Good day, everyone, and welcome to the Oracle Executive Access for Investors Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to Ken Bond, Vice President of Investor Relations. Please go ahead.
Thank you, Sam, and hello, everyone, and thank you for joining us for today's Oracle Executive Access for Investors, an educational webcast series hosted by Oracle and today is Tuesday, July 10, 2012. Joining us today is Thomas Kurian, Executive Vice President of Product Development and Equity Research Analyst, Phil Winslow from Credit Suisse. Today, Thomas will discuss Oracle's Fusion Applications and Oracle Cloud. Please note that Thomas will not be discussing any information today that is not already publicly available. At the conclusion of the webcast excuse me, the presentation, we'll turn the webcast over to Phil who will kick off the Q and A.
You may submit a question at any time during the presentation
by clicking
on the Ask a Question tab above the slides. Please keep in mind that we will not comment on business in the current quarter. And as a reminder, the matters we will be discussing today may include forward looking statements and as such are subject to risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent reports on Forms 10 ks and 10 Q, which identify important risk factors that could cause actual results to differ from those contained in the forward looking statements. You're also cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we're not obligating ourselves to revise, update or publicly release the results of any revisions of these forward looking statements in light of new information or future events.
And lastly, as noted earlier, unauthorized recording of this webcast is not permitted. And with that, I'll turn the presentation over to Thomas.
Good morning, everyone. I wanted to give you a strategy update on Oracle Fusion application. What we're going to talk today about is what's the status with Fusion Applications? How are customers taking uptaking Fusion Applications and why? What does that translate to in the business opportunity for Oracle?
And then secondly, what's our strategy behind the Oracle Cloud and how does the Oracle Cloud complement Fusion Applications? So the most important points I want to make on Fusion Applications are the following. Fusion Applications is the broadest and most complete software as a service solution available in the market today. There are 7 product families over 100 modules generally available to customers. It's seeing strong uptake by customers and it's driven by 3 primary categories of benefits functional benefits, which means we're going to improve a critical business process within an organization architectural benefits, which means that the software is more easily architected for certain cases certain important requirements and cost of ownership benefits.
Oracle has a strong capability to deliver and support Fusion applications and we are significantly expanding that capability from a go to market perspective. We've got specialized sales, support and service teams for Fusion and we have a focused effort on continuing to drive and expand the partner ecosystem. The Oracle Cloud provides very strong complementary technology to Fusion Applications. It offers customers a highly differentiated platform and social capability and I will walk through a couple of examples to show you why those capabilities are being increasingly used by customers in concert with Fusion applications. The 2 products that's the Oracle Cloud and Fusion which is part of the Oracle Cloud are very strong competitively.
We have strong differentiators in each product segment and when combined together they offer very unique capabilities And it's our view, Oracle's cloud and Fusion will continue to drive growth both for our technology and applications businesses going forward, Okay? So in a nutshell, this is the breadth of the suite that today we offer on the application side as Software as a Service. ERP, which includes financials, procurement, sourcing, project management, governance, risk and compliance and portions of supply chain, human capital management, talent management, Sales and Marketing and Customer Experience or Customer Service. All of these modules are available generally available and are being used by many customers today. Now looking at Fusion applications themselves, today we have over 2 50 customers using Fusion applications alone.
Each of the 100 plus modules of Fusion applications has at least 10 customers. So we are at critical mass across the suite and every piece of the suite is being used. The size distribution, they have a wide range of sizes of customers. Some of them are as small as 250 employees and we also go all the way up to global multinationals. If you look at the median revenue of these organizations, they're on average $1,000,000,000 to $5,000,000,000 in annual revenue.
Geographical distribution is being used in 17 countries by companies in 17 countries around the world: North America 60% Europe 25% Asia Pacific 15%. From an industry point of view, there are 15 industries represented in our Fusion Applications customer base with the top 5 being communications, retail, manufacturing, financial services and consumer products. And then deployment profile, 57% of these customers are using the Oracle Fusion applications delivered by Oracle as software as a service, meaning on a per user per month basis through the Oracle Cloud, 38% of these are on premise and 5% are using it through a business process outsourcing or hosting model. Here is a subset of the customers for Fusion Applications today. So these are all customers of Fusion Applications.
They're using various modules and I'll talk about some of them as we go forward. Now in addition to Fusion applications, if you look at our software as a service portfolio, you can add in right now an ATG for customer for CRM, right now being our customer experience module set and ATT being our commerce and personalization product suite, both of which we can deliver in a software as a service model. And then, Taleo, which we added for talent management and recruiting. And so if you look across Fusion right now, ATG and Taleo, just on the application side, we have a large set of customers, highly diversified product portfolio and growing critical mass in terms of both the customer base, the breadth of our offerings and our go to market capability. Now, we at Oracle are also live using Fusion.
We're using 3 important capabilities. We're live using Fusion CRM as our worldwide sales force automation system, supporting 60,000 users, close to 540,000 plus customer and 1,000,000 plus opportunities. Financials were also live using Fusion Financials as our financial consolidation and statutory reporting instance. There's over 1,000 people in our finance department to use it. We've got about 3,000 lines of business, over 3,000 internal lines of business and we've consolidated from 37 different charts of accounts to 1 global chart of accounts, which significantly improves both our management reporting and our financial close.
And finally, we also use Fusion for compensation talent management and a number of human capital management capabilities for our over 100,000 employees in 100 plus countries around the world. And so we at Oracle have moved our internal systems CRM, Financials, Human Capital, Compensation, Talent Management over to Fusion and these are obviously very large scale systems, very sophisticated requirements and Fusion applications are able to handle these requirements and support our internal processes on a 7x24 basis. Okay? So let's now look at why customers are adopting Fusion. It's really for 3 important reasons: functional benefits, architectural benefits and cost of ownership benefits.
Functional benefits means improving critical business processes within an organization. Architectural benefits means that it's easier to deliver certain capabilities like integrated with on premise systems and other things because it's designed on a modern service oriented architecture. And then cost of ownership benefits is really because we can do much faster implementations, much lower cost upgrades and we also have choice in deployment and upgrade which I'll explain in a minute. Let's look at these in a little bit more detail and I'm just giving you a flavor of some of the most important functional benefits that we offer in the product. There are 100 and 100 of these.
I'm touching on some of the more important ones. Financials, the biggest value proposition for Fusion applications for financial customers is it gives them a much faster financial consolidation, statutory and management reporting solution. Customers like Red Robin, Keppel Energy were attracted to Fusion because it gave them that much faster consolidation and internal and external management reporting on a consistent basis than they have with other products in the market. Human Capital Management. Fusion has the ability to manage a global workforce in over 100 countries with a very flexible model for how you onboard employees, how you manage global policies that are tied to compensation practices in different parts of the world, how we handle global talent management practices, which also are different in different parts of the world.
And that capability is very attractive to a number of our customers. Principal Financial Group, Brocade are examples of customers who have global presence who move to Fusion because of this global requirement they have. Supply Chain Management. One of the important things that's happened in supply chains is that the mechanism through which you place orders, what's called order capture, fragmented from being largely a single system driven by e commerce, it's now you can get orders through an internal sales ordering system, you can get it through your call center, you can get it through e commerce. It was very difficult to manage the process of orchestrating orders from different order capture systems prior to Fusion.
And so Fusion offers a capability to capture orders from multiple channels and then drive an order orchestration process. Eaton Corporation and Boeing are two examples of customers who are implementing Fusion for this capability. Procurement and sourcing, if you have many different business units in different parts of the world and you want to consolidate how you're buying things on behalf of all of these organizations globally and centralized sourcing and procurement, Fusion really has a very sophisticated global sourcing and procurement capability. The Professional Golf Association of America, the Pacific National Laboratories, which is a federal laboratory out of Washington State, these are examples of customers who have implemented procurement and sourcing of Fusion. Project and Portfolio Management, the ability to many organizations do work largely managing projects.
Just the example I gave you Pacific National Laboratories, federal agency manages projects, all of the costs have to be aligned to projects they're executing in various for various departments of the federal government. Our project accounting, management and execution solution is much more sophisticated in fusion than in other products in the market. They chose to move to that capability and find it very attractive. And then finally, CRM, territory planning, sales execution, multi channel marketing, these are all important things that customers have wanted. No CRM system gives them that entire breadth of capability in a single product set.
Fusion offers this. This is the reason why the world's largest consumer electronics company and the world's most valuable company period are customers of Fusion CRM. So the first reason people pick Fusion a real pain point that they have. And functionally, they couldn't solve that pain point without some of the capabilities in Fusion, so they chose to go to Fusion for these functional benefits. The second set is architectural capability.
The teams that you have in finance or sales, CRM or customer service, they want to use social and collaboration capabilities to work together using modern social networking tools. We provide that embedded inside of Fusion Applications. You want to get better business intelligence rather than having to build a custom data warehouse, load your data by yourself and bear all of that cost, Fusion integrates over 10,000 key performance indicators where the suite is pre instrumented and there are prepackaged dash ports that deliver that capability, lowering the cost and improving the time through which you can get better business intelligence. We've got these important capabilities called Business Process and Application Configurability. What this is, is really 2 very simple things.
We provide a set of browser based tools to allow business users to go and tailor the functionality of the applications without writing custom code, okay? It's a visual drag and drop kind of interface through which they can customize every aspect of the applications from the data model to the user interface to the business process. The value for our customers is we're enabling and empowering business users to control the functionality in the application. 2nd, it also makes it much easier to upgrade because when you use these composers, you define the configurability through metadata and not in code. And as a result, you can upgrade these systems much, much more easily allowing people to get value in the latest functionality, okay?
The 3rd category of benefits is really about cost of ownership, okay? Cost of ownership is really about 4 things. How fast can you do implementations? Our typical implementation time is between 4 to 6 weeks. Some customers have taken longer.
Some customers have taken as little as 4 weeks. For large enterprise ERP implementations, that's very fast. That's very, very fast. And for example at Oracle, when we implemented CRM Financials and Human Capital Management, the no implementation took longer than 4 months for a company of Oracle scale, which tells you obviously that these implementations can be done very quickly. So that's part 1.
The second is because of the architecture of Fusion where we've defined that customizations are not customizations anymore, they are configurations of metadata. It allows us to do upgrades very frequently and very quickly and easily. As an example, the entire fleet of SaaS customers which are well over 100 have been through 4 major quarterly upgrades already. 3rd is flexible deployment options. So Fusion is the only product suite in the market which has a single code base that allows our customers to choose whether they want to go on premise, whether they want to go hosted or whether they want to go with a cloud or SaaS model.
Take the Professional Golf Association of America. When they started the project that they had with Fusion about a year ago, they initially didn't have the IT skills to manage Fusion on their premise. So they started with our software as a service model. They got well down the path of implementation. And then they had trained up their IT staff and they wanted to have an on premise solution.
So we simply moved the data to their system and they were up and running and they're live now and happy in life for quite a while with Fusion. So no other vendor in the market gives you the single code base to allow you to start with SaaS and go on premise or vice versa and that flexibility makes it very attractive for customers. And finally, Fusion can be adopted in a very flexible way. It does not require our customers to rip and replace their entire applications footprint in order to uptake it. There are 2 important ways that we can help people adopt Fusion.
The first is what we call Fusion Coexist Pillars. This, for example, is what Alcoa is doing. Alcoa runs Oracle E Business Suite for Financials and Supply Chain Management, but wanted to pick up Fusion for Human Capital Management. And so at the pillar level, you can say I'm going to keep my ERP on E Business Suite or PeopleSoft, but I'm going to implement Fusion for human capital management. So that's one way of uptaking it.
The second way of uptaking it is just at the module level. So you can say I've got PeopleSoft Human Capital Management. I want to just get started with Fusion. I don't need to buy the entire suite. I'm just going to pick up talent management or I'm just going to pick up a module like compensation of benefits.
And there are a number of customers, for example, Principal Financial Group who initially started with just compensation who have now broadened to take a much larger footprint of Fusion. So this ability to incrementally adopt has also driven the attractiveness of Fusion into more customers because it's not such a big step to think about ripping and replacing in order to pick up Fusion. Now competitively, we feel we are very well positioned for large enterprise as well as mid market SaaS. If you look at ERP, we offer a full range of capabilities on both an on premise capability with Fusion ERP as well as a software as a service capability. That differentiates us from competitors in the marketplace and brings us makes us attractive to Oracle customers to date.
2nd, similarly in Human Capital Management, we have a much broader and better integrated suite than the competitors in the market. And you'll see that we're gaining They have to go somewhere else for incentive compensation. They have to go somewhere else for incentive compensation, yet another place to do multi channel marketing, a third place to do lead generation and lead qualification. Fusion gives them a fully integrated solution and this for example in the world's most valuable company was one of the factors that drove the decision to go to Fusion, okay? Now how does then the Oracle Cloud complement what we're doing strategically with Fusion Applications?
So the Oracle Cloud offers a broad range of integrated software services. It includes platform technology, applications and what we call social capability. The Oracle Cloud is generally available now and has strong early interest, okay? We still are ramping up data center capacity and hardware capacity to meet the demand from these customers. But as an example, there's over 8,000 customers waiting to trial our Java and database platform as a service capability alone.
So, we are generally ramping up our delivery capability, but there's a lot of at least early on, there's a lot of interest in the product offering that we offer. The Oracle Cloud Platform as a Service capability is highly differentiated, okay? And it's differentiated in 3 important ways: the breadth of the offering, the depth of the capability, and then the degree of integration between the different pieces of the platform as a service capability, okay? When used with Fusion applications, the Oracle Cloud's platform as a service capability are very highly differentiated. The applications, for example, bring customers to the platform and the platform differentiates our applications and that's a very important thing.
Unlike other vendors who offer technology on the cloud, who do not have applications, our cloud combines both applications and platform. The applications bring a lot of customers to the platform. The platform differentiates the applications technically. Now similarly, Oracle's social capabilities are highly differentiated with Fusion. They help us drive unique differentiation against some of the other competitors in the marketplace.
And it's this combination of platform, applications and social in our view that customers find very compelling because of the breadth of the solution, the depth of the capability and degree of integration. So let's quickly look at that. As we've said and as our CEO, Mr. Ellison introduced the cloud, it's really these three capabilities built in a common infrastructure platform. On the platform side, we have a lot of different capabilities.
Database, so that if you want to just use our database in the cloud and not have to run it on your premise, you can do that. Java, using our leading Fusion Middleware product, if you want to build applications in Java, you can do that. If you want developers to collaborate, we've got a developer capability. And then there's another range of them, web programming in PHP, Ruby, mobile, document oriented collaboration, the ability to build rich media sites and finally to do analysis and reporting. So there's a broad range of capability.
It's all bring based on the Oracle technology that customers love. And as a result, these technologies are highly differentiated from those that are available to other public cloud providers, okay? Now the platform and services have early interest from a number of customers. Here are just a small set of the 8,000 or so who are waiting in line. These guys are actually using the system and we've had very good positive feedback from early usage of the system.
Similarly, on the social side, the social products really span these 4 important capabilities. I have people within my organization and I've got, for example, customer service reps talking to customers. I want them to network together. We do that using the Oracle social network. 2nd, I want to feed that data in to collect some information about what are people using the system for, that's where the social data platform comes in, which allows us to understand what people are doing and how do we convert social data into things like qualified leads.
Then social marketing is what we did with our Vitru acquisition. It gives us the ability to build, to use social relationships and social media as a target for us to drive marketing programs for both consumer products and business to business products. And we've seen very strong early interest from customers who are customers of our CRM products, ATG Commerce, for example, who are interested in using Vitru to drive a social relationship management capability. And finally, social intelligence, the ability to actually collect data off of social media sites, translate them through social analytics platform is what we did with our Collective Intellect acquisition. And the combination of these four products give us both breadth and depth in the needs that customers have for social.
Here are some of the early customers we have for social. Obviously, many of these are very well recognized brand names and we will obviously continue to strengthen our presence in the market as we take this into our broader Oracle installed base. Now let me give you two examples of how the Fusion applications plus cloud together really offer enormous value. So the first one is an example in B2C CRM, business to consumer CRM. People want to go on the web and do social marketing, which is a marketing department wants to build a marketing campaign so that you place products on social pages on Facebook and then also do outbound marketing through Twitter.
You can use our Vitru product to do that. That's the first box. From there, you want to capture qualified leads and pass them to sales teams. We have the capability to pass that information into Fusion CRM, which is a Salesforce automation system. Then you want to monitor customer feedback because some of these guys may actually be complaining about the products and not be happy about the products.
And so they may not be leads. They may actually be customers you want customer service to interact with. So the social intelligence piece allows us to monitor what customers are talking about in social media. And then if they are unhappy, for example, you can pass them into customer service to enable our customer service teams to respond to these events, meaning people are unhappy. And that would then come in through our right now customer service product.
And finally, as sales teams in Salesforce Automation and customer service teams in customer service engage jointly with either happy customers or unhappy customers, they can internally collaborate using the Oracle social network. So the 3 pieces in white are capabilities that come through the Oracle Cloud and the 2 pieces in red, Salesforce Automation and Customer Service are our SaaS applications portfolio. And we are the only ones who can offer this breadth of capability across the product suite today, okay? A second example in human capital management. Think about an organization that's got attrition, meaning they're losing people.
They want to replace those people. So first thing we want to do is market to candidates, meaning to hire candidates on social network. It's called candidate sourcing. You can use our Vitru product not just to market consumer products, but you can also use it to market your company to candidates. So that's step 1.
2nd is you feed those leads into the Taleo recruiting product where you can manage the candidate recruiting process. Then once the candidate accepts or as part of the interview process, you've got your human resource teams, you've got the hiring manager and you've got the candidate themselves. They need to collaborate both to set up interviews and then to manage the whole benefits, compensation and other process. The Oracle social network gives you that. Once the employee is hired, they can be managed in Fusion Human Capital Management.
And finally, if you want to do analysis, let me take a look at how the time it takes from the time I hire a person meaning place the job post to the time I fill up that empty position and I'm making headroom against attrition or not, you can do that using our analytics cloud offering. So again, the breadth of these capabilities, the white boxes come from the Oracle Cloud, the red boxes are applications which are part of the Oracle Cloud, the combined breadth only Oracle can offer to our customers. So the combination of these products also architecturally, they run on our Exadata and Exalogic hardware, which gives it great performance and reliability. We've got a virtualized tenancy architecture and what that means is you get the benefits of virtualization, which means you don't have a lot of idle CPU. You have the ability to operationally manage these instances with very low operational costs, meaning administrative costs.
And at the same time, it also gives us the ability to offer flexible upgrade schedules to customers. Customers can choose to upgrade when they want to and not be forced by the SaaS vendor to meet an upgrade schedule. We do have global data center presence. Today, we have it in North America and Europe. We're adding a facility in Continental Europe and in Singapore during the month of July of this year.
And then we're also broadening in Asia Pacific, in Australia and in other locations in Asia Pacific and in Latin America as we go forward. So we'll have broad delivery capability by the fall. So how we are strengthening our go to market capability? 1st and foremost, we specialize our sales teams around enterprise resource planning, human capital, customer relationship management, enterprise performance management that are dedicated specialists in each of these complemented with an inside sales and telesales group to cross sell, up sell and do renewals. We are adding significant growth in sales capacity in all geographies.
There are specialized training and implementation teams to go in and do rapid implementations. You've seen our implementation time being as short as 4 to 6 weeks. It's largely because we've trained people who can do that. And we've streamlined a lot of things around self-service ordering so that customers can order and set up their own instances, etcetera. Now second, we're also broadening our system integration partner reach.
Today, we have a broad number of system integration partners trained on fusion applications. Here's a subset of them, but we continue to broaden that as we expand our reach into the marketplace. And so there's plenty of resources today available for our customers says, hey, I want to go to Fusion. Is there a trained partner who can help me implement? Finally, there's also a set of ISVs who offer complementary products to a for example in CRM, if you use our Salesforce automation system, but you want to use Flipkop, for example, to do inside sales, we've got that capability.
And there's a number of partners. This is a representative list working with us on product integration, which also neutralizes some of the statements that competitors make about Fusion not having a broad ecosystem. And because of the combination of these, we've started winning against competitors in the marketplace. Here's a short list of just some of our wins. So to wrap up, our software delivery team has taken on a very big project.
Fusion took us a lot of people many years to write, but we did it because we saw a fundamental shift happening with enterprise applications. People wanted to get applications that could be delivered on a software as a service model and solve some of the functional problems that they've encountered over the years, things like order capture becoming fragmented. Fusion Applications is now generally available and is the broadest and most complete SaaS offering in the market. Competitors who have spent a lot of time saying that Oracle was wasting its time writing Fusion today have a very difficult problem ahead of them because they don't have an offering that can be delivered in an effective software as a service model and it will take them a long time to write such an application starting from scratch today. Now Fusion apps is seeing strong uptake by customers.
The Oracle Cloud provides a strong complement to Fusion. Together the Oracle Cloud and Fusion strengthen Oracle competitively and we are investing aggressively our go to market presence and we believe that together Oracle Cloud and Fusion will continue to drive growth for Oracle in the years ahead. So with that, Ken, I'll turn it back to you. Great. Thank you, Thomas.
Before I turn the call over to Philip for the Q and A portion of the call, please let me remind everyone that
you can submit a question at
any time by clicking on Ask a Question on your screen. With that, let me turn it over to Phil.
Great. Thanks, Ken, and thank you, Thomas, for taking the time today for this webcast. Today, as you all know, on this call, we published a 67 page deep dive report on Fusion applications. And from doing both the research for this report and then, Thomas, listening to your presentation today, one of the unique features of Fusion applications that really struck me is the fact that the suite is architected on a single code base for on demand, both single and multi tenant, as well as on premise deployments. So the real question here is, what do you view as the benefits being to the customer from this model and for that matter of fact to Oracle?
So the benefits, Phil, are pretty simple. There are 2 important benefits. Number 1 is in order to deploy the software software as a service model, we had to make architectural changes in the product set to allow the software to be configured for example by business users without having to write a lot of custom code, right? And on premise customers have always wanted that because it makes the process of upgrading much easier. So the example of what we've done to enable Software as a Service is now also available to on premise customers.
And so the benefits the first benefit is that the features that you traditionally define for Software as a Service, which in general is a higher bar than on premise software, but now those same capabilities available to on premise The second one is that it gives customers choice. I gave you the example earlier, for example, of the Professional Golf Association of America. Customers, one of the advantages that having this flexibility allows us to do is to go to a broad range fusion? And a customer may say, I love it, but I don't have the skill set today to run Fusion. Would you operate it for me on a software as a service basis?
And then I'm going to ask my CIO to build up this skill set and then maybe in 6 months or a year I can take it back on premise if I want to. Alternatively, they could start with on premise. They may say, today I want to go and implement Fusion on premise. And in the years ahead, they may decide for a variety of reasons, IT budget pressure, other reasons that they want to move this software to run-in the cloud. They can do that.
And so it gives people a safe investment path by decoupling the deployment model that they want to go for the software from the decision to use the software. Got it.
Now let's spend a minute just kind of extending that on customizations, extensions and personalizations. I really feel like Oracle is somewhat under marketed its end user tools that are part of Fusion applications, especially versus what you hear from salesforce.com and Workday. So could you discuss how MDS and the Oracle Composer runtime editing tools enable business users to create and update customizations to Fusion apps, whether they be in the cloud or on premise? And how do you really believe that these tools and just the Fusion architecture compare with competitors?
So one very important thing that we did when we implemented Fusion was to design the software on a common what we call metadata driven architecture. This capability when you look at the applications, they are the user interface of the application, the data model of the application, the business processes within applications, the rules, they're all described in data that we call metadata because it describes data. Now the value of that is the following. Let's take a very specific example. Green Mountain Coffee Roasters.
They are a customer of Fusion CRM. They wanted to have a different definition of customer order than we did, meaning they wanted to change the definition custom tool and write custom code in order to do that, which then made the upgrade very difficult. Secondly, it also required a professional programmer or system integrator to do the implementation of that so called customization. In Fusion you don't do that. In Fusion what you do is you go into a thin client in the browser, meaning a browser is a web page and you say I want to add 4 attributes to customer.
And when you add those attributes, you can say I want that to also show up in the user interface because I've got to enter the data for those attributes. And so the data model, the user interface, the workflow, business intelligence, they all work through this common metadata management competitively, there are 2 important things that we do that competitors find difficult to do. The first one is the system was written on a much more modern stack and metadata management is today much more sophisticated than when some of our competitors wrote the code. So most of them don't have the same kind of capabilities and require to program in custom scripting tools, which has a set of problems that drive complexity in upgrades and so on. Secondly, we also have some patented technology that allows us to do what we call layered customization.
What we mean by layered customization in Green Mountain Coffee Roasters as an example is we understand what parts of the metadata was defined by Oracle and what part Green Mountain made changes to. So when we go from one release to the next, we can upgrade our own metadata without breaking what Green Mountain did, which makes upgrades much quicker and easier and frankly gives customers a higher degree of comfort that if they choose to use this capability, they can continue to upgrade new releases without worrying that every time we go through an upgrade, it's going to break them. So I think architecturally these capabilities are very important. They span the entire suite and they were possible because they were written on a very modern technology stack that some of our customers competitors do not have.
Got it. So just taking that question sort of a step further here, one of the questions that I get is, can Oracle's single tenant cloud model for fusion applications actually scale? Now I'd really kind of call your model virtualized tenancy is really kind of single tenancy makes investors flash back to those failed ASP models. Now that said, from my standpoint, multi tenancy really emerged to solve 2 problems with hosted client server apps in that ASP model. The first being just low hardware utilization and the second being the high cost of management of the application itself in terms of customizations, updates and so on.
So the question for you is, could you discuss how Oracle's use of a single line of code and that metadata driven architecture that you just discussed, combined with the use of virtualization and ExaSeries products in the Oracle Cloud, can actually drive a profitable scale for Oracle? Okay.
So multi tenancy emerged in the late '90s as a solution to lower the cost of delivering software service. And it was done for two reasons. First of all, hardware utilization, if you had lots separate instances running around, you ended up having very low hardware utilization and server cost the vendor a lot of money. And the second was people used to take these applications and then customize them by writing customized code. And when you had lots of separate instances, you ended up with a problem with hundreds and hundreds of these instances running on old versions that could never be upgraded.
So Fusion was written much later than competitive products, right? We wrote it after technologies metadata management and virtualization emerged. And so how do we solve these two problems? So the first one is how did we solve the problem of low hardware utilization? Utilization?
And there are 2 realities there. 1st and foremost, low hardware utilization in if you think of on premise customers who have hundreds of instances, the way that today if you ask an on premise customer how do you consolidate instances, they'd say we are using hypervisors and virtualization to consolidate. And so all we do in our cloud is use the modern technology called virtualization to consolidate a number of instances on a dense footprint that allows us to then handle the there's no concern therefore from a hardware and resource utilization point of view. Additionally, because these run on Exadata and Exalogic which are incredibly fast, you also find that you can drive the CPU on these boxes higher than you could on a commodity hardware box because in a commodity hardware box often you're stuck around IO bandwidth or network bandwidth, which don't affect Exelogic and Exadata. So those 2, the fact that we're used to build on virtualization, allowing us to consolidate many instances on a much denser hardware footprint and the fact that we're running on Exadata and Exalogic solve the problem of cost of the hardware infrastructure and delivery infrastructure, okay?
Now the second issue was how do we protect people from doing customizations on many different instances that then means they can't upgrade. And that's back to the discussion we just had on the architecture of Fusion is designed on a metadata driven model. And it is really state of the art in terms of how you can configure the application to meet your data modeling requirements, your reporting requirements, meaning build custom business intelligence, build configure business processes, but you're not writing custom code. And so in that and so we solve that second problem of being able to do upgrades very quickly and easily because we've eliminated customizations. And so it's that combination what we took was a different approach.
What we felt was instead of trying to say that the technology continues to evolve, right? And 2 or 3 new technologies emerged, virtualization, much better engineered systems and metadata management. And we chose to implement a system called fusion applications on top of those to give you the cost characteristics and flexible characteristics of what traditional software SaaS vendors have said you only can do with multi tenancy, while getting you some additional benefits that we can talk about. I hope that answered the question, Phil.
No, that's perfect. And just as a follow on to that, one of the things that Oracle has been very vocal about is the benefits of database level security from a virtualized tenancy model. But the question I have is what are the other benefits of a virtualized tenancy model in Oracle Cloud to the customer versus a multi tenant model?
So there's a number of benefits. I'll just touch on 3 just to give people examples, okay? The first one is really about upgrades. In a when you're running a virtualized tenancy model, we have enormous flexibility to offer customers the ability to upgrade when they want to on their schedule, okay? And that's a very important buying decision, particularly in large enterprises, because they want to have that flexibility to choose an upgrade window.
Take as an example, no matter which holiday you pick in the United States, whether July 4th or Thanksgiving, retailers don't want to be upgraded that weekend because that's the business busiest time of the year for them. There are other customers for whom the fiscal year in ERP, for example, does not end on a a particular date and they don't want somebody dictating to them that you will upgrade at the end of this month because it might be the end of their financial year. So one is this notion of flexible upgrade. The second is the area around this flexibility to move back and forth between on premise and the cloud. If you have data in a virtualized instance, for example, when the Professional Golf Association wanted to take it, it literally took us just a couple of hours to snapshot their environment and let them take it because we had their own isolated data with own isolated virtual hypervisor.
We could simply say do an export of those and they can take it to their on premise system and vice versa. The 3rd important factor is that there are some significant differences and benefits between high availability and security and I'll explain just a couple of them. High availability, okay? In a virtualized environment that we have, if a particular app user, let's say one company says I'm going to run a massive customer import this week, they don't have to tell us about it. We can monitor system we've got the ability to dynamically adjust capacity and demand, meaning they will need more CPU resources, so simply allocate it to them.
In a multi tenant world, the challenge people have there is resource management in terms of CPU, for example, gets very challenging and more importantly memory. Because even CPU, you could isolate using operating system tricks. But memory, one customer can hog up all the memory on the system and step on what other people are trying to access. And so the general notion of availability of the application for the user, meaning do I get a reasonably performant application when I go on the system independent of what all the other people in all the other companies that might be using it are doing. That's one thing you get with resource management.
It's a lot more flexible in our model than in the other multi tenant solutions in the market. And finally, we also have the ability to do much higher grade of security. Not only do we have isolation of 1 company's data from another company on the storage disk. It is also isolated on the database. It is isolated in the middle tier.
It is isolated on the network all the way out to the browser of the customer. So we've got complete isolation which for companies in financial services or public sector institutions is a very, very important requirement. So there's a number of these benefits, flexible upgrades, better resource management, the ability to handle the better security on the system, the ability to go back and forth between an on premise world and the cloud, all of which we're early in, right? Many customers are beginning to understand these benefits because Oracle is pretty much the only vendor that offers this. And as they begin to understand it and request it more and more, I think you'll see other SaaS vendors being feeling the need to also adapt to these requirements, but they are quite difficult to do because it takes quite a bit of software engineering work to get done.
Perfect. Well, as Larry once said, if you're going to innovate, be prepared for people to call you nuts, but you definitely are innovating with the single tenancy model or the virtualized tenancy model. But just on to the next question, we've talked a lot about the applications layer, but integration is always one of the top obstacles highlighted by enterprises in terms of adopting SaaS applications. So could you highlight some of the key advantages of having both on premise and on demand deployments of Fusion applications actually having been built on Fusion Middleware?
Yes, great. And so this is one of the places integrating the software to my enterprise system. So let's hypothetically say you're deploying Fusion applications for talent management and you have PeopleSoft as your HR system or I'm deploying Fusion CRM as my customer relationship management system, but all my customer records happen to sit inside Oracle E Business Suite or SAP. The one big advantage we have is that Oracle Middleware, meaning Oracle Fusion Middleware is a major middleware product in the market. It's a very leading middleware product in the market.
And using the service oriented architecture capabilities in Fusion Middleware and the data integration tools in Fusion Middleware, customers can very easily integrate their on premise system with the Oracle Fusion applications, whether that's Fusion applications themselves running on their premise or in our cloud. And we have a number of prepackaged technical capabilities to connect E Business Suite, PeopleSoft, SAP and other systems into Fusion, whether Fusion is running on premise or in the cloud.
Perfect. And then just one final question here before wrapping it up. Could you discuss Oracle's mobile strategy for Fusion apps and including what we heard back at last Oracle Open World about Fusion Tap and just kind of how you compare this mobile strategy with what we've been hearing from some of your competitors like SAP?
So our mobile strategy is pretty simple. We see 3 types of devices or 4 types of devices as you go forward. And we support all of them and they're all generally available including FusionTAP, okay? So device number 1 is what people used to historically call the primary client, which is a PC with a browser running on it and we support a variety of different browsers I. E, Internet Explorer, Fire Fox, Chrome and Safari from Apple.
So that market we've that client we certainly support and have got capability for. The second is the smartphone. And on smartphones we support both I phone and Android devices. We also have an early solution available on Windows smartphones. And so these are things like if you're a salesperson and you want to create an opportunity because you just had a meeting with somebody, you can simply tap on your iPhone, pop up a little application to go to your calendar, pick the name from the pick the time window from the calendar, take your contacts from your contact system on your iPhone and we will automatically enter the data in the back end system.
So that's case number 2. And we do this both on Android as well as on iPhone. The 3rd place that we deliver mobile clients is on the tablet. And tablets today we do iPad. We're also going to be introducing support for the Android tablet shortly.
The general model on these tablets are that we support 2 modes. We've got a native application mode, which means it runs natively on the tablet and that's used for certain applications that people want a very high interactivity. And then we also deliver on the browser on those tablets. So that if you've got an application like Business Intelligence Reports and you want to see them alongside other data from the applications, you can access them from these tablets. And finally, we've also got for people who live, eat, breathe, sleep in e mail, like for example salespeople who entire time is spent in email, we've got integration with mobile email clients like Mobile Outlook or Outlook Express so that you can create your opportunities, submit your contact, modify your opportunity stage, look at your sales forecast, all of that from within Outlook or Lotus Notes without having to go into even a native application to do that.
And so our general model is that these client form factors, smartphones, tablets and PCs, they're emerging and widely deployed. We optimize the kind of software we deliver on these devices because people want to do different things on these different devices. People are not looking at your financial results for the quarter on an iPhone because it's very small in screen size, but they may do that on an iPad, which is a much larger screen size. And so we've got a mobile framework that's part of our middleware. Our applications are built on top of that mobile framework and that mobile framework provides the ability to grow cross platform, across phones and tablets and across Android and iOS and it also allows us to build with 1 code stack from smartphone up to tablet, up to PC without having to use different technologies in all these different stacks, okay?
And so that continues to be our focus going forward. And you'll see more and more of these mobile clients coming out from Oracle for more and more of our applications. All the Fusion mobile clients are generally available. And frankly, Oracle ourselves, our 60,000 odd sales and consulting people are using Fusion Tap to access Fusion CRM.
Well, great. Well, we're at the top of the hour and thank you for the time today, Thomas. And with that, I'll turn it back to Ken.
Thanks, Phil, and thank you, Thomas. To wrap up, we'd like to thank you all for joining us today and a special thanks of course to Phil for leading the Q and A, addressing most of the questions posed most often by investors.
If you have any follow-up questions, please contact the Investor
Relations team here at Oracle and this concludes our call. Thank you very much.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.