
I'll talk to you a little bit more about it. But just to give you a context, there were early days. The first PaaS bookings we took or PaaS booking we took was a little bit less than a year ago. So we've been in this business from a bookings perspective just about a year now and now have the bulk of our portfolio available for sale. Some numbers.
This is our Platform as a Service business. I'm sorry, this is our SaaS business and our SaaS revenue. So I'm going to take you through various parts of our SaaS business. But as you can see from 2013 to 2014, we grew 23%. We grew 36% from 2014 to 2015.
You'll see as we go forward and I'll talk to you a little bit more about this that our growth will accelerate. And so as our SaaS revenue has gotten bigger, our growth rate has gotten bigger. You don't really see that much in this part of the business. Usually, as the revenue goes bigger, the growth rate declines. This is a phenomena driven by a couple of things.
1, Steve's point about we simply have more products for sale, not just new releases of products, but some of those things that we've released now being for sale in more geographies. So we literally have more opportunities to sell with new products and then the prior release. So imagine a release like Release 9 releases a bunch of products, most of the time in English speaking countries. When you get another release, those same things that were in that release now get available to more countries. So you get a phenomenon of not new product and new modules, but you get the phenomena of them being available now globally.
In addition, we simply just have a more experienced sales force. We have more references and we'll talk about that in a second. Now I'm going to switch you to deferred revenue. You all see this. It's reported.
It's a big number. It grew 21% from 2013 to 2014. And then you can see the growth from 2014 to 2015, bigger than the revenue growth number that you saw, 81% growth. Now, there is a number that is not in here. So this would not include promotions.
This would be think of it as contracts we have that are unbilled. And those actually, if you look at our history of promotions, in our early days of SaaS, we were obviously very interested in building a reference base and we would promote. Promotions are a very, very important tool for us. And what we did early was we did not want to lower the contracted price, because that's very important for us at renewal time. So if I have a choice to be aggressive on a price, and I needed references, and at a price for $1 I could just discount.
And at the end of our average contract, the price could be $0.80 and then we would renew from the $0.80 Another alternative would be to say the price is still $1 but you get a period of time free to use the product, and then you renew against the dollar. Now, those promotions over time, meaning the time of the promotion has declined. It used to be longer, now it's shorter. It's a little different by product based on the maturation of the product. And much of those promotions are coming off in a period of time that generally revolves around like now.
And that will actually cause a revenue acceleration, and now being really more defined as the second half of the fiscal year. So this deferred revenue, as big a number as it is, and as high as the growth rate is, it creates there is a bigger backlog based on what I just described. And legal will not let me give you the backlog. I blame it completely on legal. Thank you very much, Jordan.
So that is the situation as it relates to deferred and our promotions. Bookings are growing substantively. You can see bookings growth 41% in 2014. Let me just make sure I'm clear on bookings. Bookings to us, because people talk about bookings a little differently, our bookings are simply new bookings, brand new booking or an expansion, meaning in addition to an existing customer.
It is not renewals, New and expansion bookings. And you can see the growth at 106%. Again, as the number has gotten bigger, our growth rate has increased. Our last trailing 12 months of bookings, you've heard Larry get on talking about bookings for fiscal 2016. So I'm going to give you a TTM trailing 12 month number.
So that number would be a Q2, Q3, Q4 and the Q1 we just finished. That trailing 12 months, slightly under $1,000,000,000 worth of bookings. So as we talk about this prognostication of 2016 fiscal 2016 And Larry talked about one of our SaaS competitors and their projected growth rate on a calendar basis are trailing 12 months is roughly at that level today. I don't know if you all remember last year at this time, I made a statement. I had a short that talked about our SaaS pipeline.
And I think I said something like, our SaaS pipeline is really big. And I predict that based on the size because I would hear from people, they were surprised at the speed and the acceleration of our bookings last year, particularly in the second half of the year. Just to be clear, I wasn't. And I wasn't based on what I told you a year ago. We saw it in our pipeline.
We saw the growth. We saw the growth by pillar. And we saw the behavior of our conversion rate, conversion rate being our ability to convert something from the pipeline into a booking. Now the better news is when you look at that red bar to your right, it's not only like really big, it's actually growing faster than the growth rate we saw from 2014 to 2015. So we've had an acceleration, not just in scale, but also in growth rate.
And it's affected by those same factors I described earlier. We have more salespeople, although frankly, we don't have near the scale of incremental sales growth that we had. We're actually quite comfortable with our capacity levels. Doesn't mean we won't add some, but in general, we've built up a lot of capacity. We've also trained that capacity.
We've educated that capacity. We've now brought more customers live and we now have more references. So the ability now for that capacity to get more productive and build more pipeline. And that's sort of what's happening here. I'm going to give you these are sort of these aren't sort of these are customer count numbers, SaaS customer counts, 1339.
And from where we started, I mean, I'll just go back to when we started this thing in FY 'thirteen, really started, really got our engine moving. I think back on what we knew then versus what we know now. And Zephyrin, I talked about this a lot, but this, we didn't know that much, but we only now know we didn't know that much. We've learned a lot. And 1339 customers, DAS in FY 'thirteen, from a standing start seemed pretty good.
Seemed pretty good. But you see what's happened. We've had sort of almost a geometric expansion of our customer base. So the point now today, we're at almost 6,600 customers. Now let me go back.
That's at the end of FY 2015. So as we reported, we didn't quite have 1,000 customer adds in Q1, less than that. But add that to 6,596,000,000 you're in a level where we're now over 7,000 customers that we've got. I thought I'd just pick on one pillar only because when we look at ERP, ERP has such a dramatic impact on our position with our customers. It's so core to what they do.
And I thought to Steve's point, and I'll try to elaborate. When you sell ERP, the connection, for example, to HCM is very high. I mean, the more we sell HCM, the more customers tend to bundle I'm sorry, the more we sell ERP, the more customers tend to bundle as a sort of a back office process decision. So it's very strategic to us to win the ERP battle. And you can see what's happening.
We've been in this market a very short period of time, even shorter than we've been in the SaaS market. 210 customers just getting started. That was really almost onefour worth of work. We had some pilots, as you can see from the early days in FY 'thirteen, but we really went GA at the end of 2014. And you can see what's happened, 1300 customers and that is at the end of FY 2015.
We had a pretty good ERP quarter, again, almost a couple of 100 in Q1. So now you're at a point where we are beginning to get critical mass in this one key strategic pillar. Go lives, references, the talk of having HSBC and a, I don't know what word Steve used, a very big company in the U. S. That's out of the Financial Services business.
It's a manufacturing big industrial company. And so you have those that to mid market. We have a breadth of references from some of the biggest banks, biggest manufacturers in the world to mid market. We have a very, very strong position. So now what I'm going to do is so that gives you sort of a flavor of our SaaS business.
And before I go into the on prem business, the SaaS business, I would say that from a data modeling or forecast, we're just growing. It doesn't mean we're perfect and we know everything. I'm certainly not going to tell you that. But we know a lot. The number the business has gotten big enough that it starts to behave the way you would think a big business would behave.
Our forecasts are quite good in terms
of the ability for them to
make them. Obviously, they're very dynamic because in a hyper growth mode. But yet, the fundamentals of the business have grown quite strong. So let me talk a little bit about our on prem business. I thought I'd first start by talking about our let me we use the term horizontal apps.
Let me try to tell you what horizontal apps mean to us. This would be the exclusion of our GBU apps, okay? So our global business industry our industry businesses, we would extract them because they're obviously growing, maybe that's not obvious, they're growing. And really talk about a perception that perhaps the apps and those apps would be things like Siebel, PeopleSoft, E Business Suite, JD Edwards, EPM, those set of products are declining. And you can see what's happened to support in this.
So in 2010 to 2015, the support business for that category of products has grown more than 25%. So our support business is bigger in 2015 for these products than it was in 2014. I've now switched on you to look at the license business for apps. So this is the same set of products, but now I'm looking at the new software license for those products. And the percent, if you will, whatever that color is, the orange, the orange is the percent of the business that has now moved to SaaS.
And what this chart tells you is 48% is now SaaS 52 is new software license. And you can see what's happened to the mix as we entered in FY 'twelve. The mix has changed dramatically and quickly. And this is what's happened in the North America slice of that. So now what I've done is I gave you a global view.
I've now clicked North America now is materially this is an FY 2015 number is now bigger in SaaS revenue than it is in new software license revenue. If I were to click on 2016, which I'm not, just as a heads up, it would be a lot bigger because they've had strong bookings. And as you know, the beauty of this model is that the 54% comes back again the next year. So you build off that base and the bookings, some of which actually were FY 'fifteen bookings because they're either promoted or they've yet to be provisioned, adds to that base. Then we have a percent of our FY 'sixteen bookings that actually provision and turn to revenue in FY 'sixteen, and the combination of that makes this number big.
So in one of our regions, here being North America, we are now really in Apps, a SaaS company. Now, I'm not going to show you each region, although I'm sure show me Europe and Latin America, show me I'm not doing that. But you would think of our other regions 4, 5 quarters behind this model. Europe on the virtually on the same trajectory, but a little behind. And of course, because we started North America first.
Now, this is what it looks like all together. The entire apps ecosystem at Oracle is gaining share. When you look at the apps market totality, include on prem, include SaaS, the entire market. I talked to you a little bit about the age of applications and most there's probably 85%, 90% of all new apps now in big companies are being deployed in the cloud. We are gaining market share when you add the ecosystem together.
And that is going to accelerate because of the growth of our SaaS revenue. Now let me take you down a different path. It's not really a different path, but
I think it's just in
case you say, okay, I got it. So you're going to take that support. And so I'm going to move to SaaS. And this thing is going to be terrible, because I've actually heard that from one person or another. And I just want to make sure I'm really clear on what's happening here.
Application Support, by the way, that's the chart I started with when I went to the on prem business, my first on prem chart, is greater than 5,000,000,000 dollars It's growing. The renewal rate is unchanged. It's not really essentially unchanged. It's a little it's roughly the same. Support converted to SaaS, meaning as a percent or a piece of that $5,000,000,000 plus how much really did you lose that converted to SaaS?
And that answer is less than $50,000,000 So this is a very important thing I want to make sure you understand. The bulk of our bookings in SaaS are not coming from our user base. I say this on the conference calls, and I'm never sure how much this stuff sticks. We cover a lot of ground in a quick period of time. But over 60%, 65%, depends on the quarter, of our bookings come from somebody that did not have that app category in on premise.
Of the support of that did come from our support base, the multiple on that, meaning the conversion of that support revenue to an ARR or eventually a SaaS revenue number is roughly 3x. I had a dollar of support. I then bought a SaaS app. Now roughly, it's a little different by pillar. I roughly pay $3 per year in SaaS revenue.
Now at my attempt to connect a bunch of dots simultaneously, I just thought I'd build a little model. A dollar of on prem support with this gross margin of 94%. We had to make it we could have made it 95% to make the math easier, but Chartmaker wanted to make it harder on me. We get $0.94 If everything converts, let's pretend it all converted next week, Safra and I would actually be happy And we'd get $1.20 worth of net margin dollars. That's at the current 40%.
Our 39% in Q4, our 40%, 41% in Q1. We've said our margins are going to head to 80%. We've built capacity. We are not spending a lot of incremental CapEx because we put down much of this infrastructure. And that revenue we've described falls on top of the model and margins go up.
But just because I know there's so many optimistic people in the audience, And if you said, wow, I just don't believe you. I don't believe you or I just think you're confused, you're wrong, whatever word is you want to put in there. And let's say we hit 60, we're going to double our margins. We're going to double our margins. So when you hear us talk about the evolution of this business, we know the model.
We know how it works. But frankly, one of the issues in the SaaS business is we've had to invest to be able to get these bookings. It's not you can't go into the market and say, please give me a bunch of bookings before I build the infrastructure. We've had to build it to be able to sell it. I always use the hotel example.
It's hard to say, make a reservation in the hotel that I haven't built yet. I don't know if I want to do that. We built the hotel. People are now staying in rooms. So this is sort of my summary.
Pipeline is big. It's double where it was. Roughly, it's a little less than double where it was a year ago. Bold prediction, we're going to sell more. It's a bigger pipeline.
It's very broad based. It's across geographies. It's better. Our sales force is bigger. I want to make sure I'm clear with you.
I said before and I want to re emphasize, because I know I've told this audience or at least people who've been here multiple years, I was not given the model we had, we did not have the capacity to in areas like HCM. We had to have salespeople who called on CHROs. As an example, our model 4 years ago was, Mark was a salesperson, I called on the CIO, and I sold our entire suite of apps.
Okay?
After a lot of careful analysis, that model wasn't going to work. We had boutique competitors who would go directly to the functional leader. They'd go to the head of marketing, they'd go to the head of HR, and they would just know more about the subject matter. And because it's cloud, the buyer, so to speak, got democratized. The way the CIO would control the app's decision is the CIO would say, hey, it's my infrastructure, it's my server, my operating system, my database, my architecture, my standards.
You got to buy what I let you buy. Now that it's Cloud, I'm the CHRO, I'm the Head of Marketing, I'm the I got to vote because I don't need your infrastructure. I'm getting it out of the cloud. So that meant we had to be able to have this dialogue with customers and talk the way they talk, understand their issues. That caused us to ramp up capacity.
And we did it. Doesn't mean we have all the right capacity yet in every market, but the relative amount of change now is de minimis compared to what we had to do as we moved into this model. In addition to that, there's more people, but they're ramped, they're trained. They've been through a lot of training. And we needed to do it because our people didn't necessarily come from a background of selling to a CMO, selling to a Head of HR, selling to a CFO, selling to sales organization.
It doesn't mean they were not capable of it at all. It just wasn't the way we trained. They're now through multiple years of training. Our competitive position, Steve, I thought touched on it well. We have several markets where we're just the leader.
In ERP, we sort of feel like we don't really have a competitor today. There's no one selling supply chain in the cloud, marketing in the cloud upscale. Our nearest competitor in financial reporting says they've got I can't follow their lead, 100. You've seen our numbers. So we not only have a product lead, we have a brand lead.
We've made incredible progress. I know you all see this in HCM in terms of our customer counts, our market position. Marketing, we are very, very, I say, competitive in this chart. We lead now in most of these markets that we compete. I've talked to you about how many customers we now have.
The go lives now and the references have kicked in. I don't think that was an unruly person. I think it was just an important phone call. This is what happens, you get just rough crowds. Thousands of customers now, multiple lots of go lives, lots of references.
And so the need for us, which we had 3 years ago was we not only had to sell, we had to get them live and we had to get references because frankly, customers buy from other customers. I mean, you all know that, but if you don't, I'm here to tell you that it's great. I had a meeting with Mark. I had a meeting with Safra. Boy, it sounded good.
First question is, let me talk to a customer. So references are critical and we've now built a very, very large reference space in every pillar. We reported our bookings in Q1. I'll say one more time, I predict the rest of the year will be strong. I didn't comment a lot on PAS.
I think it will be probably I don't want to commit because I'm not allowed to make any forward looking commitments. But I would predict a year from now we'll probably do the same type of presentation for PaaS. We go into PaaS with frankly a better hand. As good as as well as I think we've done in SaaS, my opinion. We go into PaaS with a much bigger user base, a much stronger market position, a much stronger brand, and in a lot of cases a less competitive environment with already an existing scaled sales force and the speed that our engineering organization has been able to move products to get them available in PAS.
And I've told you, we've gone from 2 services to over 40. Our pipeline is full, but I'm not yet in a position to give you the depth of clarity of exactly how this will work the way that we can now, I think, in the SaaS business. Okay. So I gave you a lot of numbers, more numbers than I gave you last year. A lot of insight into our apps business, our support business, how we see the overall margins working.
So what we'll do now is Safra is going to come up and join me. We'll do Q and A for however long Ken lets us. We'll take any questions. We'll take a break before we get to Larry.
Thanks for hosting. It's Brent Field with UBS. Safra and Mark, can you give us a little sense of the database business and the tailwinds and headwinds that you're seeing right now on 12.2, I think there's been maybe some of us that have watched the company first in time that thought this would get to GA sooner. Is there something you're doing in terms of finishing touches that maybe took you a little bit longer than you thought? Can you maybe give a little more color on 12.2?
So 12.2 is a massive release. I know I'm sure you all saw on Sunday the advance that it is. Over 4,000 virtual private databases. It is a truly it's truly a database built for the cloud. And it's a massive release.
It's about the same time frame that we usually release the 0.2 release actually. I myself think it will be very, very important. There are, of course, some customers that 12 comes out, 12.1, wait for 12.2. This is without a doubt the release, I would say, worth waiting for. And I'm very, very optimistic because it has some incredibly important features that I think are going to be uptake very well.
Yes. And I mean, Brett, I mean, listen, if you look at our numbers, we've said this on calls, the uptake of 12C is faster than the options than anything else we've ever had. So now granted it's a dot one release. And so I think we're very optimistic. Let me add to it.
The fact that now the services that we have from a platform perspective, you've got now the availability of 12 in cloud. And we actually one more time and I think we said this a bit, we think this is a huge advantage. The fact that you can use the same database in the cloud that you use in production or use behind your firewall, use in your data center, huge, huge advantage. So we're we don't feel like we're late and yet and let me flip it around, we actually feel quite optimistic on 12. I think it's had a very exciting early ramp within memory and multi tenant.
Hey, Ryan Malincher from Barclays. Quick one, Larry talked about the changing competitive environment and the one that makes a lot of noise at the moment and is out quite a bit is AWS.
Can you talk a
little bit about and you have to position a sales force against them, seem to make a lot of noise around database as well. Like, how do you see them and how you position against them? Thank you.
I don't know, Energir, are you still maybe Energir could talk a little bit because we get this question I mean, I've heard it once before. Maybe Energia could get a little bit into the technology a bit of the difference sort of between the 2.
I'd like to address it in a a couple of ways. One is to do with if you look at the breadth of our platform versus what AWS does, we address what we call 4 personas. There's actually 4 consumers of the platform. There's developers, there's integrators, there's line of business users, there's business analysts. What most of our competitors including AWS do is actually address part of the developer persona.
So that's one aspect of things. We are far broader and the economic addressable market of our products is far bigger. The second thing I'd like to talk about is if you look at their business, they're actually growing from infrastructure up. And they're growing specifically in smaller companies. They would like to get into enterprise.
I would encourage you to actually look at some of their conferences. The sessions that I most heavily subscribe to will be the ones that are in the enterprise, the guy that's talking about the enterprise usage of. And you'll see the amount of work that is being done by the enterprises to actually get it to work on AWS. The chart that I had talked specifically for cost benefit analysis is specific to this. You see even running our infrastructure on Amazon sometimes is more expensive and more time consuming than running the same thing on premise, forget on the cloud.
So our cost advantages for platform as a service on our cloud is quite starkly competitive.
I want to just put a little bit of a business context around this for all of you using really as a model what we knew in the old on premise business. And I just want to break this up a bit for you. First of all, in the old on premise business, there is the commodity layer, the compute guys, the Dells, the Hewlett Packard, the used to be IBM's, now Lenovo. There's that gang of commodity guys. And those guys compete on price basically.
Above them, as you know, and we ourselves, we do sell X86s ourselves, but it is not the bulk of our business. What we sell is this same some of these commodity parts, but with our differentiated intellectual property, whether it's in our case, it's PaaS, all the different parts, engineered systems in the on premise world. And then, of course, we sell our applications above that. This market, the infrastructure as a service of pure metal, those folks require a lot of technical work to make them perform anywhere close to what we provide in our systems. So and though as Larry very, very clearly said, we sell fast, we sell paths, and we sell infrastructure, and we'll be very competitive for from a customer point of view for them to duplicate what we do in our PaaS PAS and even in our management of the infrastructure, but just generally in our PAS, just to match it.
As Inderjit was saying, they have to do so much labor that it isn't worth it. Our compelling proposition is, if you're using our SaaS, you're going to want to use our PaaS. And if you're using our PaaS right next to it, you're probably going to want to use our infrastructure. The infrastructure market, what you're seeing is you're seeing AWS do very, very well in this area. But our market is far, far broader.
And even when you see, I guess, Amazon has Aurora, which I think is my sequel, the reality is that this is not, under any circumstances, a substitute for the Oracle database. It never has You know, when we acquired Sun, we got MySQL as part of it, and it is incredibly complementary. No one is going to rewrite their Oracle applications to put them in MySQL. They simply won't work. They'd have to start from the ground up, and they would not even do what our product does.
It's funny the juxtaposition of the 2 questions as we're talking about 12.2, the most advanced database ever with so many features as compared to Aurora and what is offered on Amazon, which is simply the most simple system possible. So there's plenty of room in the market just like there was in the on premise market. There's plenty of room for the commodity guys, whether it's Amazon or Google rolling around in that market. And as I said, we too sell X86 in that commodity world. But we also have everything else.
And that is the high value to our customers by having them let us do the work for them, by letting them benefit from our automation and from our massive economies of scale. So there's plenty of room for all of us to do very, very well.
This is Mark Murdler from Bernstein Research. I'd like to drill in on the revenue lift comments. When you talk about $1 of on premise application maintenance revenue going to the cloud, you say that you're going to receive $3 of SaaS ARR. Just like to confirm, maybe get some more detail. That's not what
I said. What I said is that's what's happened.
That's what's happening. Okay. So maybe I drill ask, So you're saying there's a 3x lift to what the equivalent revenue would receive if a client were to move to maintenance from maintenance, but they're not moving from maintenance right now. But for that type of economics, in order for us to understand how much more valuable the cloud is as a revenue stream, are you is that number something that would be across all of your different horizontal products? Is it including whatever differentiation in sales discounts?
Is there how close is that to an apple to apple in terms of how we should think about it?
No, it is apples to apples. But remember, it is I'm simplifying it because what we do in the cloud for our customer is we actually run their hardware. We do the operating system. We do the database. We do the middleware.
It's on our premise. We actually run it. It's our operations people. We do the heating, we do the cooling. So we do more of the job as we do it.
And so it's really not a fair thing from a TCO. I sometimes think when I give this number, somebody says, Gee, that sounds high. The reality is it's low. And my view is over time, we'll get better and better at selling the value. Now the customer is clever too.
The customer would like to convince our salesperson that this is a comparison between the support price and or the license price and the SaaS price. And this is part of the point I made earlier about training. We have to go in and say, please don't get in that conversation. We need to get into the conversation about the entire stack because it isn't just that, it's the entire stack that has now moved over to Oracle. And we're doing a lot more work.
So the TCO for the customer is really, really attractive. Now we've also got the help of some SaaS competitors that are very, very, very high priced. And I think it's great because the room in between their price and that multiplier that I'm giving you on our support is we actually come in at that level lower cost than many of our SaaS competitors.
Great. Heather Bellini with Goldman Sachs. Mark, I just had a question and you had some sparks.
Where are you actually? I have no idea.
I'm sure. I'm over here. No, no. Hi, Heather.
So I mean, there's some people that would say your SaaS billings merely represent
I really love this. Some people. Yeah. I watched the Republican debate. So I'm
Exactly. So some people would say your SaaS billings represent customer shifting merely from on premise over to the cloud for the same app they were using prior. And you were sharing a little bit of this, but I was wondering if you could share with us how your net new customer base has expanded, which is what we've been hearing. And if there's anything you could share with us just in terms of SaaS billings that Oracle is getting that they didn't get before? So kind of maybe a net new SaaS billings number from like just to give us a ballpark so people could see if this is merely customer shifting from on premise to the cloud or if it's actually net new customers coming on.
I love it, Heather. I mean, this is one question with 12 parts. And I got to keep up and remember all the maybe Safra can remember some of them that I can't cover. I mean, I tried to give you a lot of information and this is why I'm always going to check because when I do, it never stops at the request for more. So let me try to what I think I tried to say, but let me try to say it again, that over 50%, 60%, 65% of those customers that we acquired, let me make sure I'm clear with it, not necessarily the customer, but the application we received was from a new application user for Oracle.
Doesn't mean they didn't have Oracle database, doesn't mean they didn't have Oracle middleware or something, but they did not use that application from Oracle. So the bulk, bulk 65%, 70% are customers that didn't have that application on support from us, So those are new customer acquisitions in terms of the rate of growth. And a lot of those come from, as you can imagine, mid and upper mid market, who we didn't have business with before. I think I've laid out the amount of support. You made comment about the support.
I've really given you the number.
No, no, that was right. No, I think you answered the first part of the question. Just the second part is, I think to the extent you could give people a sense of how sizable the billings are from those net new customers.
Oh, I see what you're saying. Okay. So your point is now translate that into a revenue number as a percent of the revenue coming from the new customers. Well, you could probably do the math. So I don't have it right at the top of my head, but I could convert the math.
I could take the $50,000,000 do the math and then take that as a percent of revenue. So it's not going to be huge. It's not going to be huge. By the time we get through 2 more questions, I'll have done the math in my head.
Hi, it's Catherine Egbert from Piper Jaffray. So you guided for modest on prem software growth for fiscal 2016. So but also Mark, you made a prediction that most apps like 80% of apps are going to be in the cloud. So maybe to put a timeframe on the 2 previous questions, what when does that crossover happen? It means 80% of apps are going to the cloud.
Can on prem continue to grow?
Well, the comment I made was that, I think it was on Monday, that 85% of new apps were going to the cloud. And I made a prediction on 2025 on the percent of apps that would be in the cloud. And I'm sticking to my statements.
Okay. Thank you.
Can I
ask just a quick follow-up? As you roll into new markets and new geographies, are you going to continue to use the same sales methodology, meaning the same promotions for China?
Can you give it to me one more time?
As you roll it, the cloud offerings into new markets Yes.
So we go to Europe or we go to Africa. Exactly.
Right. Are you going to use the same sales methodology, meaning the same sort of sales incentives, the same promotions? Just talk about that a little bit?
Well, we use the same sales incentives. In terms of tactics that we might decide to use, I don't think I want to talk about that. I mean, I think at the end of the day, to be very frank with you, I think we've been thoughtful and clever about the tactics we've used when we needed to. And I've given you again, I've been very I've attempted to be very transparent today. And I don't think I want to predict how we'll behave in a market.
What's important to us is we're going to win this battle. We're going to win it. And we're going to do we've done what's been necessary to transform the business And it shows up in the numbers that I've described to you. We have an opportunity now because we're actually stronger on a relative basis globally because most of our competitors have infinitesimal businesses outside the United States. By the time you get to some parts of Asia, many of our competitors aren't even in the market.
They don't even have their banner or their logo in the market. So our need to do things in many cases is materially lower. But that said, depending on what pillar, depending on what market and depending on the speed by which we want to build that reference base, because reference bases aren't just by product, they're sometimes by product by geography. And in the case where we would need to introduce a promotion, we might. But remember, I don't want to make that the message I leave you with.
Much of what we've done is behind us. We needed to build references, we have. And it was a very, very strong tactic for us that one of the reasons I'm more comfortable talking about it now is we're doing much, much less of it.
Over here. Thanks very much. It's Kirk Materne with Evercore. Mark, earlier this week you talked about you think 100% of dev test by 2020 goes into the cloud in 2025. 2025.
2025.
I really I'm amazed you guys quote me so much and that's just that's not what I said.
Just pushing you. But and you're obviously very upbeat about how PaaS has gone in this sort of 1st year of being commercially viable. When you think about the PaaS business and middleware in general moving to the cloud, just two quick questions. One, when you think about the economics from an on prem to a cloud shift like we've seen in SaaS, is there any real difference when you get into middleware and PaaS versus what we've seen in SaaS? And I guess secondly, on SaaS, you've had some of your competitors sort of leading the charge, right?
You've had Salesforce sort of plowing the field to a certain degree. What charge are they leading? Getting people to move or adoption of cloud computing in general, meaning understanding of it. In middleware, I think there's you guys are sort of the ones leading the charge. The question is really, can you see the same level of adoption or is the adoption curve any different with PaaS than you see with SaaS?
Thanks very much.
Yes. I mean, I think I really think when Larry was making the I mean, I think Larry really he gets it's really, by the way, bothersome to the 2 of us how right he is. I mean, it's almost annoying to a degree, but we got into this dev test discussion couple of years ago. And we got into the economics of dev test and they're actually very, very interesting because the dev test is roughly 30% of all of IT in terms of spending. And it's a very expensive process.
It's a very expensive process that inside many of our customers doesn't have a lot of governance. You've got a lot of programmers. They tend to be very they make decisions on their own. And the standards within many of our customers aren't nearly as strong as what they are in the production environment. Now eventually, all of that gets converted, whatever is done, to their production environment.
The economics, Indrajeet, I thought, showed a pretty clear chart about the power of the economics in an example that really is a dev test like example. And it's SaaS like plus sort of opportunities in that sort of TCO that Indrajeet showed. So I think you're right, we're the leader. We're the 1st mover. We also bring the customer the benefit of not having to do the conversion I described earlier.
You can actually build in the tools that you actually then run-in production. That is a huge advantage versus anybody else in the market if there really was anybody else. The only other company that's really got a platform that you can build on is Microsoft. They've got dot net and SQL and Windows and we've got Linux, Java and Oracle. I mean, we feel good about our position.
So I think it is early days though. And I think, Will, you're going to see us working hard on both the developer community and at the same time on the CIO, Because the CIO has got I've talked to you earlier about the pressure the CIO is under, no incremental budget coming. And the CIO historically is risk averse. Why is the CIO risk averse? Because most of the time, the CIO is fired because the CIO has let down a line person, has let down somebody running support, has let down somebody in a region, couldn't get a product shipped, couldn't close the books.
These become issues that get CIOs. In devtest, they really have their only real risk is within their own organization. So you'll see them take more risk in that test because the arbitrage of the cost is extremely high. Once we can get and that's why it's so important for us to see the market today. And when and we're out with lots and lots of trials, Indrajeet gave you, I thought, some very strong and powerful examples of what customers are actually now getting done.
And as those references move across the market, I mean, we have a wonderful opportunity.
So Phil Winslow, Credit Suisse. I've got a question for Safaraju and Mel. You've talked a lot about just the halo of costs around the database on premise, patching, etcetera, tuning and so forth and how you can take those out in the cloud. And it seems like you almost think the costs that can come out in the cloud are bigger with PaaS and database than even in the SaaS world. So if you translate that into sort of what you can charge customers and how you think about the relative possibility of the PaaS business longer term than the SaaS side.
I mean, how just do you think about that sort of at a high level both revenue and then profitability?
Sure. I actually don't think necessarily that the cost for our customers in the maintaining the database is higher than maintaining applications, okay? So I just want to correct you, meaning because when you are maintaining applications, you're maintaining both applications and middleware piece related to that and the underlying infrastructure. However, even that being so, there is no question during Oracle Open World, it's really one of the chances that I finally get since I'm usually back at headquarters and development meetings and day to day operations. I finally get to see a lot of customers all at the same time from around the world.
And I can tell you one thing. No matter what they're doing in the application side of the world, they know one thing for sure immediately. They are maintaining their databases exactly the same way from one customer to another. And they know another thing that we will maintain their database way better than they could ever do it. It's not even a complicated question.
And whether it's in in Latin America or it's in Africa or it's in the Middle East or in the United States, they know one thing that the just plain old economies of scale and the expertise we bring to the PaaS market to the maintaining a database is so overwhelming. Even when you don't even include what Edward Screven was talking to you about on the security side. I mean, the truth is because I got into some really deeper technical conversations with folks about what their security situations were and who they thought could do it better. And there's no question. You have to understand that the applications business for Oracle is a small fraction of our worldwide database market share and our worldwide database.
There are not hundreds of thousands of databases out there at our customer sites. There are millions of them. And there is no question, no matter how good they are, whether you are the one of the largest industrial operations in the world. And that company, by the way, sent hundreds of people here to Oracle Open World. And they actually meet here on Sunday starting at 7:30 am.
Before all of you show up, they all meet amongst themselves with Oracle from morning till night. And here they are, I'd say the best one of the best industrial operations in the world with tens of 1,000, maybe hundreds of thousands of Oracle databases, in fact. And they know that we can run their systems better and that we can run them for less, we can secure them better, and we can give them a much simpler operating plane than they have themselves. The opportunity for PaaS, what Mark was commenting on that annoys us about Larry, is he doesn't need to see 500 spreadsheets. He knows it.
He sees it. He feels it. You know why he recognizes the pattern as it's laying out. And to the extent that we move the databases and the middleware markets to our PaaS, that number will dwarf probably dwarf our SaaS numbers and the entire SaaS market, just like our database business, dwarfs pretty much the entire applications business because it's not only our applications, but it's all the custom applications. And it's going to unleash a development frenzy, frankly, as companies, as developers no longer for every new app they put up, do they first have to spin up a database and then the middleware, they can just get started.
And so as you can hear, and I know I'm talking to analysts and shareholders, so I don't want to sound too optimistic. It never pays. So I'm just going to tell you. We are generally very, very optimistic about our prospects in the SaaS market, the PaaS market and the matching infrastructure market. We believe this is going to play out exactly as we expect, and it is so far doing so.
Anything else?
I think we're in break. We're going to go to a break and then after us, Larry, questions. Okay? Okay. Thank you.
Thanks.
Am I on? I am on. Okay, great. Thank you. I really always wanted to play that ding dong thing.
And so thank you for indulging me. Then the
problem was they wanted to
take it away, and I had a little of a disagreement, but they won and I had to give it back. Larry is imminently close here. There's a lot of construction traffic out here you may or may not be aware of. And so they say he's like 3, 4 minutes away. So what we're going to do is basically we've got a couple of 3 more minutes here.
And as soon as we have him physically in sight with the car, I'll get the queue, we'll roll a video. And And then what I'm going to actually do is then come up afterwards and kind of give a little plug. We have a modern finance event going on concurrently with this. We have an excess of 1,000 finance professionals here with about 2 thirds of those attending being at the finance director or above level. So these are not IT professionals, these are finance professionals attending that.
Safra gave a keynote yesterday as did former Secretary Treasurer Hank Paulson. It's been a very good turnout and it's kind of a marquee event, similar in the way we've got these HCM worlds and the customer experience worlds. As these events are kind of rolling out, they're getting bigger and bigger, the following is getting stronger. So what we'll do is following this, I encourage you, there is a website. I will get the link out to everybody here.
Please go take a look at some of the feedback and videos that you'll see from the presentation. So just give us a couple more minutes. Again, as soon as I get the queue and the word from Larry, we'll ping the video and I'll come back up. Thank you.
Delaware Life is a relatively new company. We were just founded through a divestiture from Sun Life Financial. As a part of that divestiture, we took over the assets of the U. S. Annuity Life business.
However, we didn't take any of the infrastructure. We needed to seek new systems, new business practices, and we really took the opportunity to simplify. We were seeking to have as little to no footprint as possible from a data center standpoint. So we were seeking to be in the cloud wherever possible. We looked at SAP, we looked at Workday as well as Oracle.
At Delaware Life, we actually use Workday HR. But as we were seeking an ERP solution, we really wanted to have an independent view and pick the solution that was perfect for our needs. And that's really where Oracle ERP Cloud shine through. One of the other benefits of selecting the Oracle products was that Oracle offers both ERP Cloud Services and Planning and Budget Cloud Services. The other vendors that we were looking at really didn't offer those additional products.
So therefore, we would have had to continually rely on other products that weren't as integrated. Now that we've implemented, we've seen a number of benefits come to fruition. We've seen the real time reporting. We've seen very fast upload speeds with all of our multiple integrations and we actually do integrate 26 different systems on a daily basis. We've seen very fast performance of the data itself flowing into the reports and we're running millions of lines of data every single morning.
The real benefits of using Oracle ERP Cloud and Planning and Budgeting Cloud Services is the synergy that we get from the data between the two systems. In our prior state, we were never really able to get that actuals budget on a real time basis. And now that data flows continuously, the feedback that we receive is excellent on the usability of the system, as well as the simple fact that now all of our data is in one location.
Ladies and gentlemen, please welcome to the stage Oracle Chairman and Chief Technology Officer, Larry Ellison.
Larry Cashron with B. Viner.
When you
look at the database market, you guys have clearly dominated this for centuries, maybe decades, centuries is too generous. No question that Oracle is firmly entrenched in the customer base since you held your share. And no question that you've fought all these database wars in the last several decades and defeated all whoever aspire to be a threat. As you look at the I have to ask this question again because I remember asking this 10, 15 years back. As you look at the current crop of whatever it is out there, as you look at new workloads, existing workloads will keep running on Oracle.
But if you look at new workloads, new application development projects, how do you ensure that Oracle stands up and continues to dominate the field against whatever it is, AWS, Microsoft SQL? Everybody envies your position.
How do you view that? Thank you. I think the most to capture the next generation of workloads, there's really 2 prongs. One is making sure our technology is the most advanced technology, and I'll speak about that in a second. And the second is to make sure it's easily available in the cloud.
So I think you've got to have a delivery vehicle that's very convenient if you're a startup. So you've got to be able to rather than buy a computer, buy a server and put this stuff up, you should be able to just rent it immediately get a development environment and rent it and get going and build your application. And that's how you go after the start ups. I mean, that's where AWS has done very well. The other is our traditional enterprise customers.
And there, we've got to make sure that our technology is still the most attractive technology in terms of cost performance. Cost, a lot of that is productivity. I mean, the big costs in IT are not the cost of the server. I mean, electricity in it is now as much of a cost or more of a cost than the cost of servers these days. So, it's really the labor costs that continue to dominate.
So, if you look at what we're doing with the new versions of Oracle, it's a huge degree of automation in terms of creating a database, backing up a database, making sure that the making it very easy to create redundant copies or fault tolerant copies of the database. All of that's more or less automatic now, where that used to require considerable expertise in labor. And then there's the new generation of technology like in memory database, being able to handle structured and unstructured data to do all of that. Now the database arguably is the most complicated program ever written. So we have a huge I think a huge technology lead over the competition in database.
We have a huge installed base, lots and lots of people that know how to use it. We just have to make sure it's easily and gracefully accessible in the cloud through with a lot of automation associated with it. And I think we'll do fine. There are 3 businesses we're going into in the cloud. 1 is applications.
We were and if you look at applications on premise, we were the number 2 player in applications on premise. And we think we have a huge opportunity to be the number 1 player in applications in the cloud, because we have by far the largest portfolio of applications in the cloud. We'll sell more SaaS this year than anybody else, including Salesforce. So, we'll be selling more applications. If you look at our portfolio, we're the leader in ERP, we're the leader in EPM, we're the leader in marketing.
You can say, Workday is the leader in HCM. It's very, very close. Certainly, outside the United States, we're the clear leader. We have we're Salesforce's number one competitor in sales automation. It's very close between Salesforce and us in service automation.
We're the leader in field service and so on. If you look, we just announced manufacturing and supply chain, and SAP is nowhere to be seen, unless you count Concur, Ariba and SuccessFactors, which I don't. None of those are strategic and they're not strategic applications. They're just not strategic. Doing expense reporting in the cloud is not the same thing as doing ERP in the cloud.
SAP's claim to fame was they were the number one ERP company on premise And they're not even in the ERP business in the cloud. They're not there. They have no product. That's a very big deal. So who's going to win that?
That would be us. We're number 1 in ERP in the cloud. So we were number 2 on premise, we have a chance to be number 1 SaaS player. We have the largest portfolio. We're going to sell more SaaS than anybody else this year.
Okay, that's a good thing. SaaS in the cloud is very interesting because SaaS in the cloud includes the underlying database and includes the underlying infrastructure. So SaaS in the cloud drags a lot of platform with it. And it's very it's a little bit when we sell an on premise ERP system, we were the number 2 ERP system on prem. We sell our application and then we sell our database.
And maybe we even sell an Exadata machine to go ahead and run the application, an Exelogic machine to run the application. In the cloud, you don't do that. That's all SaaS revenue. So the SaaS application business is a lot bigger, a lot bigger than the on premise application business and witness the size of salesforce.com, which is dominantly one product, it's sales automation. And it's sales automation mainly in North America.
And that's a pretty big business for one application. It's much bigger than the sales automation used to be with the on premise leader, which was Siebel. So I believe the SaaS business in the Cloud is much bigger in dollars than the on premise business. I'll give you another reason why it's much bigger. Oracle couldn't sell the medium ERP to medium sized businesses.
SAP couldn't sell medium sized companies ERP. It was too costly. They had to buy get a data center and buy a server and learn how to use the database and learn how to backup the database, learn how to upgrade their software. You don't have to do that in the cloud. So we have a much larger available market.
So I submit to you that we are on our way to being number 1 in applications or SaaS in the cloud. And that's a much bigger business than when SAP was the number one application supplier. One of the reasons it's a much bigger business, it includes a lot of database that drives along with it. As your number one, we sell a lot of database under applications, but most of the database we sell is under custom applications. And again, we think we are leagues ahead of our competitors in the database business.
I mean, SAP came up with a database called HANA within the memory systems and we run the HANA benchmark, the unmodified HANA benchmark, a benchmark that was specifically created to make HANA look good. We run it twice as fast as that same identical benchmark, twice as fast as HANA. We're way ahead of HANA in just the in memory stuff, even using their benchmark. And we have an advantage over HANA that we think is pretty significant. To use the in memory features of Oracle, what you have to do to make your application use the in memory features of Oracle, you have to push a button.
You don't change your application at all. You don't do anything to your applications. With HANA, it's slightly different. You have to rewrite your application completely to make it use HANA. So, it's very difficult.
It's very difficult to convince someone to move to HANA when you're going to run half as fast after you rewrite your application. Amazon's got several. Redshift, they've got a lot of PaaS offerings, a lot of yes, they have a lot of database offerings. But they are not even they are MySQL. If you look at their new their latest offering, which is a SQL database, it is compatible with MySQL.
It's an open source product. It's compatible with MySQL. We are we're the main primary developers of MySQL. We keep making it better and better and better. But the Oracle database really doesn't compete with MySQL.
So we're pretty confident since we develop both products, we're pretty confident we have a huge lead technology lead over MySQL that Oracle normally runs a lot faster, it's much more it's more risk tolerance, all the backups are completely automated, the recoveries are completely automated, there's no data loss during recovery, all of these other things. The security differences are enormous between MySQL and Oracle Database. So we think we have big technology, a big technology lead to sustain our number one position in database. So, all right. So we have an opportunity to go for number 2, number 1 in applications.
And that number one position is worth a lot more in the cloud than it was worth on premise. We can sustain our number one well, you'd have to give you the name of the product that's going to beat us in database. We think we're going to sustain we're well on our way to sustaining our position as the number one player in databasemiddleware. And the databasemiddleware business is much bigger in the cloud than it was on premise for the same reason I mentioned it. You buy database in the cloud, it includes a server, it includes a network, it includes storage, it includes the labor to upgrade the software and back up the data and restore the data and have an automatic recovery database, it includes all that stuff.
So it's just a bigger business than the on premise business where people had to buy a lot of separate labor, had to build their data centers, had to acquire the software, the servers, the network, the storage. So, it's not we're just bringing a hold on to what we've got, but the number one position is a much bigger and more valuable asset to own in the cloud than it ever was on premise in terms of middleware or PaaS. So we have chance to move from number 2 to number 1 in applications to sustain number 1 and the number 1 position to be more valuable in PaaS. And finally, there's a 3rd opportunity, which is the 3rd tier of the cloud, Infrastructure as a Service. And with Infrastructure as a Service, we really never were a significant player in Infrastructure as a Service.
I mean, I can name the significant players. I'm sure you've heard of them: IBM, Hewlett Packard, EMC, Dell, companies like that. They sold NetApps, they sold storage, they sold servers, Cisco, the networking gear, those were all the infrastructure players. We were a relatively small player in infrastructure as a result of our purchase of Sun. Though our strategy with infrastructure has always been very different.
Our strategy even for on premise infrastructure, our strategy has always been to combine our software with the suite of converged infrastructure, and we call this thing Engineered Systems. And that was the attempt basically to make on premise systems work as gracefully and as easily as cloud systems. Because when you buy an Exadata, what is it? Well, it's storage and a network and compute and the database. And then you plug into it the 0 data loss recovery appliance and you got all the recovery.
And we have a service we have an online service called Platinum Support, where we constantly upgrade the software. We can do all that on premise. So it's very much a private cloud, the same strategy to take all of that stuff and let us be the integrator like we are in the cloud. We'd also like we can even be the integrator on premise using our engineered systems. But if you look at our total revenue for infrastructure compared to an IBM in their heyday or a Hewlett Packard or an EMC or a Dell or someone like that, we're tiny.
And we don't think we're going to be tiny in the cloud. We think we have an opportunity to be one of the major players. I don't know if we'll be the number one player. I mean, there's a chance, but it's not a fundamental goal of ours to be the number one player in infrastructure. We've got we want to be a major player in infrastructure.
We want to be number 1 in applications. Again, we'll sell more SaaS this year, $1,500,000,000 of SaaS we will sell this year. 2nd will be salesforce.com@1000000000. And we'll sell $1,500,000,000 plus in SaaS bookings. Just going to happen, at least 50% more.
We think we're very optimistic about our ability to sustain our number one position in platform. And we think we can go from a non player or a minor player in infrastructure to 1 of the major players in infrastructure. And we think the major players in infrastructure are going to be Amazon, obviously, who pioneered a lot of this stuff. Microsoft has done a good job over the last couple of years and I think will be there. And I'd like to contrast our approach to infrastructure with, let's say, an IBM's approach to infrastructure with their purchase of Softlayer, where what they do is very, very labor intensive.
They take custom applications and they we would call that hosting. We wouldn't really call that infrastructure as a service. Infrastructure as a service to us looks like exactly what Amazon does. You can go on, you take a credit card, you can go online, you buy compute, you buy storage, you buy network, and you're up and running. And there's not a lot of labor associated with it.
So, we believe in a highly automated infrastructure of service business where we see our primary competitors as Amazon and Microsoft. Now I said in an earlier presentation, it's a very long answer to one question, I understand that. They probably discourage anyone else from asking a second question. The I said we really don't see IBM, because IBM's approval approach to the cloud is so fundamentally different than ours. They're really not doing Platform as a Service, they're not doing SaaS, they're really not even doing Infrastructure as a Service as we think of it as Infrastructure as a Service, which is to me to us, it's what Amazon does.
That's what Microsoft is doing with Azure. I mean, that's highly automated, not much labor on either side. Lock up with a credit card, of course, you can send us a PO, make a big deal and move all of the dev test to our infrastructure and our platform, I got it. But in general, it's a highly automated system. What IBM does with Softlayer is something quite different, it's what we call hosting.
If you take what you have, they run whatever servers you want, you can run power, you decide the servers, you decide the networking, you decide the switches, you decide all these configurations, everyone's configuration is different. So a lot like lifting up the data center and kind of moving it over. It was a very different business. I mean, maybe it's a great business for IBM. God bless them.
I hope they do very well. It's because we don't compete with that. That's just not our business. It's not how we look at that business. So, in summary, if you look at our portfolio of applications compared to anybody else, we have by far the largest portfolio of SaaS applications.
And these applications are strategic applications. It's not just edge applications. I mean, it's core HCM. I mean, we are Workday's number one competitor. We are Salesforce's number one competitor.
We are the only guy in mid market, I should say. Workday has something like they claim to have 100 plus ERP customers. I don't think so. I think they count payroll as ERP. I don't I think they have very few ERP customers.
But let's say they have 100, 150, we'll have 2,500 by December, by the end of the year. It's not close. And a lot of them are big names. So, we are on our way to being the leader in SaaS. We have the largest portfolio.
We're selling more SaaS than anybody right now. Right now. The applications we're selling in SaaS aren't like Concur or SuccessFactors or a rebate. They aren't these little edge applications that you plug on. They're not we didn't get them as a result of acquisition.
ERP was built over the last 8, 9, 10 years entirely in Fusion, entirely in Java, entirely designed for the cloud. Our core HCM built entirely in Fusion, entirely ground up. We built all of that stuff. There was nothing to buy. There was nothing to buy.
So our sales automation, 100% fusion built from the ground up. So these are strategic applications. They're very sticky. They're very important. It's put us, I think, in a very good position to replace SAP as the number one applications player in this new generation of the cloud, this new delivery vehicle of the cloud.
So, I think that answered your question and 7 or 8 questions you didn't ask.
Larry, it's John DiFucci from Jefferies. You've spoken through the years on the concept of cloud and even invested personally in some companies totally focused in that area. And while Oracle has had some cloud offerings in the past, it really seems like we're seeing a much more focused Oracle on this topic here than more recently. And the entire company seems to be moving this way with urgency. I mean, that's what it feels like to me anyway.
And it's something that didn't feel that way, let's say, a year ago. I'm just curious, what in the market is causing that? And if it's as simple as demand, why do you think that's changed so dramatically so quickly? And with all due respect to Mark, please don't talk about the gig economy. Well,
I don't think it's as simple as demand. The reason we're so aggressive is we finally finished our products. I mean, it's very I think it's very, very simple. It took a long time to build these products for the cloud. So it's hard for us to aggressively market things we don't have.
I can be very frustrated. We can do it. But then, I mean, what if someone actually wants to buy it? I said, Oh, you want to buy it? I said, yes, you mean that was one hell of a pitch.
I mean, you convinced me, I want one of those. Yes, that's the problem. It's not quite done. The we started this. I know it's been said and I don't mean to sound offensive, I just I kind of missed the cloud.
I never liked the name cloud, doesn't matter. The cloud turns out it's a very charismatic name, it's a great name, who cares? Cloud is fine. The I believed in this, running things on the Internet, renting services for a very long time. In fact, I think the first cloud company is called NetSuite.
I still own a majority of NetSuite and creating NetSuite was kind of my idea. It was my idea to build ERP for small business in the cloud. And the next company that came out was salesforce.com. They came out about 9 months after NetSuite. And I was a large investor in salesforce.com and very supportive of that.
In fact, salesforce.com, if you will, was a copy of NetSuite in the sense, NetSuite said, okay, we're going to put ERP in the cloud, and that was Evan Goldberg. And then Marc Benioff said, hey, that's a cool idea. I'm going to put CRM in the cloud. It wasn't called the cloud, it was called SaaS. And they happened about 9 months apart.
So if I was so deeply involved with that, how come Oracle didn't get to the cloud just as fast as they did? Well, the reason we didn't get to the cloud as fast as they did is we started converting as many applications as we have. We didn't have to just enhance our app rewrite our applications. We had to rewrite portions of our database to make it multi tenant. We had to rewrite almost all of our middleware.
We had this enormous bottom up reengineering project. Once we realized, okay, that's what's going to happen, we're going to have to reengineer the company. But in the meantime, we got to keep selling what we've got while we're doing this reengineering project, and that's what we've been doing. We've been making again, this has been going on now for more than 10 years. Fusion applications, Fusion ERP has been going on for a very, very long time.
And now that we got it, we want to sell it because we think we have a big lead over everybody else now. We're the first there with ERP for large and mid large companies in the mid market. Work based product isn't on the field. So we'd like to take a lead. We'd like to create build the ecosystems, get thousands of customers, thousands of references, lots and lots of industries covered by our ERP product, where we have basically an insurmountable lead in ERP before we get serious competition from somebody else.
And we don't think that competition is going to come from SAP. They canceled their cloud project. Business by Design, they just canceled it. They don't have anything. And we can talk about you want to talk about S4 for HANA, we can.
It's 30 year old code. I can name names with the engineers. We got a lot of engineers from SAP. That's just old code that's been partially they put a new user interface on it and they made it work with HANA. That's it.
That's 30 year old code. So we see them either. But again, why the urgency now versus last year or the year before? Very simply, we've got the products now. We even have manufacturing and supply chain, which is brand new.
But it's only been the last 18 months, arguably 2 years, that we've been able to be very aggressive. And when you start to sell these things, then you have to get the appropriate references, you have to train your partners to do the implementations, just getting a bunch of consulting companies trained up. So they can the good news is we're selling 100 and 100 of ERP systems every quarter. The challenge is who's going to implement all these things? It can't just be Oracle Consulting.
It's Oracle Consulting and a number of the consulting companies. They have to be trained. So this shift is massive. It's not just us. We have to retrain all of our partners.
We had to change engineering had to finish their job. We had to retrain the partners. We had to get the references in place. We had to retrain our sales force, we had to change the way we sell. If we're going to go do mid market as well as high end, we have to have a much more cost effective way of selling.
We have to sell on the Internet, not just face to face, kind of that old very expensive high touch model of sales doesn't really work with this much larger available market, the mid market where the transaction size can't doesn't justify the cost of having this very high touch sales model. There was a tremendous amount of reengineering to do in the company once we got the products working. So this is not an easy change. And but now we're there with a comprehensive suite, and we want to make sure that we get rapid customer adoption, so before the competition shows up.
Yes. Hi, Larry. Brian White, Drexel. Just everything you just said about being number 1 in SaaS is your ambition, number 1 in PaaS with your database and middleware position and being a top Infrastructure as a Service player in the future. When will Oracle surpass AWS in total cloud revenue?
I think that's ultimately your goal. That seems to be where the company is heading. And is that something we can see in 5 years, 10 years
or give us some Well, AWS is not our number one focus. I mean, AWS is an infrastructure company. We have to be again, the number I keep quoting is we'll sell $1,500,000,000 worth of SaaS this year. We'll surpass and sales will surpass the number one SaaS company. Salesforce.com and AWS are about the same size.
They're close. AWS is growing faster. Believe it or not, even though AWS is more profitable or their contribution margin is higher than Salesforce's actual margin, We think the SaaS market is inherently more profitable than the infrastructure market, which is really commodity play. Infrastructure is commodity play, storage is storage, process compute is compute. Networking is networking.
I mean, a really good better ERP application. So we're working at this top down. Our focus is, again, to become the clear number one player in SaaS and the clear number one player in PaaS. So we're looking at stage 1 is we're not going to overtake Salesforce and SaaS until we sell more than them every year. Otherwise, if they're selling more than us, they're pulling away.
So that's why this year is so important, where we will sell more than them and we will close the gap and we will pass salesforce.com. So we're much more focused. But again, even that's not enough. We again, salesforce.com has done a great job in sales automation. We're already bigger and more important than them in marketing.
And again, it's kind of a draw in service. So we need to be a lot bigger than salesforce.com. We need to be the clear number 1, again, in applications, the clear number 1 in PaaS. And I would be happy. I'm not it's very hard for me to forecast, I mean, do we want to be bigger than Dell?
If you asked a while ago, Oracle bought Sun, and so is your goal to be bigger than Dell? I mean, Dell is an infrastructure company. With Sun, we bought an infrastructure company. Now in infrastructure, it's not being the largest infrastructure company. It's offering this complete suite of services where we are the number one SaaS company, number one PaaS company, and we are very competitive, very competitive in Infrastructure as a Service.
We're as good as they are or better than they are. And our customers can then come to us and put all their workloads in our cloud. But they'll primarily come to us because they're buying our applications, they're buying our platform. And as long as the data is in our data center, it's easier to get at if they do their compute and storage in our data center. So we're going to offer this complete suite.
That's way we want to compete against Amazon.com. And so we look a lot more like Microsoft Azure in terms of having apps and apps and PaaS and infrastructure than we do like Amazon, which is much closer to a pure play infrastructure company. So, I can't give you an answer. I mean, when we'll pass amazon.com, because I don't know how fast they're going to grow. I don't know how fast EMC is going to shrink.
I don't know how fast right? I mean, it's serious. That's it, right? Because what you're watching, I mean, we see it in our own in our Application business. The way we look at our Application business, the way we used to look at our application business, we had 2 components.
We have license, new how much have we sold and subscription renewals, sometimes called support. I mean, how many of those people are renewing every year? And the combination of those 2 is our application revenue. That's not what we look at anymore. We still look at license, but we primarily look at SaaS bookings and we add that to license.
You got to sum those 2 up to see how much application did we sell this quarter? Well, you want to know how much how we're doing in applications this quarter. You got to add our application license sales to our SaaS bookings. And is that growing? Is that total growing year over year?
Not just SaaS not just how we're doing in SaaS, SaaS is growing very fast in terms of bookings. But what's our overall business, our application business doing? Because we got an on prem business, which is growing slowly, but our on prem applications business and our on prem platform business is, I would describe as growing slowly, very stable, but growing slowly. And we're experiencing hyper growth in our SaaS business. So we think we're taking market share right and left.
But you got to look at it very different you got to look at those 2 together. Similarly, in past, we have to look at our past bookings plus our database and middleware license sales to see how we did in the quarter. And then when you look at our total business, our licenses, our renewals for the on premise database and middleware and our SaaS bookings plus our SaaS revenue, going to add all four of those numbers together to see is our platform business growing. And I think you'll see the same thing. We got a slow growing platform business on premise and a rapidly growing platform business in the cloud.
That's actually not so bad. In Infrastructure, we are it's our newest business in the cloud. We're not a top infrastructure player on premise. I mean, we're a reasonable player. I mean, Engineered Systems done very well.
In fact, I think we'll pass on premise, I think we'll pass IBM this year and be the number one provider of large scale servers. And large scale servers is the dollar bar? Above 25 ks. Above 25 ks. Above 25 ks.
Yes. Okay. So IBM so if you draw a line, servers over 25 ks being sold were number 1 in North America and will pass IBM around the rest of the world. So we've done and this niche, this engineered system niche that we're after in infrastructure, we've done very, very well. But it's a relatively small business when you compare it to Dell's infrastructure business or HP's infrastructure business or for that matter IBM's infrastructure business.
But again, I think if you look at how we're doing in hardware and you add that up how we're doing in infrastructure as a service, you sum those 2 and then you get a picture of how our overall infrastructure as a service business is going. But again, that is not our that's not how we're going to win. We're going to win by being number 1 in applications and 1 number 1 in platform. And thereby, I think, being a really solid top 3 infrastructure player. Yes, sir?
Thanks, Larry. Michael Turits from Raymond James. So you have product in the lower end of the database market with MySQL and in the NoSQL market and also partnerships in the business in Hadoop. So you have product there we know. But how important do you think those markets are?
And how aggressive will you be there? Well, we think it's important that we play in all of those markets and be a technology leader in all those markets. We think people there's not this bright dividing line between unstructuredsemi structured data that you want to process with Hadoop and use machine learning to kind of add structure to basically statistically profile the data and then add structure to it. And the data that's structured in an Oracle database. Companies who have this data, unstructured and structured data, often want to combine it.
In fact, they usually want to combine it. So typically, one of the first things we did with Hadoop is put the SQL programming language on top of Hadoop and on top of the Oracle database and let you issue one query that goes after your unstructured data in Hadoop and combines it with your structured data in the Oracle database. So you can look at your data anyway you want to. And we think companies are going to be hybrids. They're looking more and more.
They're finding we've now got technology that allows us to find value in in unstructured data, and that's great. And the technologies are everything from Hadoop, Spark, machine learning, we can go into all of these things. And we use and deliver all of those technologies on premise with our Big Data Appliance and in the cloud with our Big Data Service. And we provide not only Big Data, unstructured data, but we provide that Big Data side by side with Oracle structured data and let you combine it as you see fit. When you as you're navigating to your data and trying to uncover certain insights, you need to look at both structured and unstructured big data most of the time.
So that's why that's the reason we think it's so important we're in both of those businesses that we manage structured as well structured and unstructured together. That's why we do have a Hadoop offering and a NoSQL offering to go along with the Oracle offering to go along with the MySQL offering. So, we think we have to be the player in data management. And the way we're the player in data management is we've got to be able to manage all of your data, all of the customers' data and let the customer and given the most the easiest and the most rapid and the most cost effective access to all of that data. And we think we're doing a pretty good job of that.
Yes? Ruchir from Rafa. Your database is definitely superior than the competition and the market share. And even if you do independent check with the CIOs, they tell us that. Because SAP is the leader in applications, however inferior their databases, if they were to force their customers to kind of buy their database for their applications going forward?
That's
I'm sorry, I'm having a terribly hard time. I think it's because of the application. I'm having a terrible hard time understanding your question.
So if SAP were to ask their application customers to forcibly buy their own database, However, inferior it is, if that is the case, if that's how they sell it and because customers in applications, they usually tend to be sticky, how do you see that kind of impacting your business?
So what happens if SAP says you have to use HANA? We're not going to support Oracle anymore? I hope they do that. I want to be there when that happens. I think there are an awful lot of companies that would not be happy about that.
I just moving from Oracle to HANA is a nontrivial exercise. It's a well, let me start with first question I've asked SAP. So you want me to use HANA, not Oracle with SAP? I said, okay, I'll tell you what I will when you do. How come you use Oracle under Concur SAP?
Why don't you use HANA? Oh, by the way, how can you use Oracle under Success Factors? Why don't you use HANA? One more thing. How can you use Oracle under Ariba?
How come you use HANA for anything? Nothing. So you want me, the customer, to move to HANA and you review you, SAP, refuse to use it yourself? I want to be in the room for that to see what SAP says. I mean, it is I mean, HANA is certainly not ready.
I mean, why when did SAP buy SuccessFactors in Ariba? How many years ago did they announce HANA and they still have not moved? I know I make I say this a lot. And then SAP always responds, Oh, no, we have plans. We have firm plans to move all this to HANA.
Okay. But you haven't done it. Why? Because you like us so much? We send them bills, by the way.
We send them bills for using this stuff. In fact, just recently, they paid for Concur. We get into these big fights, SAP said, Why are you using our stuff and not paying for it? So we they it's not just we got into a big fight over tomorrow now. But then we said, hey, how come you're using Oracle and you're Ariba.
What are you guys doing? You got to pay us for that. And Mark calls someone over at SAP and said, What are you doing? Give me a check. And they send a check.
And then it's like, Hey, I can't believe I just called you last quarter. Why are you using Oracle under SuccessFactors as well as what are you doing? And I said, send me money. So send us money. And they're like, oh my god, you're doing it again under Concur.
I'll tell you what, you got till Friday to write me a check. Am I making this up? So this whole Hannah thing is incredible. They've been touting Hannah. They even have a restaurant called Hannah House.
Are you kidding me Hannah House restaurant? We should we don't have an Oracle House restaurant. We should have Hannah House, where people can start up and do stuff in Palo Alto. Are you kidding me? How about just making it work under one of your cloud applications?
Just one, something. S4HANA in the cloud. By the way, someone take you can go to the Oracle Cloud. Okay, let you want to test Oracle Cloud versus the SAP Cloud? All right.
I'll tell you what, you go to the Oracle Cloud tonight, I'll send you the money back, take your credit card, you can go buy compute services and storage services. On your credit card, you can do that tonight. Go log on, and it's very easy. Then go do it at SAP.
Try it.
Just try it. That this Hannah thing, excuse me, is a
joke.
One more. I'm not quite done yet. I'm not quite done yet. It is why I mean, I said when they decide after the SAP restructuring you're up, business by design, their cloud applications. Oh, golly, bummer, that didn't work.
Shut that down. But we're going to get Oracle with NetWeaver. We're going to kill them in middleware. We're going to remember NetWeaver? Anyone old enough here to remember NetWeaver?
I've got 2, got me, you, a couple of guys, okay. They're going to kill us in Middleware. They're going to kill us in Middleware. Net what? Gone.
Now their greatest idea, let's we're the leader in ERP, I have this fantastic idea, let's go after Oracle and Database. Really? Actually, I've been working out a lot on going after LeBron in basketball. I asked my son, he said, Dad, I don't think it's a good idea. Yes, he's bigger than me, but I'm I don't know what I am.
So they're going to beat us in database. They're going to beat us in database where we've been a technology leader for years years. So I made a comment a while ago about this and I said, I got to get the name of that pharmacist because whatever they're smoking or taking over there, that must be fantastic stuff. And HANA is just they haven't go out and find real HANA users any place. And they've been pushing this thing for a very long time.
HANA is the same as Business by Design and HANA is the same as NetWeaver. HANA is a 3rd consecutive failed project by SAP and 3 strikes and you're out in this business. They have nothing. They're the leader in ERP and they got nada in the cloud. If someone would like to correct me, please correct me now.
What have they got? Did they do financials in the cloud? Can they do general ledger, accounts payable, accounts receivable in the cloud? Can they do that? I think the HANA thing is not a problem.
We spend a lot of time analyzing what Amazon does. We have a lot of do a lot of time looking at our SaaS competitors. But SAP is just no longer interesting. They're just not a player in this business. Back here.
You guys have done a great job today talking about the future, but there's a transition that you've gone through with SaaS and there will be a transition with PaaS. And during this time, why not pay a more significant dividend? If you double the dividend and had something like a 3% yield, it would make people willing to hold during this period. Well, you're not going to get me to come
out against increasing the dividend.
I think that's a hell of
an idea. Maybe 4% would be going. That's it. I'll take that offline. Maybe you should start a petition.
I will be the first to sign. Again, I'll let Safra answer that. But I think, I mean, we use our money for a variety of things. I mean, obviously, we purchased our stock. We have a dividend.
We haven't made any large acquisitions in a while. We're kind of saving our nickels and dimes. We might do something interesting one of these days down the road. Not anytime soon because we are singularly focused not on acquisitions, but on maturing our maturing our existing our cloud business, which took us 10 years to get where we are, to rebuild all this stuff. And we are focused on becoming the number one SaaS player and the number one PaaS player.
We think we can do that pretty quickly if we stay focused. But in the meantime, down the road, we think we have a pretty balanced use of cash, combination of a reasonable dividend, a lot of share buyback, plus putting nickels and dimes in the bank for, I don't know, in a couple of years, maybe buy something interesting.
Yes, sir?
Thanks. Ross MacMillan from RBC. Larry, you said that your number one focus wasn't AWS earlier, but Andy Jassy last couple of weeks ago at the re:Invent conference talked a lot about the database market, talked a lot about migration tools and you talked a lot about how they're really focused on this. So why is that not a concern
for Oracle? Well, we look at their products all the time. We look at making MySQL available as a platform in the cloud and making it easier to get out is not the same thing as making Oracle available. We've been working on the Oracle database for a very, very long time. It's very difficult to replicate that code.
I mean, SAP has been working on HANA for how long? Very, very long period of time. So, we think we have the best database. We think our pass around our database and around Hadoop and around NoSQL and around MySQL, you look at all of our data offerings in the cloud and we just think we're leagues ahead of anybody else. We think we got a very strong and defensible position.
Now, what AWS came out with recently is a SQL database a SQL database that is compatible with MySQL. And they're kind of going after the MySQL base. They are not this is not a substitute for the Oracle database. But I certainly understand that they want that they want to go after the database market and MySQL is a portion of the database market and they're pursuing that. But that is very different.
That is very different from the Oracle database, which is Oracle is a much bigger, more complicated program with a great deal more security, a great deal more performance, a great deal more automation, reliability than MySQL. I think MySQL is a terrific product. It's our product. But they're again, they're leagues apart and we're pretty confident that it's difficult to replicate all of that engineering. I mean, the event it's nice.
I mean, it's great. The cloud is a delivery mechanism. What gets delivered still has to be engineered and developed. And we have this huge lead in database. And we just have to, right now, do a very good job of delivering it in our cloud and we're doing that.
And we think that customers will they're not going to rewrite their application for HANA and they're not going to rewrite their application for MySQL. It's just too much work, especially you end up going slower and you open up security holes. And there's just a whole bunch of reasons why they won't do that. We've got to make it really easy and really inexpensive for our customers to move their Oracle applications, which there are lots of them, to our cloud, and we're doing that. All the way back.
Tripp Chaudhry with Global Equities Research. I was wondering like when you look into public cloud, I have two questions. AWS continues to push forward something called CAP theorem and they say in a public cloud, they are the only ones who can address the limitations of a CAP Theorem. That's the reason they talk about 48 zones and availability zones, 12 regions and other stuff. 2nd question I have is regarding the business model.
They have 3 layers, the way you charge for the services, reserved instances, then you have on demand and then your spot instances. And on an average, AWS claims that if a customer uses these 3 layers very effectively, the price points gets down by at least 40% to 60%. I was thinking when will we see similar things from Oracle Public Cloud?
Well, I don't want to preannounce anything. But as I said, I said 2 things. I mean, a lot of people wrote about me saying we don't I'm dissing SAP and I'm dissing IBM because we said we don't see them anymore. All I'm saying is we don't see them anymore, especially IBM. I have no intention to diss IBM.
I guess they did intend to diss SAP. The we do watch Amazon very closely. We know a great deal about Amazon. And we think our new data centers that we're opening up later this year will have big cost and performance advantages over Amazon and scalability advantages, all of the above. But we're really not prepared to talk about that yet, but they will be up and running by the end very, very soon by the end of this calendar year.
So we watch them again, we pay a lot of attention to what they're doing. And if we're going to be a major player in infrastructure, again, it's a commodity business. There's nothing wrong with being a commodity business as long as you understand it's commodity business and you got to be a low cost provider. And then hopefully you find little ways to differentiate yourself. And we're going to try to differentiate ourselves in security and reliability, which we think we can do.
But it doesn't mean we don't want to be low cost. And to be low cost, it means we've got to build data centers more cleverly than they do. So we think we can leapfrog what they're doing and we'll have we will outline all of that for you sometime either the end of this year or early next year as customers start moving to the new availability zones that we're putting up. So again, there aren't a lot of secrets in that part of the business. It's a commodity business, right?
So it's not like they're building their own microprocessors. We actually do build our own microprocessors, but this is not the time for me to get into all of this stuff. But suffice to say, we think we can deliver infrastructure at a significantly lower price point than Amazon. We've done it for certain kinds of storage, for archival storage. Plan is, if we're in the commodity business, we have to be able to build these things for less money than they can.
And let's see if we can. And then we have to be aggressive on pricing on the infrastructure part of the business. And we are putting up our 2nd generation of data centers as we speak. And we again, we think we will be more than competitive with them on price, significantly better. But our stuff is all brand new.
So again, we're paying a lot of attention to them, believe me. Yes, sir?
Hey, Larry. Brent Thill with UBS. Dell is embarking upon one of the largest deals in tech and I think everyone's curious to get your thoughts on industry consolidation. You've been a major player and you're sitting on $56,000,000,000 in cash. So what just when you look at the last year?
We want to dividend almost all of that out. Actually, I have my truck out front to pick up my share. The I think it's brilliant. My friend Jim Davidson and my friend Michael Dell, I think have done a spectacular job in engineering that EMC deal. It kind of breaks our heart.
I'll tell you, we're not bidding for EMC. But it kind of I shed more than a couple of tears. God, we could make a lot of money if we did. If we bought EMC, we can make a lot of money at that price, and we could. But we're not going to do it because that what I said earlier, we're singularly focused on one thing and that's making sure we're the number one SaaS provider and the number one PaaS provider and then the next 2 years are going to be crucial for us achieving those goals and this would be a big distraction.
Kind of the wrong message to the marketplace, the wrong message to our people, a distraction to our senior management, but boy, we'd make a lot of money. So it's kind of an opportunity that's just bad timing for us. It's an opportunity we're going to miss. Again, Jim Davidson is a brilliant guy. Michael is a brilliant guy.
They saw the opportunity for this consolidation to buy a business out of fashion. And the market prices things very interestingly. If you're highly fashionable, you get these wild PEs. And if you're kind of an unfashionable company, just because you throw off tons and tons of cash, no one seems to care. I mean, so but Jim Davidson cares and Michael Dell cares.
We'll take that. How about and they're all going to make 1,000,000,000 of dollars. I mean, Michael is going to make 1,000,000,000 personally. So hats off to them. They're doing it's a fabulous, fabulous deal.
And it's kind of an interesting it's why it's so great we have free economy. When the market misprices an asset, because it's kind of it's last generation technology, but it's got a huge installed base, It's going to throw up a lot of cash. It's going to be around for a long time. And the people that own it are going to make a lot of money. So good job, Michael and Jim.
Is that it? Is that back here?
Hey, Lara. It's Steve Koenig with Wedbush. It doesn't look as if you're going after the CRM, and in particular, I should say the sales automation market with the same vigor maybe that you're going after HCM when we look at your price list and we talk to integrators. Is it too late to go after that market? Or could Oracle make a real big push there?
Well, we are making a push there, but we've got an incumbent that's been there for more than 15 years. So when you're fighting against a well established incumbent, it's a slog. We think surprise, surprise, I think our sales automation application, which deals with territory management, does we do a lot of things that salesforce.com doesn't do. The bad news is our sales automation product is pretty new. The good news is our sales automation product is pretty new.
It's newer, better technology, more features. But you've got so many people that know how to use salesforce.com. Again, it's a long term incumbent. It's tough. We're winning a fair number of deals.
I mean, we're doing okay in sales automation. Again, we're their biggest competitor by 4 I don't know who I guess Microsoft and low end also competes for this. But in the mid market and the high end, we're their biggest competitor. And we're very serious about it, very aggressive about it. We're putting in a bunch of vertical features.
We're going after them. But it's very different because, again, they're so well established. So well established in this market that it's tough. I mean, it's tough to go after an established player versus in HCM, we've got a very small company Workday with a relatively new product. And we think we can beat them and beat them badly.
And I will even explain to you why. In the mid market, there's no such thing as an HCM market. There's an ERP HCM market. A medium sized company or smallish company doesn't buy HCM from 1 guy and ERP from another. So we think by beating Workday and ERP, we get all the HCM stuff by default, because they don't want to put in 3, 2, 3 different companies different vendors products.
In the high end, in the large scale ERP product or HCM market, where these are people who have their own data centers, have their own programmers, they want they need to integrate that HCM product with other products. They might want to put extensions, not modifications, but extensions onto the HCM products. But they do integration and they do extensions. And you need a platform. The large customer needs a platform underlying their HCM product in the high end of the market.
And Workday has no platform. So we see Workday as a very hot company that's highly vulnerable. They're highly vulnerable because they don't really have an ERP product yet. And yet, as the mid market moves to the cloud, they're going to be making a combined a sweet decision. They're going to be buying ERP and Enterprise Performance Management and HCM kind of as a package.
They'll buy it all together. And Workday can't offer that. And the high end of the market is people get more sophisticated about what you do with these cloud applications. You have to be able to integrate your HCM product, your HCM system with other systems. And to do those integrations, to make those extensions, you need a platform.
And Workday doesn't have a platform. Workday is a small company. They have no platform. They have no ERP. They're a one trick pony.
They're new and they're hot. So we'd like to make our reputation by beating them. And we have a strategy to beat them at the high end and we're doing it. And we have a strategy to beat them at the in the mid market and we're doing it. And we have a strategy to beat them outside North America.
They're really focused in North America. So we'd like to develop all the markets around the world before they get there, and we're doing that. So we're very focused on not letting them become a sales force like .com like problem for us. We don't we want to beat them before they become established. So we're very focused on them.
Yes.
Hi, it's Ed McGuire from CLSA. It's really interesting to hear you focusing on applications and the strategy to go after the SaaS opportunity. But what really struck me in some of the presentations was the work you're doing down at the bottom of the stack, particularly some of the silicon level security. And I'm interested from your perspective, how does the
work that you're doing at
the bottom of the stack advance your strategy in SaaS over time? How will that play and how do you look
at investing in that part of your technology? Okay. So I'll tell you, we're in a competition right now with Workday for large scale customer. And it's interesting. People have preferences and this and that.
An interesting question to ask is, can the engineers at Workday see all your payroll data and all your personnel data? Can the engineers or does that all does it work to encrypt all of its data? Is it all secure? The people who create the data business over at workday, can they look at your data? Can they?
They can't at Oracle. So you're talking about security as you're talking about silicon and security. So these underlying things we build into our database, all the security and we have this thing called database vault that actually enforces separation of duties. The people who create the database by the way, this is a differentiation between us and DB2 also, us and MySQL. So it turns out that the person who creates the database with MySQL and with DB2 and a lot of these databases, the person who creates the database has privileges on that database, all sorts of privileges on that database.
So the technology guy or gal can look at the data in the database. It's true of almost every database. Not true of Oracle. You put your data in our cloud, our engineers can't see it. In fact, we'll even we'll keep it not only is it all encrypted, and the guys our guys don't have any access privileges, we'll even put the encryption keys on a small server and on your premises if you want us to, where we can't even get to the machine that controls the encryption keys.
So we would we think as people get more and more sophisticated, banks get more sophisticated, banks get retailers get hacked all the time, right? And they do sometimes tens of millions of credit card numbers in one hacking. Airplane companies, military contractors, lots of people, insurance companies, lot of people who people don't want to get hacked. It's so interesting that in most of these databases, the engineers who run the cloud can just look at all your data. Would that bother you?
So we think by engineering the entire stack, engineering security into every layer of the stack, the application, the platform, the infrastructure down to the silicon gives us a tremendous advantage. What looks like just an ordinary competition between us and Workday for an HCM deal that we offer security and reliability they can never offer. So, the interesting thing of all the stuff we're investing in, it's going to help us compete with Amazon. I say the way we're going to differentiate against Amazon in security and reliability, and we're going to work very hard at making sure we can deliver a lower cost than Amazon. It will be very interesting.
But security and reliability is a big deal. Also, if you have your application in our cloud, you might want to put other stuff in our cloud near the application. If you're using our database in our cloud, you might want to buy our infrastructure as well. So we by investing at every level in the cloud and we do something clever done in silicon and we do something clever done in our database, those clever security features, those clever reliability features, those differentiators then percolate up into all the applications that run on top of our database and run on top of our cloud. So we end up with a secure cloud, where no one can see your data but you.
We end up with a reliability our data centers are reliable.
I mean, no one doubts
that Amazon has these availability zones in multiple data centers connected by a fiber optic ring and all of this other jazz. And we do too, but Workday isn't. So we think that we get tremendous competitive advantage and differentiation by doing a lot of do a lot of low level silicon engineering that will help us compete with Amazon and infrastructure, help us compete with whomever in platform and even helps us those silicon the silicon stuff in the database even helps us when we're competing with Workday or Salesforce or whoever might show up in SaaS in the future. So we'll continue to invest in all levels of the cloud from the application all the way down to the silicon, from the application all the way down to encrypted storage. Yes, sir.
All right.
I was hoping to stay here for a couple more hours. Oh, okay. Is that in the same building? Okay. Traffic is nightmare out there.
Yes, sir.
Derek Wood at Susquehanna. Just you've got release 2 of 12 C coming in a matter of months. Just kind of curious how you're thinking about the options, the in memory, the multi tenancy, what the interest is, the uptake? And how do you message going forward to get customers to upgrade their on premise infrastructure versus getting them to go to PaaS and going to the cloud?
Okay. Two things, in memory and multi tenancy are have had the highest uptake in the history of any options we've ever introduced. And that's really interesting for me because normally people don't go to the .1 release. They say, oh, .1 is nice. It's got a lot of cool features, but I'll wait for .2, which tends to be a somewhat more stable release.
So a lot of people hold off, but there is so much pent up demand for on prem and in memory. We actually got a big kick in the point one. We think as 12.2 comes out, we're going to get our traditional upgrade cycle, where people who bypassed 12.1 and waited for 12.2 are going to adopt 12.2. So we expect another big spike in customer adoption. But in fact, multi tenancy is much better in 12.2.
On 12.1, we could do a couple 100 by 2 40 instances per container database, database instances for now we're up over 4,000. So we've got real cloud scalability and multi tenancy in 12.2. We've done a bunch more work in our in memory database, including putting part of the in memory database, Oh, you meant that means the database is in a columnar format in memory. Well, what if it doesn't fit? Well, it doesn't well, now if it doesn't fit, it goes into this thing called a Flash Cache.
So we pretty much with 12.2 can hold any size database in columnar format in memory. So it's a better version of the in memory feature. It's a better version of the multi tenancy feature. It's a more stable release as the dot2s are always more stable than dot1s, and we expect, again, very, very rapid adoption of those two options. So I'm done.
Thank you very much.
Ladies and gentlemen, please welcome back to the stage, Ken Bond.
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