Good morning,
everybody. Good morning. Wonderful to have everybody here. So let me start with some basic house keeping items, if it's okay with you all. 1st and foremost, please make sure you keep your badges visible as you'll use the restrooms and
be moving in and out. We want
to make sure we get you back in the room as easy as possible. The restrooms are just to the outside the hall here if you've not attended before. There's Wi Fi in the room. There be little placards on your table helping you get logged in. If you have any problems with that, please go to the back room so that people can help you.
What I'll do now is take you through I know what is always the most exciting slide of the day. Please indulge me here. I'm going to just kind of do a read through of this briefly. Statements in this presentation relating to Oracle's future plans, expectations, beliefs, intentions and prospects are forward looking statements and are subject to material risks and uncertainties. Many factors could affect our current expectations our actual results and could cause actual results to differ materially.
A detailed discussion of these factors and other risks that affect our business is contained in our filings with the SEC, on our most recent reports on Forms 10 ks and 10 Q. Copies of these filings are available from the SEC or by contacting our Investor Relations department. All information set forward today is current as of today, October 5, 2017. Lastly, we undertake no duty to update any statement in light of new information or future events. Additionally, we will be using, in particular Mark's presentation, you'll see non GAAP financial measures being used.
So, want to make sure that you're aware of that. And then lastly, is also to understand, especially as Thomas, Steve, Reggie, some of our other executives are speaking, there will be some discussion around future products and technologies just to make sure it's only for your information purposes only. So with that, thank you for your indulgence. Let's go through the agenda. So we'll start with a technical discussion.
Steve Miranda will come up and speak with you about SaaS business, what's going on there. Thomas will then follow to speak about platform and infrastructure as a service, give you an update on the technology. And then Thomas will be bringing up a number of customers here. So the chairs, if you're wondering why they're here, we'll be having a panel discussion. We'll have some Q and A with that as well.
We'll take a break around 1:15. Now if you haven't I know some of you are on East Coast or farther from Europe or Central. If you're on a different time zone, if you're hungry, please make sure you get yourself a snack. The lunches will be ready at 1:15.
So I know those of you on East Coast time,
that will feel late. So please get yourself a snack. Lunch will come in at 1:15. We'll come back from break around 1:40. At that point in time, Reggie Bradford, who's here, will come up and speak with you about the Oracle Accelerator Program.
I think you're going to find it pretty interesting in that we'll talk about how people are developing on Oracle. Then after that, Doug was here with us last year to talk about the accelerated buying experience.
He'll be giving you an update, not
only on the accelerated buying experience, but how we're transforming the company as a whole to basically live and work and play in the cloud. At that point, Mark will come up, talk about the business. He'll invite Safra up. He'll do a Q and A with you all. And we'll take another short break.
Afterwards, Larry will come up. We'll have Q and A as we always do with Larry, and we'll conclude today. So with that, please start the next
video? Responding to the market conditions for a finance function requires a level of agility that the historical operating model between business and IT does not necessarily support. We are no longer interested in customizations where we are looking for a one way of doing things. We want to be upgraded every 6 months so that we never have to have to wait 5 years to get a functional upgrade and all the costs and pain and challenge that come with that. We wanted a public cloud solution.
We were historically SAP House. We began the journey with them and in the process found that SAP were offering private, you were offering public, they were offering customization, you were offering vanilla, we're going live with Fusion GL, we're also going live with Oracle DRM, we're going live with an accounting hub solution, a reconciliation solution. So we have a lot of components that we're bringing live. That is the first time I've ever been part of a project where we didn't have to spend 9 months doing requirements. It was a transformative operating model that would change how business and IT work together and allow us to focus on what we're good because you start with the solution as a vanilla configuration based solution and you iterate from there.
The net cost of delivering that is fractional to what we would have cost us in the past. You think about businesses are spending $60,000,000 to $100,000,000 on these types of programs and we're operating at a fraction of that. We're seeing these increases in agility and reductions in costs enabling us to be more creative and more aggressive sometimes in solving problems and solving more than one problem. So, I can only see us adopting more in the future.
Of Applications Development, Steve Veranda.
Okay. Good morning and thanks
to everyone. I'm going
to go through the slides very quickly. I know you have them for content. So, in going through them, the couple of key points that I want you all to remember. First and foremost, if you've been to the previous 3 days, what we showcased in just about every one of our sessions was not Oracle talking with our customers, but actually our that they move forward with SaaS solutions, not based on things that we feel and believe, but actually showing them other customers that are similar. So I'll go through that.
The second is we think we're going to extend the lead in applications that really across the board, particularly with our investment around machine learning and the speed that the SaaS applications and the cloud platform PaaS, IaaS and SaaS deliver going forward. And the third is a little bit how we're transforming to become a services company to make this result really come home with our customers. So, let me go through some highlights. Any place you look across the SaaS portfolio, which we are talking about for this part of the session, we are in the lead. We have 97 of the top 100 U.
S. Advertisers using the Oracle Data Cloud. We have grown our customer base in HCM, significantly larger than our nearest closest competitor. We are the leader in B2B and B2C marketing as the measures you see there both in terms of customers and actual usage. And we far out pace any vendor in the marketplace in terms of users, customers, different sites and phases for our ERP cloud, which we think is substantially differentiated and substantially unique.
What do we hear from our customers as far as the reasons why they choose us over competition. 1st and foremost, across the board, most customers today are moving to SaaS for speed. It's all about speed of innovation, speed of reaction, speed of either disrupting others in their industry or speed to be avoided in that disruption. And I'll give a number of examples we go through today. When you get into then Oracle SaaS, first of all, we have the most complete SaaS suite of anybody on the market, not only because we have CRM, HCM, ERP, supply chain, but also in those areas depth of that solution.
I'll explain why that becomes important for customers. Next and probably what gets overlooked is that we have the broadest, it doesn't mean we don't have the best of breed in every solution going forward. So when we compete head to head against HR, head to head against sales force automation, head to head in financials, we have strengths there that we bring to bear best in class applications. And part of that speed, the emerging technologies, which I'll talk about today, things we've delivered in the past as far as user interface, things we've delivered this past year like IoT applications and machine learning applications and also how we're going extend those going forward. Next, our global reach.
Not only the global reach in terms of the breadth of Oracle's products supporting globalizations and local rules and regulations, but the global reach of our broader infrastructures. Oracle's consulting, Oracle partners, the training that we can afford, the language we can do, support that can take global customers, really allowing for global customers today, but also customers who are expanding globally. They never have to fear that you're going to end up in a place where Oracle is not already there and able to support you completely with the infrastructure. And at this stage, we see many examples of this. Now in the apps world, it's a little bit complicated.
So to illustrate when I say many examples, when customers ask us for references or examples of success, they ask us for ERP customers or CRM customers or HR customers, sometimes big customers, sometimes small, public sector organizations, commercial organizations, non profits, sometimes with the PeopleSoft as their starting point, sometimes with JD Edwards, E Business Suite, Siebel and sometimes net new. And what we try to illustrate here is just about every dimension when you slice and dice that, do you have a financial services customer who used to be on PeopleSoft HR, who is in Europe, who's moved to the cloud? Yes. Do you have a telecommunication customer who's in the United States or who's global, who used to run E Business Suite, who moved to the cloud service? Yes.
And you see examples like Cablevision, MoneyGram, HSBC, Siemens, Hearst, Linux, kind of we can show you the whole spot. And just about every one of these customers spoke on our behalf today, not only on that they've selected us, but on the real business benefits they've achieved by moving to our cloud already and then expectations going forward. So really we made tremendous progress over the last few years, not only filling out the product, but in customer adoption. I think you guys see that in the numbers. And now it's bearing out in terms of customer benefit across all of those dimensions.
But the important thing that we talked about today or at this past conference was not only speed of where we've been, but the speed going forward. So at this conference last year or 2 years ago, I talked about how it wasn't a question of if our customers were moving to SaaS, it was a question of when. And then I talked about the benefits of that. There's some cost savings by us doing the labor and hosting things. We think it's more secure because we keep you always up to date and we enhance the technology, as Larry talked about, on Sunday and Tuesday.
So, there are substantial benefits. But just functionally, the speed of innovation is unmatched. And so, that's in part improvements from our engineers, but it's also in part the way the model used to work or if you were a legacy ERP vendor only, even if you were producing new capabilities, your customers are only upgrading RP vendor only. Even if you were producing new capabilities, your customers are only upgrading and adopting
that once every 5, 7, 10 years at best.
Update 100% of our customers twice a year. And the importance of that is really borne out over the last couple of years. New technologies like Blockchain, like IoT or Internet of Things and machine learning capabilities, we might have been talking about those a year or 2 years ago, probably not 2 years ago. And it certainly would not have been as mainstream or technology advanced as it is today. So if you are on a 5 year, 7 year, 10 year release cycle and you have technology changes being introduced in weeks months, you need a technology investment and a platform to react to that.
And this is what we're seeing not only from the customers so far, but as we talk to them going forward. And I'll talk to spend a bit in machine learning in just a couple of moments. The way we do this, of course, is with a complete stack of applications. And let me give you the from the keep a heap stack of technology. From the apps perspective, why are all these important?
So, if you are going to take a marketing system and move that to the cloud SaaS application, we provide that in our marketing cloud. However, now you can supplement that marketing cloud with data to do more targeted marketing. I use this example last year, all of you probably see this in your everyday lives. You go shopping for anything online, You go to another website or any other website completely unrelated and you automatically start seeing advertisements for that. That's targeted marketing, very likely powered by the Oracle Data Cloud and Oracle Marketing underneath that.
However, our marketing apps typically don't run standalone, even if you're an end to end Oracle shop. You have bespoke applications that you bought either from the ISV or a 3rd party or you built yourself. Those applications, if they run on the Oracle stack, can be run-in our platform as a service. So our platform as a service runs standard based technology, Java, the Oracle database.
So you can
run your marketing app in the cloud, supplement it with a data cloud and then add other applications. Oh, by the way, if you have completely other workload related to marketing that doesn't have anything to do with the technology stack and you need to move that to the cloud, our IAS infrastructure allows you to take 100% of your workload and move it to the cloud. So when customers look for an end to end solution, though they may be looking at the marketing cloud application, really what enables them to get the big benefits of the cloud is the complete stack from IAS for full workload, PaaS for extending the application or third party ISV applications, our SaaS apps and all of those supplemented with our data cloud going forward. So hopefully you get the sense of the power and the leverage of the stack. When we go through it today, I'm going to talk about 5 sections.
I'll talk about ERP, EPM Cloud, Supply Chain Management and Manufacturing, HCM or Human Capital Management, HR, CX or Customer Experience, basically sales, service, marketing and the data cloud. So those will be the sections that I carve up the rest of the time. So now let me just spend a couple of minutes talking about new technology and innovation going forward before I give the individual product pillar updates. And I talked about some of them that are really become more commonplace in the world today, both technology wise and by customer demand and customer adoption. Talk about AIMachine Learning, IoT and Blockchain.
Just drill down first on machine learning or AI. So I think it's important and I'd like to refer to it more as machine learning than AI or artificial intelligence. And the reason why is I think artificial intelligence sort of implies there's a little bit of magic to it. It's artificial. You don't know what's going on.
Machine learning, though maybe a more boring marketing name, I think, better reflects what's happening. And I think it's important to understand what's happening because we think we have a unique ability to deliver machine learning. So we feel that there's 4 necessary components. First is data. So without data, the algorithms that the machines learn on and they use to progress, there's really nothing for them to process.
There's no way for the machine without any data to derive a suggestion or recommendation or an offer to you. Between the SaaS applications we have and the Oracle Data Cloud supplementing that, we have a unique set of assets that no other SaaS vendor has for data to drive the machine learning. 2nd is you need data science, both a combination of data scientists and algorithms, computer science algorithms to have the machine learn and process that data to suggest. 3rd, you need actual applications and use cases to surface those recommendations. So, let me give you an example.
We have a new application we call Next Best Offer, which is essentially an e commerce add on app. If you go to any e commerce site today, if you are registered and you bought something from that site, it will probably say things like, we know you bought product A, we recommend you buy product B. However, when you take that simple use case, you add external data, meaning you haven't bought anything from that e commerce site, you've never even visited that site. But we know from your digital profile, other websites you've visited, other things you've shopped for, other things you've bought, other things other people like you have bought, we can all of a sudden give you a recommendation based on that learning. Then when you service that through our e commerce app, if that recommendation worked, meaning you bought more, we use machine learning to tune it so that other people like you get that recommendation the same way.
If you did not buy it, we tune the machine learning algorithm to go forward and kind of iterate on it. So the machine learning, the application improves as you go along with that source of data. And then finally, to deliver all this, it's a vast array of data, which we'll talk about more in the data cloud, as well as the technical argument. So you need data, decision scientists, the applications to actually surface that recommendation and feed it back in so the application algorithm actually improves and the horsepower through our platform to run all of these things. And with this unique combination of assets, we built a host of AI applications, one which I mentioned next best offer, next best recommendations.
If you think about it in the back office space or in HR, if any of you today went to any customer's website to look for a job, it's oracles dotcom/jobs or slash careers, etcetera, you'd be presented with probably 2 drop downs. 1 is a job type, you want an IT job, a sales job, a finance job, another is a location. Are you going to work in the U. S, in Europe, where does it go? Pretty universal.
You would see the same thing that I would see. If we went to an e commerce site, we'd see very different things, again, based on this recommendation engine. We're taking the exact same techniques, data, machine learning, our recruiting app and surfacing those capabilities for recruiting to give you a better recruiting engine. And then based on the results of success, we're going to tune that going forward, substantially differentiated with the machine learning and the data from any competitor we have in HR or ERP or CRM. And then this year, what we announced is we're taking that capability and making it much more pervasive throughout the applications, not just add on apps, but in everything you do in the application.
The simplest example being something like navigation. When you sign on to the system, if we have a consultant and they're signing on the system Friday afternoon at 4:30, chances are very
and my benefits
enrollments due December 1st, it is very likely that and my benefits enrollments due December 1st, it is very likely that I'm signed on to do my open enrollment type of work. So taking that same data, machine learning techniques, horsepower and making it pervasive through the applications, including some very commonly thought of user interface to these like chatbots for service and service use cases, augmented reality for IoT use cases. And in the case of IoT, we've built out specialty IoT applications that sit on top of our and anybody else's manufacturing application that ingest the vast amounts of data, whether it be for your own products that you deliver to customers or to the machines or hardware that you use to produce your product. And we can do things like predictive maintenance, we can do things like tuning your supply chain, detecting anomalies in the products that you're producing and combine that with supply chain planning again to iterate your entire lifecycle going forward, combining that with new technology for augmented reality, allowing you literally to walk around the shop room floor, scan with an iPad or another device, the machines and detect which machine you need to be look out for repair or preventative maintenance.
And the ability again to deliver all these things with speed enabled by SaaS applications and SaaS application updates. The next one gets talked about a lot. Again, the same concepts is blockchain. And we're taking blockchain technology, once again, that we've built in the underlying stack and that we inherit at Oracle from the applications division and applying blockchain to things like supplier payments or payments in general and also for contract and contract negotiations. So this isn't about cryptocurrency, it's about taking the blockchain technology capabilities and applying that to real world business cases and delivering that to our customers within our existing applications.
Okay. So now let me go pillar by pillar to give you updates on what we've highlighted in each product area and then some of the differentiators we have there. First off, before I get into any individual pillar, across the board with every application I'm going to cover, As with every release, Release 13, we have a substantially new user interface, keeping it contemporary and doing improvements. There's really 2 dimensions to think about this. 1 is contemporary.
So, again, you all experience this in your everyday lives. You update to your new iOS or your new mobile device ID and you'll see new navigation patterns, new UIs, slight new colors. It's critically important that our applications stay contemporary. So when you use Oracle apps, it looks just like you're using a consumer device. So that's always contemporary.
2nd is since we host our applications, we collect a vast amount of data on how customers are using them, which features they're using, which features they're not using, which enable us to tune the application in ways we could never do before by learning and knowing exactly the use patterns that are being used that make those most optimal in the UI. So brand new UI across the board for the applications. And then, of course, I mentioned the adaptive intelligence or machine learning applications. Again, I showed a few examples, but those are going to be pervasive across every pillar. Now within the pillars, first starting with EPM and ERP.
So if you look at EPM and ERP, things like the SKUs, if you will, or the individual products, GL, AP, AR, expenses, fixed assets, etcetera. We have everything we've always had and anybody's had in an ERP suite of application. That work has been done. And now we've gone to the stage of really enhancing and going beyond what we've even had in our traditional products, E Business Suite and PeopleSoft. So you'll see where we've added localizations, countries like Brazil and India and Argentina.
Those localizations were never part of E Business Suite. You always had to customize or extend. So in the local in not only the product dimension, but now in the localizations dimension, we've actually gone beyond what we ever had before in our cloud apps, our what we had in our on premise apps with our cloud apps. In EPM, we've now completed that portfolio. So we've always had budgeting, planning, consolidations, but now we've added profitability and cost management, tax reporting, planning and automatic reconciliation.
So once again, if you compare either E Business Suite or PeopleSoft or Hyperion and you just look at the features those traditionally had on premise, we've substantially surpassed that going forward just on an apples to apples. And then when you add things like adaptive intelligence, more mobile, more BI, it's a substantially more compelling offering for our company and the customers. And you see that with customers again big and small, the example here being Qualcomm, a very large long time customer of ours who've moved their platform and we see this again big customers, small customers, public sector, global, local, etcetera. Then I talked a little about the importance of the depth. And let me use this first slide as an example.
When you compare SaaS applications versus our closest ERP competitor, which is typically SAP and the speed, still today, the vast majority of the SAP applications are in the on premise or R3 mode, which are in this 3, 5, 7, 10 year at best upgrade cycles. So regardless of what they're saying in terms of speed of innovation, their ability for their customers to adopt that is tremendously handicapped. So if you're in a 5 year even given credit for a 5 year update cycle, impossible to do things like get blockchain technology or IoT technology, which were never introduced going forward. The next thing that the breadth allows us to do is, as customers like Qualcomm implement the core of our ERP solution, core financials GLAPAR, it also enables the ability to further expand our portfolio and solution within those customer base to come back after that initial success and add components to the picture. The next point I'll cover is our supply chain management.
And supply chain is probably the best area illustrated of not only the speed, but now the completeness of solutions. So if you go back to your slides of what we presented at this same forum, 2012, we had supply chain, but it was really around the financial parts of supply chain, procurement, inventory, costing. 2013 2014, we started to add components that you could surround your manufacturing base with product lifecycle management, transportation, product development. 2015 2016, we really got to the core of manufacturing, manufacturing, order management, pricing, configure price quote, that a manufacturer could go live with our solution. And now at this conference, we've introduced 8 new products, which just gives us full complete suite, maintenance, warehouse management, quality, service, you could read the rest.
And the result of that is we've gone from service companies moving to our ERP cloud to now core manufacturing customers like NCR, who the heart of their business is manufacturing, moving their business to the complete ERP cloud, including now supply chain and manufacturing. And this includes both large traditional customers of Oracle like NCR, but also net new customers like Carbon Ink, the 3 d printer just down the road who started their journey with their 1st ERP system moving to our ERP cloud inclusive of the manufacturing and that's really the heart of their business. Next, let's move on to HCM. So, with HCM, it's very similar to financials where we have the complete set of what you traditionally think core HR, benefits, payroll, time and labor, etcetera on the SKUs. But we've added substantial new features that surround that, sourcing and recruiting, including the machine learning recruiting that I talked about in my example earlier, governance risk and compliance for segregation of duties, a volunteering app, so that when companies have donation matching type of programs, you can register your program, you can track donation management and you can track volunteering or encourage volunteering, which more companies are doing these days as their workforce shifts.
Employee health and safety, not only wellness programs incorporated into HR, but also disaster preparedness and disaster recovery or reaction to it to have your HR group be able to find employees when events happen and you need to track down where people are. And then modernizing some older products like learning management, which used to be training, which many of you go through whatever manager training or compliance training you have to, but now supplementing that old kind of next next answer question training with video training, the way a modern person learns a YouTube style including social to recommend videos, record videos and have that pervasively throughout the system. And once again, very similar to the finance case, 100 if not 1000 of customers now moving to the platform, big, small, global and otherwise, companies like AXA, who really implemented global, they started across Asia, but now taking their whole entire set of applications that were in PeopleSoft and move those over to our HCM Cloud. And in that example, reducing their employee new hire employee timing for training from 3 weeks to less than 2 days. And once again, when you look at the completeness of Suite and the breadth of Suite, really 2 dimensions stand out here versus our primary competitor in Workday and why we're selected.
The first is we have a clear and demonstrable advantage when there's HR and financials in the picture. And you saw in the video, which preceded me, there's at least 35 examples in the Oracle use case, 35, where there are integration touch points between HR and Financials and this unified platform becomes critical. But even if you ignore that fact, within core HR, we have a substantial lead on the depth and the breadth of products and the number of products. So when you look at things like learning management, when you look at things like recruiting, when you look at things like employee wellness and benefits, substantial advantage as far as the depth and the breadth of those products when we win on a daily basis versus Workday. Next, let me move to CX, and CX being our customer experience, so really sales service marketing.
And the trend we're seeing in the market here is that the lines are being blurred more and more every day, particularly through consumer demand on what's a sales opportunity, a service opportunity in marketing and especially getting blended with social. So, it's reasonably common these days to have your support experience with a 3rd party or supplier of yours personally to happen actually through a social network. If you want to get a fast response to those who are going home today or tomorrow, you want to get the fastest response from your airline, I would not call their 800 number, I would immediately go to their Twitter account. That is where you'll get faster response going forward and that is commonplace. What that happens is then you have a now a multi channel service organization that's not just a call center or a listening center, but a listening center, but actually a monitoring center of social.
But also the side effect of that is now brands are engaging with direct consumers subsequent to that service engagement for more marketing, because they now have a one to one relationship with you through that service engagement and they use that either directly or indirectly for marketing. Or if you're a B2B company, they feed that engagement directly into a direct sales or becomes part of Salesforce automation. And the term you will probably hear customers talking about is moving towards a much more digital transformation or digital transforming themselves. And what really that means is changing their entire buy side experience from customers, sales, service, marketing in a much more integrated approach and a much more digital approach, including social and working more one to 1 with you to consumers. Another term you may hear companies talk about that's reflective of this is traditional B2B companies trying to get closer in touch with their consumers directly and becoming B2B2C companies.
So, Pirelli, for example, spoke on our behalf at this conference. And they talked about how, yes, they do business with dealers and they're still going to do business with dealers like they're B2B. But they also want to have direct contact with the end customers who are buying from those dealers. And they're using this digital transformation as a way to enable that. Another example being Mazda, 20% faster resolution time in terms of their service requests using our CX platform and then incorporating that into their marketing channel as well because they now have closer tighter relationships with their customers.
When you compare this against our traditional SaaS competitor with Salesforce, first off, take everything I talked about before CX off the table. They have no ERP, no HCM to speak of at all. And important in the ERP, realize what that means is, when you need a 3 60 degree view of the customer, but you do not have order management, so you actually don't know what the customer has bought or what they have paid for or what they owe. It is impossible to have a 360 degree view of the customer. So don't think of CRM, well, that's what all you need for the customer.
ERP is a pretty critical part of it, we believe. But then when you drill down in the individual components, both the depth and the breadth of the integration for our Marketing Cloud, CPQ for Configure Price Quote, Commerce Cloud that's online service. And when you add to that the data cloud, which supplements these in the examples I gave up before, substantially more depth and breadth than Salesforce. And when you look at an integrated solution, that's really where we come into play and really where we win customers who want to transform digitally. And the last part I'll cover is the data cloud.
Sorry, I know I'm going fast, but I almost got a couple of minutes left. Okay. So with the data cloud, first an explanation for what it is. So with the data cloud, these are advancements we made this year, getting more audience information from channels like Snapchat and Pinterest. But what it is, is over 4,000,000,000 user digital profiles.
So that means we track your cookie activity be it on your laptop, on your home computer, on your mobile device, through your Twitter account, through your Facebook account. We also have other data, real world transaction data from credit card companies and other partners of ours. And we create what's essential what's called an ID graph, so that we with high likelihood understand not your name or any of your PII information, but on your digital profile when you use one of those things, a laptop or a phone or a tablet or a credit card or a Twitter device or Twitter handle, there's a connection that we know that that person is the same person. So when you interact with a brand digitally and you may start a transaction through one channel or you may just browse their website, we can have a better ability to advertise to you or to give you better offers through the other channels by utilization of the data cloud. And these 4,000,000,000 profiles are by far the largest set of digital profiles used by marketers today.
And really the customer base here is a who's who of brand and brand advertisers. And we see examples like this all the time with Lowe's getting a 29 times return on investment in terms of improving their marketing and their digital targeted marketing by leveraging the data cloud underneath their go to market platforms. And the last part I'll just say is all of this, the SaaS application improvements, the customer adoption, we've also changed and frankly introduced a lot of roles that didn't exist at Oracle before to be customer focused. When we are now running our customers' business as part of our cloud, that's what we are doing. We are running our business.
We are much more intimate partners with our customer. And we've introduced brand new roles like customer success managers, implementation success managers, customer feedback programs. So because when the customer gets the software now, really we are incented and we work with customers to get live and get successful. And I think that's what you've seen with the results going forward. And there's examples like Customer Connect, which is an online forum that we allow our customers really as kind of a social network to engage not only directly with our product managers, but with each other.
We have over 2 we have 2 events a week. These are product managers giving updates on new features, new functions or customers presenting to us and other customers on innovative ways they're using the applications. And we've grown that to now over 25,000 company members. And you'll see this reflected in quotes from our customers, not just the benefits we're seeing, but like Siemens says, I can see the transformation in Oracle from a product company to a service company or Kaiser, who we're working in tight partnership with that our customers are starting to see those results from the benefits of the product they're using, but also in partners with us so that we are ensuring their success going forward.
10 years ago, when cloud infrastructure was really getting started, no one knew where it would go. It was really kind of
a big open free for all. When we
think about building a new cloud, there's some
things that fundamentally we think that enterprises need that they don't have today. What we're talking about is best of class performance and fundamentally different ways in which we're building virtualization and building a software defined data center. When you've run BigCloud before, you quickly realize
that the network is the platform.
Typically, people are used to plugging things into a single rack. What we've done with the physical network is take that rack level performance and we've blown it out to where the entire availability domain gets that same level
of performance. So it's always possible to satisfy a request from bandwidth going from point A to point B on this core fabric. When you are interacting with your storage system, let's say, from a compute node, the performance is going to have the same characteristic. So very, very low latency, phenomenal bandwidth. Then the second element of this, we've got a great physical network, was that we decided to do off box virtualization.
If you think about the way that every other cloud provider operates, they have to perform incredibly complex logic around management, around billing, around provisioning,
around
networking, around compute, around storage, all on the same host where your application runs. What's very, very interesting and different about what we're doing with bare metal cloud services is that we give you physical machine, and we don't have any software running on it.
So I think that was truly one of the core choices that give us, I think, a very differentiated and and a very effective foundation on which to build. Another important area of investment for us is the way that we manage governance. So instead of having to have multiple accounts that are very, very difficult to control, we can have a singular relationship with Orca from a billing standpoint, from a pricing plan standpoint, etcetera, and yet let you internally regulate how your own user, your own project use a cloud resource and they benefit from the full cloud experience in terms of very low friction provisioning within the limits that you've set.
It really is first in the industry, having all the benefits of the cloud, all the benefits of bare metal. So we see large mission critical applications coming over and getting drastically better performance and drastically better assurances about security than they're getting anywhere else. I cannot beat that.
Good morning. Can you all hear me okay in the back? Thank you for coming. I'm going to briefly talk about what we're doing with our cloud infrastructure and platform as well as give you a glimpse of where we're building our software for the next 8 to 10 years, okay? So whenever we build our software, we're working on it in 2 time dimensions.
What you see with the Oracle Cloud, infrastructure, platform, Software and Data as a Service. The engineering for that started in 2,007, so over 10 years ago, okay? I'll talk about today new things we're enabling with our cloud. I will also talk about briefly a glimpse of some of the new areas that we've been working on for the last 3 years that we think will represent very important areas of growth and innovation for Oracle from the area of applying artificial intelligence to systems to drive autonomous computing, the areas around new forms of human interface and how people interact with systems different ways going forward, sensor driven computing and how it can make business processes more efficient, blockchain. And I'll talk about those to give you a sense of these areas we've been working on for the last 3 to 4 years.
You're seeing the first introduction of capability at this open world, but they have they portend where we will see major capability over the next 5 to 8 years, okay? So I'm going to start with cloud infrastructure. We're building cloud infrastructure on 2 important dimensions. First is the workloads that we see are necessary and the scale of infrastructure that's necessary. And so if you look, when you went from PCs to mobile devices, the volume of devices grew substantially.
As devices get instrumented with sensors, we believe the volume of devices grow by another order of magnitude. Today, we manage over 20 exabytes of data in the cloud over the next 5 years, and an exabyte is 1,000 petabytes. We think you will need to manage an order of magnitude more, meaning thousands of exabytes. And when you have that volume of data, humans have a hard time processing it. And so increasingly, the data will be processed by algorithms or AI based systems.
And we think that the mix of workloads that require those kinds of algorithms will increase substantially, Okay. So at the heart of it, what we're building is very high scale, very high performant, radically different architecture data centers to enable this. So if you look at a data center, you saw a brief video of it. What we've done is built a gigantic flat network to which we attach compute of various kinds and storage of various kinds. They're attached in what's called a leaf spine design so that as the number of these compute nodes grow and grow, the bandwidth between different compute and storage nodes remain 100% the same, even as we attach more and more computers to it.
So it's a giant flat physical substrate. If you look at Frankfurt, where we opened a data center region just yesterday, there are 9,000,000 ports, okay? And these are not gigabyte Ethernet, these are 25 gigabit Ethernet ports. So the amount of traffic that, that data center supports and the amount of compute that you can attach to it is very significant. Now for a customer, we take that giant flat physical substrate and allow the customer to come in through a graphical user interface or through an API and carve up a software defined fully private virtual data center.
So what do you do? You come in and set up an account. You then map the users you're giving privileges to, to create the data center. You define a virtual network. You define subnets.
You attach compute of various flavors. You attach storage of various flavors. You can set up load balancing in software. You can set up firewalls in software. You can do DNS in software and there's a whole bunch of additional services, okay?
Now what we introduced in OpenWorld were 5 new big announcements: the fastest compute servers in the industry, the fastest GPUs in the industry to run AI and machine learning algorithms, the fastest elastic block storage, all flash elastic block storage in the industry, the 1st cloud to provide in any cloud provider 25 gigabit Ethernet networking directly to the host. So our computers have dual NIC 25 gigabit Ethernet interfaces. So in and out, you can do 50 gigabits of Ethernet. The average computer in a public cloud data center runs 1 single network interface card running 1 gigabit Ethernet. It's about 50 times more bandwidth down.
And for big data and various kinds of workloads, that's very important. We've also integrated the highest scale elastic DNS service. We're measuring DNS traffic from 300 edge locations globally. We 40,000,000,000 data points every day, and we optimize the traffic, and we have very, very low latency query times in DNS. So why that's important is if you get a DDoS attack on your site, you can push out the traffic globally and distribute it, which ensures that your site doesn't come down.
If your North American data center goes down and you want to route traffic somewhere else, you can route very, very efficiently. So you may wonder why is performance such a big deal. So in an on premise world, when you bought a machine, you had the machine. And if it was fast or slow, it didn't really matter once you bought it. In the cloud world, the faster the machine, the less time you need to complete a computational job.
The faster the machine, the fewer processors you need to run a job. And so speed is inversely proportional to cost. And here at OpenWorld, we announced 3 new benchmarks. SPECINT has nothing to do with Oracle software. This is a straight industry benchmark to see how fast compute is.
You can see our numbers. Smaller in these charts mean better. TensorFlow is the industry standard AI algorithm. This is the industry standard ImageNet TensorFlow benchmark for AI. You can see our numbers.
Again, smaller is better. And this is an industry standard IOPS benchmark to see how fast you can run a workload. Just to be clear, the expensive thing in everything is not compute. Okay? So when we say 4x faster, it means 4x less compute.
And people say, well, compute is $0.75 an hour. So that's $3.80 an hour. It's not really that. It's the cost of the software licenses that run on top of it that dominate the cost. So if you took a system that runs 4x faster and it requires 4x less processes as a result to run the same computation, you are saving 4 times on all of the software licenses and maintenance you pay on top of it.
So the computational comparison on cost is not just on IaaS cost savings, but on all the software license and maintenance you're paying on top of it. Now what's the value prop with IS? This is a typical customer workload. Cost is in cents per core of compute per hour. On premise, people pay $0.025 roughly for facilities, something like $0.10 approximately for hardware.
It depends. If you got an incredibly old machine that's fully depreciated, you may be but on average, because most companies have a mixture of new and old. You pay for software licenses, mostly operating system and virtualization and on top of that ongoing cost of maintenance. What IaaS does is it takes the bottom three pieces and it delivers it as a service. And then it takes the top piece, which is maintenance for people and reduces that because you need fewer people.
They are more highly paid. They're called DevOps people as opposed to IT administrators. So you don't save all of that money, but you will save significantly relative to running a system on your floor. If you look at Oracle's economics, we had virtually nothing on the left side of that picture. The OSs were owned by other people.
Facilities, we were never in the Facilities business. We were never most people were running Intel from Dell or HP or somebody else. And so every time somebody chooses our IS, we make money, okay? Now to differentiate us competitively, fastest and cheapest, That's relatively easy to say, right? If you cost the same amount and you go 2x or 3x as fast, you save a lot of money.
And I said it's not just on the IaaS that you're saving. It's on the hardware above on the software licenses above the IaaS that you have enormous savings. Best reliability and high availability. There's enormous number of differentiators we have in how resilient you can run a system. So here's an example.
There's a number of ISVs that have done press releases at Oracle Open World, SAP, FICO, CALYPSO, Manhattan Associates, Informatica, MapR, QBO, etcetera, running on our cloud. And one of them is a company called Calypso Software. They're a company that sits and that provides the software that does risk management and financial trading for many, many, many of the largest funds in the world. They started a project with us last year. They actually met us at OpenWorld, started a project with us.
They chose us over every other cloud. They went live in January. 70% of the North American business that they have runs on the Oracle Cloud. They manage over $3,800,000,000,000 of assets on the Oracle Cloud. And they chose us because of the mission critical nature of the application and the degree of reliability and availability we provide.
Deployment flexibility. If you're a company in an industry where you're regulated, take AT and T, if you're a company in a country where you cannot put data outside the country's boundaries, take Banco Di Chile, If you're an organization that has patient data or highly sensitive data, take Glint, which is the largest hospitals management system in Western Europe. They all have the choice of running Oracle's infrastructure and platform behind their firewall and clouded customer. No one offers this capability. We have over 200 customers with over 70 life using this.
So there are even in an area like infrastructure, which people believe is commoditized, there are fundamental differences in what we're doing versus the competition. Let's look at platform. So if you look at our platform as a service vision, it is very different than what other companies look at with platform. It started with a fundamental realization in 2,008 that platforms were not managed efficiently at all, okay? So if you look at it, people install our software.
They configure it. They back it up. They patch it. They upgrade it. They set up disaster recovery.
They encrypt it. They monitor it. They do change management on it. Not only is it extremely laborious, it is extremely inconsistently done. And as a result of it, you find a lot of problems.
So our vision for platform as a service is very simple. Eliminate all human labor, 100% of human labor in monitoring, in configuring, in administering our software. And do it not by us hiring an army of cheap DBAs, but do it by having the software do it. And in doing that, we can fundamentally lower the cost of owning and operating our software at a very radically different price point than anyone else can offer. Not only does it lower the cost for people, but it makes operations run way more reliably.
This platform vision allows us to build 8 big areas of capability on top of the infrastructure as a service that I talked about. Today, in the interest of time, I'm going to focus on just 3 of them: data management, application development and analytics. So if you look at data management as a service, we run the world's best database, Oracle, better than anybody else. We also run a number of other databases. We have the fastest MySQL and MySQL clusters in the world.
We offer Cassandra as a service. We offer HBase. We offer a number of other data management solutions for customers to manage structured and unstructured data at very large scale. If you look at what we're doing with the Oracle database, the major thing that we introduced to open world was a fully autonomous database. Think about running a data warehouse.
It is a very complex thing to run a data warehouse well. Are very few DBAs who know how to administer data warehouse well. You have to decide which of 300 types of indexes to create and manage. You have to decide what your partition allocation mechanism is. You have to decide how much to let data age out and rotate partitions out.
You have to decide how efficient parallel query is running. You have to decide how much allocation of memory to do because different nodes need more memory depending on the mix between read and write. As a result of it, if you're a line of business user, you don't get your own data mart. Now for 6 years, we've been working on providing capability in Oracle database to make it fully self managing. When I say fully self managing, no human at all required.
You load your data, you query it. Who creates the index structures for you? We do. Our software does it because we know every query that's happening on the system and what's the best way to optimize it. Who handles capacity addition?
We do because we know how to do it better than anybody else. Our software fundamentally knows where we need to add storage and how do we optimize or defragment the storage underneath the database and reallocate it. We're doing the same thing for transaction processing. I'll give you an example for transaction processing. For 17 years, we've been studying database health.
There are 2 kinds of failure conditions: performance degradation and crashes. Performance degradations happen very incrementally. You can see them trending bad. And unless a human tries to adjust it and makes a mistake, you have enough time to go optimize things. Health, on the other hand, the median time between your healthy and your down is 4.2 seconds.
Even if the software instantly discovers it and alerts the DBA, there's not enough time for a human to come online and resolve the issue. So in a fully autonomous world, our software takes care of it. We know that the system is not healthy and we'll resolve it and we will ensure that your system doesn't crash as a result. So these fully autonomous systems do 3 important things for us: dramatically lower the cost for customers, broaden our reach into many parts of the organization that would love to use our technology, but don't have the skills to do it because it's now so much simpler. And 3rd, dramatically improve the reliability and consistency in the way our software runs.
How do you build applications against this? We support 5 styles of application development, recognizing the mixture of capability that customers want in their own organizations. Migrate and extend is lift and shift legacy applications. I've got an application that's written 22 years ago. I need to shut down my data center.
You can lift and shift it into the cloud. An example of what we do differently there, we offer bare metal as a standard environment. Many legacy applications are written before virtualization. They have a hard time running inside a hypervisor. In our world, you can lift it clean up to the cloud because you got a raw physical server to deploy it on.
Cloud native is using a PaaS layer to spin up workloads. Container native, we introduced it here at this conference. We've had it for a while, but we introduced it formally at this conference. There's a technology called Docker and Kubernetes that's becoming very popular for people building something called microservices. We have a fully managed platform.
You don't have to you simply tell us how many how big a cluster of Docker nodes you need and spin up that using Kubernetes. You don't have to deal with managing it. We offer that. Serverless is another thing that we introduced here at OpenWorld and at Java 1. That's for developers who just want to write functions.
They just want to write their code and they're like, frankly, we don't care what infrastructure you deploy it on, scale it out for me. I want to write what's called a reactive program that listens to events, adds capacity on the fly, humanity infrastructure for me. And then visual development is for those who are truly non technical and want to drag and drop and assemble applications. So we support all of these, which means we are able to reach a very broad community of developers. We've also integrated this into open source tools to do what's called continuous integration and continuous delivery or, as some people call it, DevOps.
You check-in code, you check into source control, you can kick off a build and test, you'll get a notification if you're a developer on your Slack channel that the build is ready. You call Kubernetes, that will spin up a Docker cluster. You can deploy your executable as a Docker image and up and running. And we've got an extremely clean way of supporting all of these different styles of application in one continuous integration, continuous deployment pipeline. Who's using this as an example?
Banco Santander want to take their banking services and make them available to, let's call it, millennials who want to bank but don't want to use an app. They want to message with the bank from SMS. They built a mobile banking solution with what's called a digital assistant or a bot front ending their core banking. AXA Insurance moved their claims management, something called AXA Direct, onto our app dev platform to deliver claims management directly on the web. So you don't have to fill out paper and forms if you've had an accident or whatever it is you've had and you're managing your claims.
Back office, you're worried about who in the back office doing this. BAE is one of the largest aircraft maintenance companies. Their entire maintenance, workforce scheduling for maintenance, repair, that entire system runs on our application development platform. So I said, if why are we taking this focus in autonomous computing? It's because of this chart.
So if you look at a typical customer running any system, Oracle is one example, Facilities cost, hardware cost, software operating system is a small percentage of the total, okay, the Oracle license. And then the biggest cost is the cost of people. Typically, there are 6 sets of people: storage admin, network admin, sysadmin, sysdba, appsdba, securityadmin. With the autonomous solutions that we're building, you don't need almost all of that. So you save dramatically in cost off the top line, not off the infrastructure pieces, not off the facilities hardware and software, but off the total run and manage.
And this number that I've got in front of you is actually from a customer who spoke at OpenWorld. Performance is still important even in platform. And you can see our results that Mr. Ellison shared in his keynote on Sunday. We're slightly faster than the competition running any other database, And we're also substantially faster running Oracle.
So when you look at our platform, the areas that we have fundamental differentiators, a unified platform. So just to give you a sense, between infrastructure and platform, since last OpenWorld, we've introduced 98 new services, 98 new services, okay? So there's a lot of new innovation, but it's on one architecture, one architecture. It's not on a plethora of architectures, fully autonomous. I think a long time ago when we started, people said, is PaaS just an image of your software that you can configure on top of IaaS?
That was never our vision. Our vision was always to eliminate the need for skilled people to operate our software. And by doing that, to dramatically lower the cost, broaden our reach and differentiate from the competition. Now how easy do you think it is somebody else to build an autonomous database or somebody else to build an autonomous Oracle database? Imposs I mean, they'd have to go back 17 years and observe everything we observe for 17 years.
They'd have to go back in time in order to understand what conditions we see and to build the algorithms because the algorithms that we use are extraordinarily specific in order to ensure that, for example, we're not doing any false positives, right? Like take health, you don't want to kill the patient if the patient is not sick. So you have to be very accurate in detecting if the database is having a problem or not because if you over correct, you're going to mess up the system. Now that only comes from learning for the last 16 to 17 years what makes it healthy or not. Obviously, we have a lot of customers who use our platform to extend application software as a service.
And then there are other differentiators as well. So with that, I've got 2 more sections. Can does it make sense to stop and take a few questions now or hold till the end? We'll take a couple of questions now to break up the session, and then we'll come back and talk about our vision for analytics and the other pieces. Yes, please.
Hi, Thomas. It's John DiFucci from Jefferies. The slide you put up was really interesting with the numbers. And thank you for that.
Do you
want to go back to that?
Yes, that would be great.
Could you
go back to that?
One more? No, I think back to the I think you talked about the green, red and blue one, right?
Yes, the
color blind, but yes. Okay, yes.
On the left though, that Oracle license, when you're comparing these costs here, that Oracle license cost isn't spread out over the lifetime of the customer. It's like the upfront cost. So I just want to make sure I'm looking at it.
It's the license and maintenance together, blended. And we did it over averaged over 5 years.
Average over 5 years. Yes. Okay. So, but even if you were to take if I said your customer was 20 years and you took the average, that would be reduced and it would still be higher. Okay.
Yes.
I just want to make sure of that.
Yes. Thank you very much.
Yes. Hi, Thomas. Michael Turits from Raymond James. Can you talk a little bit about the mix of both demand and how you're approaching it between hybrid cloud and pure public cloud and also managed cloud with your at customer and Oracle Cloud Machine?
Sure. We so just to be clear, I'll cover what we're seeing as a mix between hybrid, which is defined as at customer and public multi cloud, which I'll explain in a minute what we do there. And then so currently, our mix is about 20%, 15% to 20% clouded customer, 80% public, meaning public is in our data centers. In terms of we also have a number of offerings that are multi cloud, okay? When I say multi cloud, multi cloud is you're using TEG security as a service and you say, hey, every cloud vendor says use me for identity management, use me for system management.
So we've got 6 offerings in our cloud that run across a variety of other clouds as well. And when I say other cloud, Salesforce, Office 365, Azure, Amazon, Google, Rackspace, pick your favorite. So if you map your users from on premise and you say, I want one place to manage the user identities in the cloud, I don't want to have an Oracle identity and an Azure identity and a Google identity and an AWS identity, you can use us as an identity system. If you have services that you've deployed in other clouds and you want one place to manage it, you can use us to manage that. If you've got a salesforce.com application that you want to integrate with somebody else's and you want an integration bus to connect the 2, you can use us for integration.
So multi cloud deployments, we're seeing about 15% of our base doing that. And we were the earliest in a long time ago, we recognized that most large companies will have multiple clouds. And so we built 5 or 6 different services that span this environment. Did I answer your question? Okay.
One last one or keep going.
Hey, Thomas, Murphy with JPMorgan. How do you keep this huge global community of Oracle DBAs fully engaged and fully in your corner while you're announcing the driverless database? Because if you're the driver that's becoming driverless, it
might not be
the most kind of uplifting realization for them. But can you find some other way maybe to appeal to the business owner?
Of course. Well, the DBAs, I'll be frank, this is the same question we've addressed for many, many years, right? And I'll let me explain myself. Prior to 'eight and prior to introduction of real application clusters, you couldn't really run a very large database because the size of the database was one machine. And so people said, when people have hundreds and hundreds of little databases, aren't you going to take away the capability from the DBA by consolidating the larger databases?
And we said it's better for the DBA to have fewer larger databases than lots of little ones. Most DBAs loved when we came out with technology like clusters because it gave them the ability to run a much more efficient infrastructure. So there will always be work for the DBA to do and in fact work that they far better enjoy than they do today. Look, no one wakes up on a Monday morning, no DBA on earth has woken up on a Monday morning and said, I am so excited today because I'm going to patch Oracle all day. Not a single person.
We've tried to find that person, believe me. So when we do the work for them that they don't want to do, they have a lot more important things they can do. So take an example. One of the things a lot of DBS would like to do is to look at if somebody is looking at data inside the database they're not authorized to see. And I'm not talking about some rogue attacker from outside the company.
A lot of the vulnerabilities happen now within the company. And you want to spend time analyzing the query patterns on data based on user behavior to see are people able are people looking at data they're not supposed to see. But those tools, the average DBA never gets time to do that because they're so busy with day to day stuff that they never get to do that. So we're not talking about not needing DBAs. We're talking about making them do other things that are far more valuable for a business than mundane things like patching, okay?
Let me go forward. There are 2 more sections. I want to talk briefly about analytics and then what we're doing with new technologies. What's our vision for analytics? So if you look at analytics, for the last 30 years, it has been what's on the left side.
People look at numbers. They take those numbers, aggregate them in a set of charts. They make professional user do that analysis. And then those people then derive insight from it and tell the rest of the world, this is what it is. Now many, many things have changed, and we have introduced over the last 4 to 5 years a new suite for analysis.
It is predicated on the very basic principle, analyze any data. So not just numbers, images, sounds, audio, video, sensor data, textual data, Twitter streams, anything. Present it not just as charts, but for example, you can say monitor revenue in the Northeast for me, leave that with a digital assistant. That will run the analysis for you and monitor what data is changing. It can send you an SMS if that KPI changes, and it can leave you a voicemail telling you why it changed.
So that's a very different experience with analytics than having a human being sit in front of a chart and run a report every day. 3rd, it is designed to make things extremely easy so that anybody can do the analysis, okay? And when I said anybody can do the analysis, you bring up data in an interface, you say I want to mix revenue and product. Now underneath the covers, we're creating an aggregation mechanism called a queue in order to allow you to summarize revenue by product. Underneath the covers, we're generating what's called an MDX query on a MOLAP cube.
Humans don't need to know that. We're simplifying that because we know what analysis you're trying to do. So that broadens our reach with analysis to everyone in the company, not the 10% of the company that were power analysts, but the 100% of the people who want data. We've introduced a brand new suite. You're welcome to look at Forrester Research, for example, that just came out with their latest cloud BI vendor comparison.
We are the winner and we're the only one in the leader segment. Now if you look at it, numbers, images, audio, video, various kinds of data can be replicated into our cloud. You process them, you summarize it and visualize it. And our goal is to offer an end to end platform. So, the heart of it comes down to 2 pieces, okay?
When you move data in, you can spin up a scalable HadoopSpark cluster, you can stream in data through something called eventing, and then you do these 5 things. Imagine you've got images from Instagram of athletes and you want to compare how many mentions that a particular athlete's had, you want to actually first understand how many pictures people posted of a particular athlete, you need to do what's called entity extraction. Just process the image, extract the entity, say, I know that this is a picture of, pick your favorite athlete. Then you want to clean the data, you want to enrich it with data from your corporate systems, and you want to blend it with data from other sources. And then most importantly, we are processing a very large volume of data, you will not have a human be able to understand all of it.
We have algorithms that are custom built to allow you to do statistical processing as well as AI on this data. The output of that data can be put into our autonomous data warehouse if you want to compare it with other data from your corporate systems or it can be processed, okay? So you can model it in our analytic tool, you can visualize it, as I said, in a variety of ways. We're not saying charts don't make sense. But if you think of the human interface, right, people have 5 senses.
All computers are restricted to 2, your eyes and your fingers, fingers to enter stuff in a keyboard and your eyes to see stuff. Now we believe you should use all your 5 senses. So we're going to send you data on voice. You can say, here is why a particular number changed, not just here is what the number is, but also why it changed, because the system understands the patterns of the data. So our goal with this is any data, any source, anyone can do analysis and the system will monitor your business for you and tell you what changed and why it changed.
The why it changed is really important. So what's our competitive differentiators? All forms of data for analysis. Every form of data. End to end solution, not just a warehouse, not just an analytic tool, but an end to end data pipeline.
No one offers a full data pipeline. Ingest it, stream the data, cleanse it, process it, aggregate it, model it, visualize it. If you use someone else's, you got to assemble all these pieces from 15 different tools. And then most importantly, why we were chosen as the winner in that Forrester review was self-service. All analysis should be enabled for everybody without waiting on anyone.
Who are using this? I'll give you a couple of examples. Yum! Brands, they use us to allow a hotel manager or a restaurant manager to be able to look at what products in the restaurant sold, how successfully at the end of every day, at the end of every day. Now their challenges are following.
They could take all that data from that store or restaurant, ship it up to their corporate data warehouse, standardize the data in the warehouse, and 3 weeks later, they could get the restaurant manager to see the data. They wanted it the same day. 2nd choice, put a server with a database in every restaurant next to the boiling furnace in which you're cooking fried chicken. It's typically a bad idea. What they did was load your data, run your analysis in the cloud, 1500 restaurants get their analysis every day from our cloud.
The U. K. National Health Service, what an idea of how good customer satisfaction for their patients were. Wait time, average time to schedule an appointment, which specializations needed more staff, etcetera. They get their analysis from our analytics cloud.
So this is an area where most people look at Oracle and think, when you guys say analysis, you mean numbers with charts? Absolutely not. And this has been a significant growth area for us over the last several years. Emerging technology. So Steve talked about a number of this, but what I'm going to do is just give you a glimpse of why Oracle is uniquely positioned in these areas.
Okay, so the first one is evolution of business applications. If you looked at business applications in the past, you saw 3 things: a professional user, like an order management clerk, a supply chain expert, go to a screen called a form, enter some data, it kicked off a workflow that then ran a rules engine called a constraints engine that said, hey, this order should be shipped from that warehouse because we don't have it stocked in this warehouse and that's the nearest one. That's what applications used to be. That's not where we see applications going to be, Okay. So where do we see applications going?
Professional users to self-service. All business processes will go self-service, 100% of them. Everything, accounting, ordering, HR, supply chain, manufacturing, everything. When you make that self-service, business rules that are encoded inside the application will be replaced by algorithms called AI based algorithms in many cases. Let's take a very simple example of why we believe that will be true.
All of you do approvals and workflow, yes? And if you look at the average company, for every 100 approvals, 99 are approved, 1 is rejected. So the average human is looking at 99 approvals to find the one that they will reject. Now why can't a rules based system capture that? A rules based system cannot capture that because people are idiosyncratic.
You take 2 different people, same list of approvals, they will reject different things. And so you cannot write a rules based system to capture
every human and what
they're likely to do. Learning system can look at your particular set of rejections and over time flag just the one that you're going to reject. So AI to us will replace rules as a centerpiece of all of these calculations. So I'll give you three examples of things we're doing. Okay.
1st, we built an artificial intelligence machine learning platform as a service. That's part of our PaaS, okay? You can run any algorithm you want on it. We have built our own unique, extremely domain specific algorithms for our apps. So ERP, HR, CRM, Examples.
In ERP, identifying what's a fraudulent transaction in procurement, okay? Fraudulent transaction in procurement is I've got a kickback scheme going on between a supplier and one of my procurement people. You could write a set of rules, which used to be called governance, risk and compliance controls. But as you know, the smart ones always know how to get around the rules. Algorithms can find fraudulent transactions way better than any rules based system.
Pricing, what's the best price to offer somebody when they place an order? What's the best job to offer a recruit? There's 100 of these examples. Now what are we uniquely positioned at? To do it well in the applications, you need a platform that provides great scale and power to run AI.
I talked about our GPU facilities and Infrastructure as a Service and our PaaS for AI. So we're the only ones who combine applications and platform. And in this space, that gives us an advantage. How domain specific are these algorithms? They're not at all like what you hear about the consumer companies working on.
Let me explain why with one simple example. If you're looking at pictures on your favorite photo site and the search is using an AI algorithm and you enter find Steve Miranda in a park, and it picks out a set of pictures. Whether you think it's Steve Miranda or not is an orthogonal question. You really don't need to guarantee how the algorithm found it was Steve Miranda in the park. However, imagine you're in procurement and a transaction gets flagged by the engine saying this is a fraudulent transaction.
As part of your, let's call it, discovery process, you will want auditability on that algorithm to know how did that algorithm find that problem. Now that is an extremely hard problem in AI. It's called traceability. And we have we are working on solving that. So this is a very different space than consumer algorithms in terms of how domain specific they are.
And because we have a lot of history there and we understand the domain, we obviously know how to build a bunch of these algorithms. Blockchain, similar example. We offer a blockchain platform as a service that lets you build a blockchain. It lets you build smart contracts, it lets you build a hyper ledger, it handles the distributed nodes, it allows you to do all of that. But on top of that, we offer in the applications themselves capability that lets you leverage a blockchain without having you have to do a lot of work.
So let's give a simple example. Intercompany accounting, intercompany accounting is 2 different business units in
a single
company reconciling a transaction, okay? Often, the controllers of the 2 divisions argue over what's the real financial allocation of that transaction, what price was the intercompany charge between this business unit and another. Now with the Hyperledger in blockchain, that becomes irrelevant because whenever that transaction is executed, you can guarantee the integrity of the audit trail of that transaction. And therefore, you don't have this intercompany problem to deal with because all of those are calculated in the Hyperledger and tracked in the Hyperledger. So we're going to apply it to a number of domains.
And again, if you're an applications company, you need to have a platform allowing you to do blockchain. If you're a platform company and you want blockchain adapted in a bunch of these scenarios, having an apps offering helps you. Same thing with IoT. We offer an IoT platform as a service as well as applications. People use both.
If you're in Japan and you travel in SoftBank's ride sharing service in Tokyo, it is monitored and the fleet is optimized using our IoT service. We're monitoring all of the little cars that are driving around, and we're optimizing where they're going. If you're in industrial manufacturing and you're a manufacturer called Noble Plastics, one of the largest manufacturers in the world, We monitor their industrial robots in the shop floor and do predictive maintenance and failure detection using our IoT supply chain apps. So we offer both the platform and apps. To do AI well, you have to have data because garbage data fed to an algorithm, I'll guarantee you, will give you back a bad result.
And so we started on this data cloud back a long time ago, in 2013. And most people ask us why would you be building a data cloud because we always knew that applications eventually would have rules replaced by algorithms and algorithms needed incredibly accurate data in order to work well. So in this area of emerging technology, it's very simple our differentiation. In artificial intelligence, we have incredibly domain specific knowledge that allows us to build algorithms for specific domains because we've had a long history in those application domains. We complement that with the largest, highest quality data in the data cloud.
For domains like blockchain and IoT, our strength in both platform and applications. Both platform and applications differentiates us from the competition. And so these are I just gave you 4 or 5 areas. There's a lot of new stuff we're working on. I gave you 4 or 5 because most people have asked us what's beyond the cloud for Oracle.
And we wanted to give you a glimpse of where we see the next 5 to 10 years, okay? So in closing, we talked briefly about the cloud. It's been a 10 year journey building our infrastructure platform, application software as a service and data as a service. We now have a fully complete suite. There's always new stuff to do.
But as I said, in Infrastructure and Platform, we introduced 98 services. Steve introduced almost 200 modules since last OpenWorld. So the rate at which we're introducing stuff, you can compare us to any other cloud vendor. We're doing a lot of new capability every year. Not only are we doing that in the existing modules, but also introducing a lot of new capability in these new areas.
And it's the combination of both of them that drives solutions into the customer base. It's the combination of the breadth of our suite and the new innovations that differentiate us as we go forward. So with that, I'll take a couple of questions and then we've got a customer panel. Any questions?
Hi, Thomas. It's Adam Hope from MoffettNathanson.
How are you?
Good. A couple of questions about the IaaS and PaaS business. It seems over the last couple of quarters in addition to doing a lot on the product side, you've also had some learnings about how customers are consuming, particularly IAS business. Can you talk about some of the things that you've seen, specifically addressing maybe the usage of some of the cloud machines relative to some of the other types of infrastructure as a service? Yes.
And then maybe longer term,
given how big
these markets are and how under penetrated they are, do you think the IS and PaaS businesses can grow faster than the applications businesses over time?
Okay. So what have we learned? I'll give you just one example to illustrate what we learned and how we translate it into an action because often people say, what did you learn? How do you convert it? So one of the things that we've seen that customers have really struggled with is they have 2 challenges that they struggle with.
The time they have a budgetary cycle is distinct and separate from the time they're in a consumption cycle, right? Because they say, hey, we've got a budget, the budget fiscal year cycle ends in September, my projects are really going to start in December. So they have a difference in time between when they can spend versus when they consume. That's number 1. The second is people have an abstract view when they look at a workload, even an existing workload, let alone a new workload.
They have an abstract view of what services they want in the cloud. They say, I think I'll need 20 cores of compute and 4 cores of database and certain amount of object storage. And then when they actually prototype the application, they realize, oh my god, that's actually not what I need. My database is far more heavy than I thought my compute was required. So that was one of the things that we saw a lot of customers asking us for.
And we came out with a new scheme called Universal Credits. Universal Credits says, you don't have to buy a particular SKU of our infrastructure or platform. You give us a dollar commitment per month on what you're willing to spend, and you have rights to any and all of the SKUs in infrastructure and platform, which makes it extremely flexible for people to consume and it avoids them having these two problems. 1 is the consumption cycle being tied to the budgetary cycle because now you can budget and say this is what I think I roughly will be willing to spend. And then you can later on decide what projects you want and what components of cloud services you specifically need for the project.
So that was one of the things that we learned over the last few months observing IaaS. The second thing we saw was when our clouded customer, when we're deploying at customer, we have to work with the customer's data center people in order to attach our compute into their core corporate network, we've now automated a lot of that to deploy much, much faster, okay? Maybe one last question. Yes?
Hello, Thomas. Tripp Chaudhry, Global Equities Research. You've been here for almost 7 days. I can clearly say that you have changed the industry tone in the enterprise software with many things you announced. I have two quick questions.
First, in your machine learning algorithm that you have placed, in some specific instances, do you have human in the loop? And if so, how do you think that could progress? 2nd, your 2nd, your customers seem to be quite excited by
having bare metal GPU offering. Yes.
Why do you have it and why AWS doesn't? Thank you.
Okay. Why do we have a bare metal GPU offering? GPUs are often they're called graphical processing units. They're designed to run AI and machine learning algorithms. When people deploy these algorithms, many are used for what I'd call intermittent computation, meaning you're not running the algorithm all day, all night.
You're running it, you load a certain set of data, you run the calculation and you're out. The virtualization introduces significant overhead. A typical hypervisor overhead is between 15%, 20% to even 30% in certain cases. So a lot of customers say, can I get a raw physical GPU and be able to just run my algorithm and get out because the faster I run the algorithm, saw in the video, we took virtualization from being done in compute and put it into the core network? So on a single fully virtualized Layer 3 core network, we can attach physical processors, either regular compute or GPU bare metal.
You can run hypervisors or you can run Docker on top. So that's one piece. Now algorithms for AI and human involvement with it. So, our algorithms are designed to address extremely domain specific scenarios. So, I'll give you just one example to illustrate what I mean.
I'm going to use an e commerce example, okay? In e commerce, one of the hardest problems with product recommendations is understanding what product to put in front of a customer, okay? For many years, there's been this notion of collaborative filtering as the state
of the art.
We've introduced a new Proximal CTRL, which is far more accurate than collaborative filtering. Now why did we introduce that algorithm? We introduced that algorithm because collaborative filtering works well when you have a very large number of products and a very large number of customers, okay, because it averages the experience in a certain way across all the people looking at a wide diversity of product. If you're a company with a very small number of products, it has significant what's called AI skew, which is because the data set is small, meaning the number of products, it causes significant statistical skew in recommendations. So that's one example of something we did very differently because small retailers ask us, I've got a small population of products and small set of customers.
I really need more accuracy. And the historical algorithms I've tried have got significant skew. Now what's the second kind of thing that we do? Imagine your historical recommendations had a failure in introducing something called novelty. Okay, what's novelty?
Imagine your algorithm was based on what's everybody buying and let me recommend based on what everybody is buying. The core problem you have is imagine you were Apple. You would have iPhone 7 is what everybody could buy. I8 was not available. So, 8 would always remain bottom of the tree, because I'm recommending what everyone bought and what everyone used to buy was 7.
So I never pop 8 to the top. So 8 always remains at the bottom. So when you introduce new product as an example, you need to introduce this notion of novelty. Novelty is, trust me, I know the algorithm is going to recommend this, but this is the product I want to put on top of. The third is to your question on human involvement.
So human involvement typically, a human comes in and says, this is a new SKU, I needed to go to the top of the thing because the merchandising manager says, trust me, I want to push that. 2nd example of human involvement is, I've got a lot of product inventory over here. Even though it's not a popular product, I want everybody to see it because I need to get rid of that inventory. So we allow humans to be assisted by algorithms, not to be replaced by
algorithms.
Ladies and gentlemen, please welcome to the stage Senior Vice President of
Oracle's Start up Ecosystem and Accelerator
Thank you. Good afternoon. I'm Reggie Bradford and really excited to be here. I'm new to this crowd, but not new to Oracle. I'm going to take you guys through for the next sort of 25 minutes how Oracle is approaching next generation audiences, including startup ecosystems, developers and I'm also talking about university programs.
Before I get into that, I just want to kind of give you my background because I'm not a traditional enterprise executive. I'm actually a startup founder myself. I'm actually a 3 time entrepreneur. So, my most recent startup was called Vitru that Oracle generously acquired in 2012. And I had 2 startups before that, that I've dealt with many guys around, 1 in the communications industry and 1 in the health industry called WebMD.
And so I bring a particular brand of experience around how do startups think about corporates and accelerators, and I wanted to do something that would create value that I thought that startups would see. Just a typical safe harbor statement. So, when I was asked about 9 months ago to approach this initiative, what I focus on is how do we take and create leverage in this incredible ecosystem we have called Oracle in 185 Countries with 420,000 customers and how we leverage that to create one unified voice, which has sort of been the challenge, I think, that I've kind of witnessed is, we have great programs all over the world, but we don't really unify that in a single cohesive experience across our developers, startups, universities, SMB. And you've heard at OpenWorld all this week about all the initiatives, but think of this as a sort of a container to bring all that together, hopefully, under a unified umbrella and do so on a global basis to capture the enormous opportunities that the cloud and globalization enables. So, at the heart of the future really is developers and startups that are really driving innovation around the world.
And you guys have seen that and heard that. And we fundamentally believe that enterprises that really rethink collaboration, both with other enterprises as well as the startups, so those are going to lead and be in the future and will be the ultimate innovators. Tom has talked about some of these massive transformations like blockchain. And we fundamentally believe between our platform, our enterprise customers and then also working with startups and developers, that's going to be the key to unlock value and continue to grow our position into those marketplaces in the future. So if you could queue up the video, please?
So, really quick from the video. First of all, one key takeaway is that you don't have to be in Silicon Valley to develop a great startup. My 3 startups were all developed in Atlanta, Georgia. And I always felt this giant sucking sound and moved to the Valley to bring my startups to market, but we were able to create great business there. And there's startups developing all over the world.
That's number 1. Number 2 and we want to be able to take advantage of that opportunity to help them and facilitate that. Number 2 is, I never joined an accelerator in any of my previous startups because I was like, where is the value in it? And these are kind of a dime a dozen in some respects. So what we want to do is create an accelerator that I wanted to create an accelerator that I would actually want to join.
When I was a startup founder, I was focused on how do I generate revenue and reference customers. And I started thinking to myself, Oracle absolutely knows how to sell to the enterprise. If we can help startups actually sell products into the enterprise, the world is our oyster. No one's been able to do that at scale around the globe. So that's what we're focused on.
First of all, in terms of the program vision, it's a next generation accelerator initiative. We want to reimagine the relationship between startups and enterprise, fostering co development and co innovation. What I mean by that is, again, when I was in my startups, for example, in social marketing, we went to Apple actually, and we went together and said, what is your future view of how you see taking advantage of Facebook, Twitter and Pinterest and Instagram? We said, this is our product road map and our future. Let's develop that together.
We see the same opportunities. So, we've been working across our product development teams and our field teams to identify where are the gaps in the portfolio, where is opportunities for start ups to innovate on top of our platform that we can also work with our enterprise customers and really drive innovation across the industry and really push the boundaries on where we can all win in this together, okay? A background on the program, it was actually initiated by SAFRA visiting with the Prime Minister of India back in, I believe, it was April 2016. In Bangalore, we launched our first accelerator. We got it up really, frankly, probably too quickly, but we got it up and running in 2 months.
And then we announced with my participation, the global expansion in January 2017, so really only 6 months ago, okay? And we decided to expand from one location to 9 total in the last 6 or 9 months or so. It's been extremely busy. These are the markets that we just expanded and have launched in. As you can see, a big penetration across Europe, in the Middle East, Tel Aviv, Asia Pacific, South America and then we're also in the U.
S, okay? These are some of the stats that we'd like to just kind of mention since we launched in January. We've had launch and promotional events in every single market. I've been to 6 continents in the last 6 months. We've spoken in numerous, not only Oracle events, but industry events.
We've generated over 300 positive media articles around the globe about the initiative with millions of social media mentions. The program has been so well received internally. We've got over 50 Oracle markets around the globe that now want to bring the initiative there, which is tremendous. We went live in all the 8 markets, which people told me would never be able to do that quickly. And we created these ecosystems of innovation across Oracle.
So literally partnering with our innovation advisors, which is part of our field, to bring startups into enterprise customers. We're also readying for global for additional expansion Phase 2, sorry, and a wider ecosystem strategy, which I'm going to be coming to you guys to talk about very shortly in terms of broadening this. These are just a couple of examples of headlines. My point here is not to tell that positive news stories turn into business, but it is important and people are paying attention and they see this as a very strong important vehicle for us to look at repositioning Oracle, democratizing Oracle, contemporizing the brand and the into millennials, gone down, etcetera, which I'll get into. Really quick on the program benefits, I picked this term up from Israel, but I've heard it before.
It's a pay it forward model. So, our philosophy is that there's plenty of venture capital in the marketplace. Any startup that has a product and service with a decent track record can raise capital. That's not where the value is. So we don't take equity.
It's run by product development. So I actually work for Thomas. The reason why I think that's important is we have peer to peer relationship with the startups. We really help them understand how they take advantage of platform as a service and infrastructure and really give them mentoring advice. We give them access to platform and infrastructure for free.
We give them engagement opportunities, I mentioned, across the portfolio of customers. Mentoring and advising, we have PR. We had 15 startups here this week. We give them co working space, and then if they need it, we connect them with customers. Really quickly on the program, it's a 6 month program, immersive experience facilitated by technical and business experts, both within Oracle as well as outside angels and VCs and repeat entrepreneurs, etcetera.
Selection process includes pitching interviews. And then we have an alumni program once the startups graduate that they can continue to be part of Oracle Marketplace and connect with our customers and opportunities. Really quickly on who can apply, we deliberately kept this open rather than focus specifically like on a blockchain or cybersecurity because Oracle sells to every just about every enterprise in the planet across every vertical, we wanted to see the diversity and be able to provide a tremendous array of startups that can address all different aspects of the portfolio. They have to have a large addressable market and a defined yet malleable product road map, so that they want to be willing to work with us to develop further. Includes to be together 6 months in a pitch and an overview, okay?
Shapiro is a fast platform for tracking and managing road transportation.
Ambulabs is an IoT company that we believe in using artificial intelligence to unlock the true power of all of that data.
Micro companies, people at the beginning of something to work with large enterprises, to work with people who might become their customers, to kind of co design new stuff in this kind of rich vibrant ecology is really important.
To build a foundation is to build a really kick ass leadership team. So we're highly focused on the big organizations that spend 100 of 1,000,000 on innovation with millions of consumers under their belt. Oracle itself
and the organization there, but all the customers that they have and the list of people that they have, which gives us a global reach that we couldn't otherwise have.
Oracle provides a gateway to customers essentially.
It's quite hard to meet an enterprise in much easier in the U. S. You can meet everyone. In France, if
you are
not backed or supported by Oracle,
You can wait
a long time
and as a separate product. So Oracle has quite
a big presence in Bristol. I know the people here. I've talked to them. They visited where I work. And that's a good aspect, too.
So to have a company that has a physical presence here is very important.
For us, it's very important to be enterprise grade as soon as possible. So to deploy all what's needed to do so as quick as possible and our
Okay. So really quick, we had almost 3,000 start ups supply for the first forty slots. It's harder to get into Stanford University than it is to get in our program. And the reason I bring that up is because we were able to attract much later stage startups that most of them have a substantial business model developed. 1 has 1,000 customers, for example, in SMB and wants to attract the enterprise.
These are just a few examples. We brought 15 of them here to OpenWorld. They span Blockchain, HCM, transportation, logistics, hotel, hospitality, CX, across the entire portfolio, okay? And then the last thing is just the partners and alliances. And one of the things that we're doing around Oracle is focusing on sort of reimagining the workplace.
So we're working with WeWork, for example, in several of our locations to think about space for the startups and how we collaborate together. These are local partners all across the globe. But again, we've just put this together, again, in a very short period of time. So we've been developing very strong relationships, okay? I'm going to now shift to universities.
And obviously,
college students.
Again, thinking about imagining the future, positioning ourselves for the millennial entrepreneur on down, which is the young adult that wants to maybe quit college and start a company. There's sort of three things that we're focused on here, is to get cloud into the hands of very young adults and gain mind share against the next generation of IT leaders and founders. Number 2 is this also applies to workforce. And Oracle being a place that's attractive for young adults as they're at engineering schools or whatever the case might be to have Oracle be part of the agenda and then want to come work in here. And then 3, I think, again, on the sort of the pay it forward side is and I know SAFR is a big proponent of this, is the providing activities and philanthropic activities, but really giving them a vehicle so that we can help provide higher education students computing resources to develop their skills in the marketplace, again, using cloud and then educators, so they can do curriculum and create opportunities, again, built on the same technology that we use.
So the program benefits for cloud services, they get access to any combination of a wide selection of metered services in terms of infrastructure as a service and platform offering. We have massive online open online courses, attend courses with recorded lectures, so again, giving them content and then community forums that they can communicate and connect together. We launched this, I would call it in a beta with a handful of universities around the globe, some of the most prestigious, including Stanford here in town. And we've got a tremendous pipeline of universities that as we develop this, again, think of it similar to the start up ecosystem, start with a small cohort, a few and prove ourselves, get traction and a track record, understand what works and what doesn't and then look to expand that. We've got a video to show.
So when we first started this project, the 4 of us, none of had experience working with Oracle Stack. So it was really an eye opening experience. And then I think with Oracle, we've just been really lucky to have the team at Oracle backing SPSO response, it's been so great to work with.
And so, the Oracle tech stack gives us access to just so many tools we couldn't have
possibly imagined to begin with.
So, when we initially kind of started using Oracle Services, we picked a lot of our technology stack and it was pretty seamless to say, okay, well, given that you've already decided to write this in Flask and that you want to use MySQL instead of this, we can make that work across this set of specific solutions, which is great to know that there's kind of the flexibility of whatever technical decisions we make, can still implement it on the service.
So just to summarize with those first two initiatives before I go to the 3rd. This is about really awareness. I was with those students earlier this week. They're on the open world from Stanford, short trip. But it's really not that we have a bad reputation with students or start ups.
There's just low we don't have the awareness that we need. And it's about making available to those either startups or those university students. And once they get a taste, they start running projects, there's a tremendous change in their hearts about wanting to work with us. And it's there's a perception because I think we've been in the enterprise space along. Now with platform infrastructure, we've got a product suite available to 2 people in a garage on up.
So super excited about the traction and what we've seen so far. Again, just for the sake of time, the 3rd area I'm now going to talk about is developers. And as you all know, with Oracle, developers have been in the heart of Oracle for years years years. This is not a new thing. What we're focused on now is sort of a retool, reboot, extending the capabilities and continuing to provide developers with a strategic approach, outreach and engagement programs.
Again, goal is to increase the awareness with developers around the Oracle Cloud, winning the hearts and minds of developers versus other platforms, continuing to change the perception that might be out there with Oracle as a cool contemporary hip company, easy to use and then continue to drive adoption, obviously, to cloud, okay? First is a developer champion program. So basically, if you're familiar with the term influencers, that's basically what this is, is identifying and working with who are sort of the leading edge folks out there that influence a lot of people on social media in the developer community, experts in modern development such as microservices, containers, DevOps, machine learning, IoT, SQL, non NoSQL databases, they contribute substantially to open source projects. They're authors on contemporary development projects and approaches, and they speak at lots of events, and we've brought them into our events. They draw a big crowd.
So these are some of the developer champions that we have created relationships with. I'm not going to go through them right now, but consider them to be leaders in their space and influencers in the marketplace. These are some of the areas I mentioned that the champions are focused on their expertise areas around open source. I mentioned already IoT, Big Data. Thomas had talked earlier, machine learning and AI, serverless computing, database and Java, JavaScript, etcetera, okay?
This is our website and interface for the developers, the portal, if you will, that they can access and connect with, the developers, build projects, create capabilities. For this group, for us, again, it's not just about the platform and capabilities that we enable, making it easy to use, but it's really about creating content and planning that will enable them to build projects. So content is key around containers, microservices and APIs, how to take advantage of those, making it accessible for them around AI and machine learning, developer tools and low code programs, giving them access to languages in multiple areas, okay, and making it focused on education and sharing and really hands on demonstration, making it quirky and nerdy. These guys are a little bit different, which is fine. It's not just exclusive for us.
We offer programs that all these programs developers can use, startups can use, but they can also work with other platforms. That's not really what it's about. It's about mindshare, okay? And then we revamped and launched our Codes event series, which is basically our roadshow to go out in the marketplace. We went to 20 cities in the last 12 months or so.
We had over 10,000 developers that attended and another 350,000 participated online. So that was a very good success in terms of the reboot in those markets. And we really go we try similar to the start up ecosystem, we go where the market is. So these are some of the examples of cities that we've gone, just like where we go with the accelerator, trying to line up where we have data centers and we have existing infrastructure resources, so we can go into a market and have a very strong presence and point of view and position across North America, EMEA, Asia Pacific and then Latin America. And then these are just some photos of the events.
You can see it's obviously not as formal as this group, which probably a good thing. But yes, it's kind of shirts and blue jeans and hackathons and a lot of fun type of activities where developers and again, we see this playing extremely well around some of those big tentpole future areas Thomas talked about, around getting developers, startups, our developers and enterprise customers to work on, for example, a hackathon over the weekend to solve a real problem that exists in the education industry or with blockchain or web case in the marketplace. So we see tremendous potential here over the next couple of years to continue to extend and enhance Oracle's position in the marketplace with developers.
These are some
of the other programs that we offer, again, about education. MOOCs, which are massive online, open online courses, they're all for free. So again, providing value back to the community. A code online webcast and dev live interviews, so again, sort of webinars a developer newsletter with monthly updates Oracle Zip Labs, which is hand on labs at conferences, and then we have a legends and luminary speaker series for developers. And obviously, across all these programs, we have a very tremendous robust presence.
Steve Miranda mentioned it around social media, but connecting and engaging with audiences across the globe in a real time basis. There's 4,000,000,000 people on messaging platforms now around the world, so with mobile devices. So being able to connect and engage with them on the medium that particularly young adults want to be able to communicate with is extremely important and big part of the developer outreach and engagement. So just to sort of summarize because I've got to wrap up, but again, think about this as sort of a unified platform across all these different services, one innovation across Oracle, leveraging the capabilities of the cloud with our enterprise expertise, the global footprint and capability that's unmatched in the industry and then connecting that with start up ingenuity that really is a win win for us and our customers and the startups and developers and university students. And we think this is a tremendous recipe for success.
And I think finally, it also keeps us on our toes. We're moving very fast. Fortunately, I've had super support to launch these programs in 6 months or less, I think, is a testament to the organization and some of the changes that you guys have hopefully seen in terms of Doug's going to be talking about right now around buying experience and other aspects of this. But this is sort of the tip of the spear about how we're going to be super competitive and continue to position Oracle for the next 40 years. Thanks very much.
Doug Carenheit.
Well, I got the title I got the longest title. That's the one thing I can take credit for here. So you guys might remember, I was here last year. I'm here again, so I didn't do anything too badly. We're going to transition a little bit from the products and technology side to the more of the business and operational side of things.
And I did want to spend a few minutes here before we turn to and Safra, giving you a little bit more of the inside baseball of what we've been doing on our own internal transformation. It really is it's amazing how far we've come when the questions you guys ask to the panel and to hear them say it from their own words about how Oracle has really transformed in terms of how we touch a customer. And it's really important because, I'm not going to repeat the speech from year, but I'll just highlight again that we're moving from being a products company to a services company. Obviously, intellectual property underpins everything we do. But as you move from to that services side of things, it's no different than when you think about Airbnb or you think about a Lyft or any other company that's obviously disrupting an industry where it's really about a superior experience.
And so when we think about delivering cloud as a service, the ultimate experiences is going to be the predictor about whether we're long term successful in this business. So let me start with just highlighting maybe the 3 pillars of our cloud strategy because I think this helps you understand how we think about it internally. So clearly, technology has always been the driver for what differentiates ourselves. But really, as we move to the cloud, it's these next two pillars that have become more important. And I'm going to give you a little bit more color about the customer experience.
And I'm going to introduce about what we're doing from an employee experience because employees are now front and center of everything we do simply because as you deliver a service, it's those individuals across our company that are touching customers every day. And to the degree that they are motivated and highly engaged, they can deliver a much better customer experience than those that aren't. So we think about those pillars. Obviously, on the technology side, it's really important that we deliver the right solutions that exceed customer expectations. You've heard from Thomas and from Steve about what we've been doing there.
It's been an amazing amount of transformation on that side. In terms of the best customer experience, the reality is, we're not going to be successful in the cloud unless our customers are successful. These are long term relationships, just as the customer panel had described. And so the entirety of that customer experience and what we do to enable them to be successful, we determine whether they stay and they renew and they keep doing the things that will enable us to expand our relationship with them. And then finally, on that employee experience, that idea that we need to attract the best talent and make sure we retain that talent long term, it's a lot more competitive, as I think everyone knows, than it's ever been, right?
The competition for talent and technology, given how much money is available and how many startups and other companies are being funded, it's critical that we find new ways for Oracle to differentiate ourselves when it comes to our people. So I'm going to get into the customer experience. But as I lay this out, I want you to think about our transformation along 3 different categories. 1 is people, 2 is processes and third is platform. These are things that are fundamental to what we do when I go around internally inside the company and talk about how we're going to do something differently.
Now if you're a start up, it's great because you start from scratch. You don't have anything legacy to have to deal with versus when you're an established organization, you have all of the this is the way we used to do it that you have to overcome. And so when we think about overcoming, it's doing across those three areas. It's who are the people and how are you organizing in order to succeed? What are the processes?
How do we reimagine and reinvent the way we do business like the accelerated buying experience? And then 3rd, what do you do it on? Which is, obviously, we're going to talk a lot about how we leverage our cloud platform in order for us to have the agility to update our transformation that much more quickly. So we move to the customer experience. And again, last year, we highlighted this, but I'll explain these 3 categories because as we spent more time on this, it's evolved a little bit and it's become a lot crisper.
We think about a customer experience along the entirety of the journey, right? From the moment they're thinking about purchasing a cloud service all the way through to the renewal, that's the entire journey that they're going through. And we have to make sure that it's a superior experience on each phase of it. So the first phase is the discovery process. It's the idea of, Gee, I'm interested in the cloud service.
How do I find out what Oracle offers? How do I try it out? Pilot it? Do things like that, where I'm discovering what it is that Oracle is offering in such a way that I'm prepared to purchase it. In a lot of sense, that discovery process is something that often does not involve our sales reps, right?
It's just like with our mobile applications on an iPhone. You know, we don't go into the Apple Store in order to find out which of our next applications we want to purchase. We do the Web site searches. We look online. We do lots of things in order to discover what it is.
We want to have that same rich experience in our ecosystem, so that our prospective customers can find the Oracle Cloud Services. Then it moves to the cloud ordering process, in which, obviously, they're going to purchase from us. And part of the purchasing is to make that quick and easy. And then finally, it's the utilization. So the moment that they've made the purchase, what's that installation look like all the way through the renewal?
How rich is that so that they want to renew it and expand it? The entirety of that process is really built around these ideas at the bottom, which is make it fast, make it simple, make it intuitive and make it flexible. Built around the Oracle Cloud. So whether it's discovery, using Eloqua to help us understand when folks are going through that process of analyzing and are ready to purchase or the CPQ Cloud, when we figure out what they want to purchase and when, all the way to the cloud utilization, where we're tracking them from a cloud service standpoint to understand what issues they're having or what bots we can put out there in order to push more information to them. So let me just highlight where we've come on the accelerated buying experience.
So if you recall, last year, I talked about the experience being one in which we want to target 90% of our cloud purchases. And it's a simple idea of, with the customer, you determine what their cloud needs are once they've done all their discovery. You review the order with them and then you click to accept it. Now how are we done? The target has been reached.
We're now almost 2 years into this and we've reached our 90% target of our overall cloud transactions going through this accelerated buying experience. In fact, in the last year over year, it's the volume of these transactions are up 3x. The deal velocity, which is how quickly we're getting these transactions done, has increased 50% since the launch of the experience. And ironically, it's costing us less, which we always knew would be the outcome of this because that's what cloud should do, but we need less people in order to deliver this experience than we ever had. It wasn't why we started it, but it's how it's come about.
Now, we don't end with that, which is all this time, we're continuing to identify ways to improve the experience. So we're in the process of rolling out the next version of our CPQ that's all about, for the salesperson, how do we make it even more intuitive for them to do something. We're going to roll this video and you're going to see an example of how a sales rep goes through a process of doing an order. Go ahead.
With CPQ Jet, sales teams can sell Oracle Cloud Services as easily as 1, 2, 3. 1st, the rep chooses the services that the customer needs. Next, he or she indicates the type of discounting required. And third, the sales rep selects the applicable agreement. Once the ordering document is generated, the rep sends it to the customer for review and click through acceptance.
Once accepted, the order is automatically booked kicking off the activation process.
That's it. That's how you get an order done as a salesperson. Now, of course, if you have some options and you might need approval with, we might kick off an approval process internally. But most a majority of the Oracle Cloud transactions don't require any additional approvals now. And that's the entirety of the process they go through.
It's a very simple, intuitive process of going from screen to screen that helps them walk through how to pick what they need and how to get it ordered and sent to the customer for completion. Sorry, can you go backward slide? Okay. So let me introduce a new phase of our customer experience that we've been working on since we last met, and this is around the cloud utilization side of the house, customer feel as they go through the usage of the cloud service, all the way from how do I activate and get my cloud service up and running, How do my users utilize it? And then, How do I continue to succeed and enable me to expand my usage?
So we think about it around these three pillars. The first is around rapid activation. So how do we enable that quick use of cloud services? So we spend a lot of our time trying to identify ways to make it repeatable, make it so that every customer that comes in can utilize the experiences the last cloud customers so that they can get their cloud service up and running faster. Then the second is, now I've got it deployed, how are my users learning how to use the cloud service?
And how do I deal with issues that they experience just from a knowledge standpoint? And this is where we're providing proactive journeys, where folks, again, through an intuitive process, can figure out how to utilize the cloud services more easily. And then finally, this notion of easy self-service is really around the idea of what's my view look like as an administrator? How am I understanding all of the cloud services that my organization has and whether my users are experiencing any complexities that might have to talk to Oracle about in terms of training and other things. So this is them having a full dashboard view of what we have in place.
So we're going to show you a video now of what it's like as you come in as a new user to the Oracle Cloud Service. So after you've made the purchase and now you're going in to get started, and this is going to be something that's focused around our infrastructure as a service. So if we could roll that next video. Details section. Note the username, password, and the name of your Oracle Cloud account.
Click Get Started with Oracle Cloud. Sign in to your new Oracle Cloud account with a username and password and a welcome email. After you pass through security, you're asked to reset your temporary password. This ensures that your Oracle account and your data will be safe and secure. The first thing you'll see is the Guided Journey page.
It's like an information desk. Select a task you want to perform, and we'll ask you a few questions so we can guide you to the right place. You can visit this page at any time. For now, let's make our way to the My Services dashboard and have a look around at
your new account. The
dashboard is like a terminal map. To see all the services, click Customize Dashboard. Scan the list of services, and make sure the ones you want to use are set to Show. Okay. So that gives you a sense of the type of things that our customers are seeing as they order these cloud services.
Again, it's really important that we push this type of help to customers. It's no longer about them having to pull from us, where they need to contact us and ask for things. It's these type of information pushes that we put out there. And they're also simple. They're easy to use and discover.
Around this whole superior ownership experience, there's other things we're doing like communities. So it's the idea that I'm a user of ERP, what about all the other customers that are using Cloud ERP at Oracle? How do I learn from them in terms of what they've experienced and how to do things differently? Again, create communities, create forms for collaboration, All of that is helping our teams push the assistance out to customers so that they have a great rich experience, and then the likelihood of renew goes up. When we think about it from a business and financial standpoint, the impetus of the value has now shifted from that upfront sale to that renewal, right?
So rather than just selling to a customer in the traditional on premise format of the license revenue and letting the customer go discover what they're going to discover with our products and knowing that we've gotten the vast majority of the value out of them, it's now shifted to that renewal process. And so the superior ownership experience has become critical to enabling us to have that renewal be much more simple and much more likely to occur, along with giving the opportunity for folks like the customer success managers, who are in with the customers, seeing what their experience is and knowing the type of things that they'd like to expand into, so that we can generate new sales opportunities. So when you turn to it and say, well, how are we doing on that front? Again, it's something I didn't talk about last year, something we've been working on, though, for a little while as well. These are a couple of different metrics that we track when we do our customer success interviews, where we send out different questionnaires to folks and continue to get feedback directly from customers.
You can see things like, is Oracle proactively providing the help I need? Again, up 18% year over year. Am I getting the business value I expect from the Oracle Cloud? Up 27%? Would I recommend the Oracle Cloud to another, at an all time high from when we started doing this tracking?
So this is a continuous vicious cycle of going out to customers, getting their feedback, incorporating into our processes, continue to improve it on a constant basis with that idea that those customer sat type studies are the best indicator of where they're going to be from our renewal process when we get to the financial end of the cloud. Okay. So that's a little bit that I described is all about what's the customer experience look like. And I just want to finish my discussion today talking about the employee experience. I started off this session talking about why that was important to us.
And quite frankly, the way I've looked at it is, it's the same idea for an employee as it is for a customer, as you can imagine, which is ultimately, they have to have a rich experience and wake up and be extremely engaged with the product in order to for a customer to renew or an employee to stay with your business. So we at Oracle have been going through the same process of understanding how do we become a great company to do business with from an employee perspective as we have from a customer perspective. So similar to so what I describe as the customer experience, it's the same idea for an employee. What's the journey like for any of us when we come on board from when I'm interested in being part of Oracle to when I become an employee, to when I start to become a contributor, all the way to when I'm a champion, I'm a leader, I'm an executive, I've promoted myself through. And these are the 3 pillars that we spend a lot of time understanding, how do we improve that experience so that employees are going to recommend to other employees to other prospective employees why Oracle is a great place to work as well as how they interact with the customers, so that the customers again feel a positive experience with Oracle.
So okay. So how do we approach it? We approach this and Mark's been a huge advocate for how we think about this internally, which is around 3 ideas of listen, evaluate and act. Listen is the idea of going and surveying our employee base just like you would survey a customer base, right? And then as you bring that information in, you have to evaluate it, take the analytics, unpack it, understand what's important to employees and how to change their experience just as we did with the customers.
And obviously, ACT is the implementation of that. It's amazing, but as you probably could have guessed, if the experience for our customers is very difficult, we were just the same for the employees. We knew how to make it life hard at Oracle in order to get things done, like how do I hire somebody, How do I get a purchase order done? Those sort of ideas. So we spend we continue to spend a lot of time thinking about how do I simplify the process, right?
So how do we move complexity out of Oracle to make things go faster? How do I streamline approvals, take people out who aren't adding value? And how do I just generally improve the user experience so that so folks feel a richer outcome? Again, this is important for you to know, not because you think, well, Jesus, you should do this anyway, but more from the perspective of freeing up employee time, make them more productive, make them more engaged. All of that contributes to what we believe is a better financial outcome for the company.
So I'll just, in the last few minutes, just highlight one of the areas we're spending time on and have launched is called the Accelerated Hiring Experience. So the Accelerated Hiring Experience was this idea of how does Oracle go about getting offers out to candidates and getting them onboarded, right? And again, it was one of these things where we did needle in a haystack versus not. And one of the examples is, if you want to come to Oracle and we're going to extend you a job offer, we had to make sure you cleared a background check. Now that's, as most people know, if you're this is not going to be that many people who don't clear background checks, right?
It's, as I say, the needle in a haystack. But instead of giving somebody an offer and then doing the background check-in the process of onboarding before they started, we waited to send the offer out until the background check had been completed. It's going to be a multi week process. So as a candidate, you're sitting there and you've got one job offer from somebody who just issued it to you because they're going to make the background check your start date contingent on the background check. And Oracle says, we're not going to give you an offer until you complete the background check.
Ours was much riskier. So as a result, when you weigh the 2 potentials, a lot of people chose the other offer and went forward. Weren't willing to wait for Oracle to conduct its process, in which case, most of the times, it didn't matter because almost everyone passes a background check. So it was things like that where we changed the approach, and now we've reduced our offer time all the way from when you initiate the offer to when it gets out to an employee to a week. Our onboarding of how employees feel about the experience they go through as they come in come on and become an employee has increased 50 percentage points, which is it's an astronomically high percentage, but that's how far we've come in a short period of time.
And of course, as a result of all this, compared to the history, employees are feeling great. Our new candidates, as they've come in, feel great from an employee success and just a general goodwill standpoint. So again, these are things that are important to us. And what we did about a few months ago as we kicked off our new fiscal year is we held a Global Employee Summit. And as part of the Global Employee Summit, where we talked about our strategy and what we're doing, it's no different than what we did today, which is we want to convince investors why they should be long term shareholders.
We're going to do the same thing with our employees, convince employees why you should remain long term employees. And as part of that, we asked folks, submit videos. Tell us how you feel and what your experience is with Oracle. And I'm going to show a video to show some of the impact here of just how much folks are really positively feeling about the power of Oracle now and where we're headed
from a cloud perspective?
If you could start the video. What makes excited is our opportunity to really define the future of the cloud, the future of the software industry.
We're a technology company, but we serve people.
It's all about the customer and what we, Oracle, can do
for him. Whenever I see my customer success because of my work, I feel motivated to take on the next challenge.
I love the fact that Oracle has given us the opportunity to
share research with the world. Building a team and building successful products is so fulfilling. We have a lot
of autonomy and flexibility with our management team. We're helping Oracle realize the promise of machine learning for our SaaS customers.
We have to change and stay on our toes all the time. So it's always really dynamic here.
What I love the most about working for Oracle is the chance to work with a team of highly motivated people all over the world.
Here, it's a fresh day
level that you're at, everybody here has a voice. Speaking to cloud.
So this is a sea change of culture that's going on. Larry and Safra Mark initiated this a few years ago. It takes a long time for this to trickle through at times for everyone to get the spirit of moving from a product to service led company. But I think that's starting to give you proof points of how well it's going. And so the purpose of today was just give you an update on that transformation.
And with that, I think I'm complete. Thank you. Ladies and gentlemen, please welcome to
the stage, Chief Executive Officer, Mark Hurd.
I didn't expect a standing ovation. I can't think of a better way to end what an exciting week at Oracle Open World and be with all of you. But let's I'm just trying to get a little energy in the room. All right. So the stuff Doug described, I think there are a couple of other metrics that might be worth sharing.
Just to give you an idea, when we make an offer on the college campus today, and we obviously, I think most of you know hire 100 and 100 of people every year. 87% of our offers are accepted, just to give you some context about how people want to join the company. 2nd, our time to fill a rack, Doug talked about the time we take to onboard people. We've about halved the time to fill a rack. So, it used to be 60 days, now 30 days.
And then to the point Doug described about our surveys, we survey our people. We ask them the point of listening, what's going well. One of the things we got 3 years ago was it is really, really hard to join this company, hard to figure out how to get things done, where to get things, etcetera, etcetera. And one of these things that's I have a big belief in engagement levels because engagement levels, if you plot them over time, the higher the engagement level, the higher the productivity and you can align the engagement levels really to financial performance. And we had like a 30% favorable onboarding rate.
Not good. You read all the verbatims. And so we did a lot of work on the exact point Doug described and we more than doubled it in 2 years. And so it's a big deal for our employees to speak to us, for us to listen, evaluate. Some of the things they say we're not going to fix like we'd like to have the autonomy to spend $50,000,000 No.
But some of the things they do say are extremely insightful that we then go and fix and has a meaningful impact on the business and it shows up in our numbers.
All right. So what I'm going
to do is talk to you a little bit about a couple of subjects. I think first, let me reiterate what Ken said. And then I think what he said again and what he said yet again. So I support every bit of that. All right.
So, let's talk about SaaS. Can we go back one? This dynamic thing does not mean no, no, no, I don't want to be on that chart. Next chart. Next chart, there we go.
All right.
I'm going to talk to you a little bit about applications. I'm going to talk to you not just about SaaS, but I'm going to talk to you as much about the applications ecosystem. So we talk about how the total application business is performing. I tried to do it in a way of I get a lot of questions and tried to synthesize those questions. And hopefully, what I do is give you more clarity, a little bit more insight into how the business performs.
And then we'll talk a little bit about the database, not just our database business, but the database market. And then we'll actually listen to a customer for a couple of minutes. And then we'll do Questifer and I will do Q and A as soon as we get through with this. Okay. Let's talk about SaaS and SaaS revenue model.
Let me try to take you through how the SaaS revenue model. So I'm talking about how you think about revenue, how that works. We have a pipeline. I'm going to talk to you about the pipeline. The pipeline is really big, okay?
We then have salespeople who take this pipeline and they try and close deals. That is what we then call ARR, annual recurring revenue. You would then take that ARR, You would then divide it by 4 because that would then become a quarter. Only my only caveat on that is it takes some time. There's a late there's some latency between the receipt of an order and when it gets provisioned.
So it's not a perfect model in terms of ARR showing up right away in terms of revenue. Then you add that to the revenue and then there is a percent of the existing revenue base that is up for renewal. Okay? And that number changes on a quarterly basis. You can imagine if we sold more in Q4 and the contracts were 1 year, that year, that next year, you would have a lot of renewals to do.
If it was 3 years, it would take 3 years for those renewals to occur. But there is a percent every quarter of that revenue base up for renewal. Now just to give you more clarity, each pillar has a little different renewal rate. So I can give you a renewal rate. But for example, 3 year, 4 year, 5 year ERP, ARR, I will say use the term ARR, have a really, really high renewal rate.
3 year, 4 year HCM contracts have a really, really high renewal rate. 1 year marketing campaigns that's still in ARR have a lower renewal rate. So the renewal rate is a blend of all of these. And when you're growing, let's pretend our average contract length moves toward average contract length moves towards 3 years, not completely 3 years, but that's roughly right. And as you're growing, you'll have a little less than a third of that, provided you're growing up for renewal and then you'll get a percentage of that.
So that, I look at that as a positive or negative. But then you take the part that's not renewed, you subtract that from the revenue base and then you get the total SaaS revenue. We'll do Q and A later. But I hope that was clear because I get questions about this a lot of can't digest add the ARR to the revenue? Doesn't that work?
No. You have to do the renewal process as part of that as well. And the contract lengths are continued just as a trend line continue to lengthen. Why do they lengthen? Because a bigger percent of our ARR is now ERP.
Bigger percent of our ARR is now HCM. And those are stickier and stickier and stickier apps, ones that frankly you just might view the renewal rate.
And by
the way, let me be clear about what we look at renewal rate. Renewal rate to us is literally a comparison of what was signed the first time compared to what renewed the second time. It does not include expansion. Okay? So, if we renewed 80%, it would be to say it was 0.8% or 0.85% of the original thing we signed.
And expansion would be in what we call new and expansion that would show up in ARR. So, my objective for this discharge is to make sure we're level set because there may be some of you say, I knew all this. I am no smarter than when I when he started. There are some who asked me about this frequently and I just want to make sure we have absolute clarity and we're not confusing anybody. Okay.
This chart just simply to say our pipeline has been big and it's getting bigger. And this is again SaaS. Our pipeline is growing in the context of a lot of ERP, a lot of HCM and the contract lengths in our pipeline are increasing as well. This is SaaS revenue. I'm going to talk to you about how the build goes in our applications revenue ecosystem.
But our SaaS revenue has grown from 23 to 36 to 42 to 64 in terms of growth rate. It is at $1,200,000,000 and grew 38% last year year over year. In terms of bookings, Now our bookings last year, remember last year we made the statement, this is a subset, just to be clear, of the more than $2,000,000,000 worth of bookings we did last year. So last year around this time, we were prognosticating roughly around $2,000,000,000 dollars I got a lot of I don't think that's going to happen. It did.
This is a portion of that, okay? So that's the ARR for SaaS. It drives application ecosystem revenue and this is the implication of what happens in the application ecosystem of total revenue. So what we've added in here is on premise support, on premise license and uh-oh, I'm more chart behind. I'm a chart behind.
Sorry, I'm looking at the wrong chart. This is the chart I was on. I meant to be on. This is what's going on in our total applications ecosystem. This is if you look the chart from the other page, if you go back one chart, you see the 64%.
Go back one chart if we can. That's the 64% from the previous chart. Go forward. That's the 64% in blue. The red is the addition of the on premise support, on premise license and that gives us 8% total revenue growth last year.
In a second, I'll talk about Q1. I made the statement somewhere last year that this year our horizontal applications viewed again as SaaS, support and license will grow roughly double digits this coming year. I'm sure I know I put the caveat on it. If it's 8, 9, 10, 11, don't call me up and tell me I lied. This is roughly right in terms of what the revenue performance will be for this year.
Now, this is with SaaS now becoming a bigger and bigger part of the revenue pie. And the market, depending on whose numbers, I tried to pull the consistent research and I used IDC. This is not my number 4%. I can find numbers of 2.83%. And what I did was I didn't take 1 year.
I took 2 years, tried to make sure I smooth it out and got the 4. I could have probably put 3 up here and had a research firm that would have agreed with me, but I would have had to switch research firms as we go. And either way you do it, we're gaining share. And if you look at our Q1, which was obviously materially better than the 8, we gained material share in Q1. This will continue.
This will continue in terms of us taking market share. I'm going to explain to you why in my next chart as well, But we will continue to take market share in applications. This is what happens in our support business and we're way beyond the ideas of Mark and Safra's modeling or this is data over now thousands of transactions. This is what happens in our support business. Our support business is a good business.
We get a dollar and we got the high amount of gross margin. And many of you who've been shareholders in the company have known this model for a long time. Here's what happens when we convert it to SaaS. And remember, we get $3 instead of $1 because we're also doing more work. It is in our data center.
We do the hardware. Database revenue is in that number. Middleware revenue is in that number. We do a lot more our labor is in that number. We get $3 Today, we get 67% gross margin on that or make $2.01 instead of $0.95 in support.
As our margins move towards 80% and above, we will make $2.40 or more as we convert our application support base to SaaS. We do this analysis every quarter in every pillar and we have very tight understanding throughout our management team of how we go to market on the conversion of support to SaaS. We want to convert our support base to SaaS. I get that question a lot. Are you concerned about that?
No. I am excited about that. We are trying to drive this faster. Now that said, we are driving it at the pace that makes sense for the customer. We are not end of lifing our on premise applications.
I believe that to be a bad move for us. We want our customers to move at their pace. We give them choice. We also give them modularity, meaning you can move part of an app, you could move budget and planning as part of your ERP, move that to the cloud and convert it 3 to 1 and leave your on premise, your e business suite on premise. So you can do mix and match as you map your journey to the cloud.
Today, in our SaaS revenue base, only about 35% of our current SaaS revenue is revenue that converted from our support base. The bulk of our SaaS revenue is from new logos. And that really hasn't changed that much over the course of the past couple of years. Okay? So let's go through a few numbers.
ARR plus 48% CAGR between FY 'thirteen and 'seventeen was up 54% in Q1. I will not give you a forecast for Q2. I'm looking over. You don't want me to give a forecast for Q2? No?
No. We have a big pipeline. So, up 54% in Q1. Obviously, we grew in Q1 at a faster rate. I think I said this at SaaS at accelerated rate than we did the year before.
By the way, just to be clear, we're better at this than we were 4 years ago, 3 years ago, 2 years ago and a year ago. Our sales teams are better. The participation rate of our salespeople is increasing. The quality of our references has increased. We are getting I'm not trying to tell you we're terrific, but we're pretty getting pretty good at this.
And by the
way, I think I've told you all for we had a lot to learn. We had a lot to learn. We've learned a lot and it shows up in our performance. Non GAAP SaaS revenue grew 68% in 2017. It was up 62% in Q1.
The non GAAP apps ecosystem that I just told you about that grew 18% grew 18% in Q1, And again, that's a phenomena now of our SaaS revenue getting bigger and bigger as a percent of the total. Our support base, while in a bit of decline, its decline, its biggest category of decline is moving to our SaaS. So as a result, we get this level of growth. Again, I expect this market share gain in applications total market to continue. Cloud short term deferred revenue, you can see what happened.
SaaS pipeline, the biggest base we've ever had as we go into the year and now we go into Q2. So I just say, listen, the momentum in the bit I'm not going to take you through all this. I sort of said all this, but this applications business by the way, I will say as a percent of what we what I talk about when I see investors, I talk less about apps now than I used to. And it's probably because of these numbers laying out the way they have. But I would be this is a double digit sort of $1,000,000,000 business for us, all ecosystem included.
This is a big deal. And we're now on offense. We're not on defense. We're much this is not like it was 4 or 5 years ago. We're much better, much more skilled.
The references, I mean, the thought that we could sit here with the Bank of America moving its financials to or I mean, I can go on and on with some of the references that we now have that we didn't have 2 or 3 years ago and the quality of wins that we've got. Our teams are high our morale in our teams is high. These sure gains are going to continue. Okay. I am going to move to talk a little bit about database.
And I do get more questions about database and I want to have I want to share some numbers with you on database as well. But I think we're going to get started with a video. And so what we've got is John Donovan, who is now the CEO of AT and T Communications, did a video for us. Obviously, we did some things as we announced our deal with AT and T. We can take questions if you want about it later.
But John did a video with us. So if we could roll, John? Let's go to that.
Long gone are the days of relying on traditional hardware intensive ways to build our network for this continued data explosion that's taking place on AT and T's network. Our network has seen a 250,000 percent increase in traffic come across it since only 2007. We see 168 petabytes of data travel over our network every average business day. And to put that in perspective, at the end of 2015, we had only 114 petabytes a day. Our internal IT migration to the cloud is essential to not only stay on top of this demand, but continuing to deliver the best customer service and new products and services on an accelerated timeline.
We're moving thousands of database and hundreds of petabytes into the cloud. Oracle is a leader in the cloud, and this collaboration aligns us to put together roadmaps that will be meaningful to AT and T and other Oracle customers. We remain one of the most aggressive cloud and software companies in the world. Having a collaboration with a company where you have confidence you can do all of this together is a huge deal. 2 key motivations in this new collaborative approach.
First, it shifts from our relationship from transactional to strategic, and it accelerates our movement to the cloud, Working with Oracle, it allows us to rapidly increase the speed of our cloud migration across the enterprise, while also improving cost structures. So we're excited because this agreement gives AT and T global access to Oracle's cloud portfolio offerings, both in the public cloud and on AT and T's integrated cloud. This includes Oracle's infrastructure as a service, platform as a service, database as a service and software as a service. AT and T is in the process of moving thousands of databases with hundreds of petabytes into the cloud. Oracle is going to address our specific need.
How do you tear down a massive database and regionally distribute it, so you can be really fast in how you're managing your IT application changes that rest on top of this data. This will fundamentally change how AT and T will do things. We don't have to waste our energy and time now on each and every database trying to determine how we're going to migrate to this new architecture. Instead, we've worked closely with Oracle to build a world class database roadmap to migrate an extremely large company from fixed databases to clouds. We're also looking at applications and within applications with capabilities like artificial intelligence and machine learning.
So let me give you a couple of specific examples. AT and T becomes Oracle's first database as a service deployment on a customer premise. This helps increase employee productivity, reduce IT costs and provides new flexibility in how we implement software as a service applications across our growing global enterprise. We also selected Oracle's field service cloud to further optimize our ability to schedule and dispatch for more than 70,000 field technicians. We're able to combine the field service cloud into our existing machine learning and big data capabilities, which will quickly increase the productivity, the on time arrival and the job duration accuracy of all of our field technicians.
Take workforce management for our dispatch function. We have 70,000 trucks that we dispatch every single day. It's one of the largest fleets in America and that can present administrative challenges. So on the efficiency side of it, if we're rapid and nimble, we can change dispatch strategies tonight and have it implemented tomorrow. We can start to think about not only what did we learn yesterday and how can we get smarter, we can bring in 3rd party data that allows you to do things like look at weather, neighborhood construction.
And instead of using an average time to complete a job, now all of a sudden your precision gets better and better and better and our truck rolls become more efficient and the company saves money and this cycle continues every day. Our customers get faster, better service from us because of this migration. And our hope is that we'll significantly reduce the appointment window. It's one of those rare virtuous cycles. It's better for the technicians.
It's better for the customers. There are 3 things. 1 is the liberation of data, just getting it to be usable to more people. The second is speed. We believe that we should be able to innovate faster, but in order to manifest that, you really have to materially speed up.
And the third thing is that we want to use data as a product. We want to move from the way we think of it data generating to data powering networks. It's subtle, but I think it's an important difference. This is new ground for everyone and should be viewed as one of the more exciting cloud driven projects in front of both companies. We have a lot of work to accomplish in a short period of time.
But I know we have 2 of the world's best companies working together, And we're already seeing great progress in our short amount of time together in this new agreement. I look forward to hearing about the progress all along the way. Thank you very
much. Yes. Thanks. That was a lot for John to do it. I really appreciate it.
Let me just give you some stats about AT and T. John touched on what a big out this, but it's not unlike many of our customers. There are 12,000 or so Oracle databases inside AT and T, Couple of exabytes worth of data across this enterprise. Not quite. Huge.
Huge. Inside that ecosystem, 500 databases are bigger than 5, 6 terabytes. It's only 4% of the databases. But it has 70% plus of AT and T's data and 4% of those databases. The ability to modernize those just the simple process of patching them.
You want to go patch all that stuff? You want to take the company down and patch it? That's the kind of problem John's faced with. And the only reason I wish he was here I love the video. The only reason I wish he was here I know one of you would have said, did you consider something else?
And you would have got a heck of a kick out of his answer. So, we'll get him out on the road, shortly because this is a lot of work we've got going together. But it's exciting and it's not while it's big in scale, it's not unlike the situation that most of our customers face. All right. There are a few choices now, but John touched on a couple of them by which you can buy, Oracle.
We made this announcement of BYOL. BYOL again means announcement of BYOL. BYOL again means bring your own license. I'm sure that was
covered yet today. You can
do it from on premise to the cloud. And let me be clear, we don't care.
We don't care. We don't care.
We don't care. We don't care. We don't care. We don't care. We don't care.
We don't care. We don't care. We don't care. We don't care. We don't care.
And let me be clear, we don't care. We're non denominational on how you buy, where you buy and how you use. We have lots of different ways to help you solve your problem. You can buy on premise. You can move to the Oracle public cloud.
You can bring your own licenses, as Stuart describes, to PaaS. You can do it in the public cloud. You can do it in the private cloud. In the private cloud, we manage it for you. You can see Oracle managed in both boxes.
The only difference in the two charts is the thing that says Oracle Cloud Data Center, Customer Data Center. Your choice. Same stuff, same OS, same platform, same version of the database, same everything, our labor. You're alleviating the risk of patching, of upgrading. We do the work.
This is our data database ecosystem, same way looking at the applications market. I did this over 4 years. I am in a good mood today, been a great week. I don't want to call anybody, but I get the question every now and then. You know, I think you guys are losing market share.
And I always find that how did you come to that conclusion? Well, you know, I looked at a thing from, MongoDB And they're going public and they look like they got a bunch of revenue And I must say, I start with I mean, you're kidding me with this stuff. I this is I'm going to stop. I'm going to get back on target here. So, this is this is not thoughtful analytics.
This is a big market. The market grows 3.5% per year. I've rounded up here to 4. Our 4 year CAGR by the way, let me go through it again. On premise support, on premise license, database as a service is 5%.
Now let me compare 3.5% that I've rounded to 4% to 5%. That means we're gaining share. That's how the math actually works. It isn't doing well, I'm not going to tell you again. That's how the math works.
These are the players in the market. There you can probably read Oracle. You might be able to read the next one and the next one. And you probably can't read the blizzard of players that come after. This is not my chart.
I just want
to be clear. I did not. This is not from
the Mark Herd Research Firm. This is from IDC Research. It has names like Microsoft. It's got Fujitsu. Some of the things that I find interesting is some of the names on here is actually Oracle, reported by them.
This is the reality of the market. The top 3 are still the top 3 from the year 2000. The market share of the 3 has changed 1% during that entire timeframe.
Okay?
These are the numbers. And by the way, I would love to appeal the part like SAP, which is Sybase plus HANA plus whatever else stuff they got in there. But this is an IDC report and I can't mess with it. So, this is the market. We have our biggest announcement by the way coming and I'll talk about that in a second.
Why do customers stay with Oracle? You just heard it. I mean, it's just the best database. It's the fastest. It's the most scalable.
It's the most secure and it costs the least to run. There's no business case to justify. I get a lot of people say, I hear this is always love this one. I hear people are moving off your database. And I was like, who?
Let's talk through them because those are the numbers. And there is no business case. When you get down to the point of what's the business case to justify the move, you may hear it. We don't. This is not what our people see in the marketplace.
We have a big sales force. And if you asked our sales force what are the issues they face with, this ain't it. In terms of new workloads, this really becomes a lot more interesting. New workloads on where they're going to go. Because I'd argue we're gaining share in the most important announcement we've made in database was made Sunday by Larry.
If you wanted to see a field sales force jacked up about something, I used to joke about, if I put the value of this database into a note and I put it in the mouth of, maybe even a dog and I have that dog run up to customers and hand them the note, I think I'd get business. I do. This is the way you motivated a sales org. So I explained to them, the good news is I have you guys. So you can imagine how this went.
This was a thrill of minute with these guys. So anyway, this is this has our sales force more jacked up than I've seen them in years. And this is a group that when you look at the numbers is winning. You got to buy 3 features to make this a reality. You got to buy multi tenant, rack.
And to get the SLAs you have to have Data Guard. Great features. You can bring your own license. It's automated, automatically provision, upgrade, patch, tune while running. I don't know how much these words mean to you.
To anybody in the database technical community, this is life. Most of our customers, if you don't have this data, when we release a patch and we implement it on our cloud, it will be 14 months later when that patch ripples its way through our user base. 14 months. We have customers very, very large customers who are very good who've accelerated that process to be 4 or 5 months. And their CEOs say 4 or 5 months, I'm exposed that you've got a patch that I haven't yet deployed through my through through my entire Oracle base.
And if I have a problem, whose risk is that? This changes that entire dynamic. That's as big a deal I'm telling you today with and this is now patching I was in a meeting with 1 of the biggest banks in this country with the CEO for an hour. We spent 30 minutes of the hour talking about patching, patching and speed of patching and what we could do to help them. I think you know guarantee we're guaranteeing at half the cost of Amazon, not a hard guarantee for us to make.
Reliability as long as you have Data Guard, you get that SLA. We're gaining share, our biggest release just made. Database ecosystem, we're up 6% in FY 'seventeen. So that 5% I showed you is the 4 year average, 6% is last year. And that's the reality of what's going on inside our database ecosystem.
The stuff Reggie is doing, getting the new startup companies, our next release. And I'm going to get you a little bit off of now just considering what is our D BaaS growth, but looking at this aggregated ecosystem because you're going to see an impact on license sales as a result of what I've just described.
All right. Ken?
Joel Fishbein from BTIG. Just wanted to follow-up on the proxy that was recently filed to talk about compensation and in there you had some pretty interesting targets, long term targets in terms of from both SaaS, IS and PaaS, longer term models. And I wanted to know if that's something that we can use to sort of benchmark you against and use to track against going forward?
Well, I can tell you that my husband and his wife will be benchmarking us as well the children since it's their inheritance. I'll tell you, these are targets we're going for. We wouldn't we don't earn anything if we don't get there. And we are very, very serious. I'm sure many of you have walked around Open World.
You saw customers here who we let you ask them their the questions. And you must see that the last piece of our strategy has now that rubber has hit the road, which is we are now ready to take production Oracle workloads into our cloud. That's why we've been so optimistic. That's why these things are in our comp plans because we are now ready. And we'll be, surprise, surprise, an overnight success, frankly, 40 years in the making.
The technology that Mark was talking about, that Larry announced on Sunday means it's time. It's time to bring the most important data of any company. And all that data is in Oracle databases. As you could see in market share, we are basically the market share of everybody else combined, okay? And that number goes up every year, not down.
And why is that? Because companies want their most important data in Oracle because it's way better. And now our comp plan goes ahead and shows you what we think we can do. Okay. I'm going to tone it down.
I'll run out of energy.
I thought it
was pretty good. Did you
want to answer that one?
No, no. I think I would say one thing that would be just to add to it is, it isn't just the 2 of us. It's our Board. It's Larry. I mean, we're when we put that out, we're collectively I mean, this isn't just really a comp plan.
I mean, this is us saying, this is where we think we're going to drive the company. And when you looked at each line, many of those lines sort of I think, the way we're working is we can't just go crazy on one line instead of another. It's a set of things that work together to what we think at the time we achieve. And by the way, there's nothing that says we can't achieve them quickly. So don't I also wouldn't take the time line to say there's some of those things in there that we think we can do faster than the time line you see laid out in the proxy.
So we're motivated to go get these things.
Okay. Thank you. Brian White, Drexel. On the Autonomous database, maybe you could give us a feel for how this is different than other database cycles? Should we expect market share gains here?
Are you going to reach new customers? Is this going to drive other pieces of the Oracle platform? Just some type of guidance on that would be great.
Listen, I don't plan to prognosticate anything other than to tell you, I think this is going to be the most popular thing we've done in years, just in years. I wish I could show you again, I love the benchmark of the enthusiasm of a sales force because it's they're motivated by simple things. They're not motivated by very complicated stories. This is not only amazing technology, it's easy to articulate, it's easy to describe. Our customer base has listen, typical CEOs, this is a problem that's changed in the market over the past 2 or 3 years.
It used to be you got hired and fired generally speaking on revenue performance, earnings performance, cash flow performance, stock price performance, all this stuff. Now you have the added problem of risk, risk of something happening in this poor situation at Equifax. You can go down many others. And the fact of what this does for you that nobody else can do. Who else is going to do this for you?
When you've got a new workload, unless it's a Tinker Toy workload that means nothing and you don't care if anybody steals it. Why would you pay more pay more money to have an insecure to have a workload that's unsecured? I don't know, maybe you've got some workloads that make sense. I'd like to pay more to have an unsecure workload. So this is going to be a lot of fun for us over the course of the next period of time.
And do I think it's going to drive more growth? Yes.
Yes. Let me talk to you about the way I look at Autonomous Database, okay? We have all wanted to change a tire while we're on a freeway. That's what this does. We've been working on this not for the past 2 years, but that's why I say it's 40 years in the making.
Because for those of you who followed us a long time, you remember when we started with Parallel Server, then rack. So you're running multiple databases. Let's say you've got 4 running, like 4 tires on a highway. Imagine you take one down for any reason. You slow down a bit, right?
Imagine if you'd now take that one, patch it, bring it back down on the highway and move to the next one. That technology, multi tenancy and active data guard. Remember, each one thought of differently. Now those 3 together and also using the experience that we gain in running 1,000, 100 of 1000, 1,000,000 ultimately of databases allow each customer to get the benefit of the whole. Catching and upgrading databases while they're hot.
That's been the issue. Do we believe this is going spark a lot of database sales? Yes. Do we are we absolutely sure that it will spark a lot of options? Yes, many in our customer base have RAC, not that many have active Data Guard.
Very few have multi tenancy. And we expect those customers to do one of 2 things. They will either add to their ULAs or buy additional licenses so that they can come to the cloud or they will use PaaS where they will rent those same features. So we think this is very big. For those of you who have wondered why are we so optimistic because we've seen this coming.
And BYOL, bring your own license. I know a lot of you are hearing us talking about it and Larry talked a little bit about it on the earnings call. And also the second piece of BYOL, which is universal credits, where our customers buy basically credits that they can burn down any way they want. They no longer have to say, I know exactly what I want when I buy it. And that's all I can get.
Now they have universal credits that get burned down as they need them. Again, immense amount of flexibility. So yes, we think this is going to increase our market share because we have done something that no other database and no other cloud service of a database, as far as I know, is even trying. So yes, we're very optimistic.
Yes. Hi, Kash Rangan, BFF Emer. Hi, right over here. Congrats, Safra and Mark. The conference vibes are definitely more positive than they've been in the
last couple of years. So certainly, something is going on in the customer base that we're able to pick up. A question for you, Safra. One is, if you're in the beginning stages of a big cycle where everything moves to the cloud, particularly Oracle databases, is this not a very capital intensive lower margin proposition? Maybe it's not.
But curious how we should think about your earlier vision for double digit earnings growth rate, not only this year, but presumably into the future in light of what looks to be a lot of capital that you would need? And one for you, Mark, the product portfolio seems to be widening every year that we come here. How are you changing or not changing the go to market and upgrading your sales force to be able to sell what looks to an increasingly complex set of products? Thank you.
Okay. So we've talked about this before. We've talked about the fact that we control virtually our entire supply chain, that we in fact make our own systems, that we also have the benefit of having an infrastructure that is optimized for our own workloads. And then as a result, we have an extremely performant infrastructure. Is it true that the more successful we are, the more capital we will have to deploy?
Yes. But because of our economies of scale and our optimized infrastructure, I think we're going to make it extremely profitably. While by the way, let me remind you, to the extent that the customer is bringing their own license as part of that ecosystem Mark was talking about, we still get support and they buy more licenses. So we're very, very optimistic in our ability to manage our investment, even though it is to some extent ahead of my ability to recognize some of the cloud revenue, there's a lot of revenue coming in. I think it's pretty straightforward.
You can even look just into our past. And you would have said, well, look at all those in the SaaS business. I mean, I think many of you wondered how we could possibly bring those kind of gross margins to the SaaS business. We have to build up remember with SaaS, it's not only compute and storage, straight database, you have to run the databases, you have the middleware, you have a very, very large infrastructure. We were able in that case to make that very profitable.
Again, I think we start benefiting from those economies of scale. Though it is true, we do make the capital investment often in advance of our ability to book the revenue from the cloud. In the platform side, we will get the benefit that I think many of you did not expect. You were thinking that in SaaS, like in SaaS, when you're no longer, let's say, using your PeopleSoft, you cancel your PeopleSoft support. Now you're just buying SaaS, which is renting your licenses.
With the platform, it's different potentially. Many customers that already have large investments in the database and want the additional features or want more unlimited capabilities, they're going to buy more licenses. They're going to continue paying support and they're going to deploy in our cloud.
By the way, that I think it's an interesting point. You cannot compare everything in PaaS to SaaS for the reason that Safra described. The SaaS application support is binary. Am I the using HR on premise or I'm using it on the cloud? We may do some things to smooth it out as you transition, but it's a fairly binary exercise, not so in database.
Take AT and T as an example. AT and T will be using on premise databases for years years, even though they'll be using databases in the cloud as we go forward more and more. They will do that in the construct of a ULA and a license agreement and that support will stay where it is and potentially may increase as they add options bring those licenses to cloud. So it's a different model in that respect. In terms of the margin and capital you're describing though, there is similarities.
If you remember what we did in SaaS and I can trust you we do, when we had a low gross margin, when we were building out our capacity several years ago. In Q4, I think our margins hit around 39% as we were deploying more capacity in start up data centers. Once you plunk down that unused capacity, then from there, everything really is a percent of bookings as you add capacity going forward. I'm not going to add more capacity if I don't have customers. And so the analog of trying to take a Microsoft or an Amazon that doesn't have all the cogs that we do is a mistaken analog.
We have a very different business model, a very different set of costs than they do. And so as we go through scaling up from there, it really is to Saffron's point, we'll pay more capital. But we look at an income statement, the expense gets offset with an offsetting booking that turns into revenue. To your question on the sales force, we haven't changed that much in our sales force cash. This year, we made one change.
We changed nothing this year in our applications sales force. We did not change many of our specialties in our tech ecosystem, but we did move what you would think of as our database rep and now call that a cloud platform rep. And so they are now again, remember, our principles are the same. We align our sales force by product, by buyer, by competitor. What changed over the past couple of years?
Our competitor. So we've adjusted to align for that competitor, say that we've really made no other significant go to market change. That is a change though, because what we see now is lining up against cloud ecosystems. And so that would be a change we've made, save that everything else extremely stable. Just to give you one more stat, because I just want to make sure, because every now and then I get some email about I'm hearing you made a massive change in your sales force, which again is just fake news.
So in the end, we had all of our territories, all of our comp plans, all of our training, all of our bosses done by, I don't know, June 10, 11, 12. So there's really just it's a stable sales force. And I would tell you, I'm coming out of this week with a big percentage of them here, probably the most jacked up sales force across apps and tech that we've had in years. And I hope you talk to them. I hope you talk to them while you're here.
What about it? I mean, that's where we're going. I mean, that's our plan. That's what we're planning on hitting. I mean, if we hit it, we hit it.
If we don't, I mean, we're doing our best. We are very optimistic on having a great year.
Sarah with Macquarie. How are you? I wanted to dig into that a little bit more on the BYOL. It seems to be probably the biggest area I'm getting incoming questions on. I know it's only been a couple of weeks.
But I do think that the impact on the financial model, if you could walk us through that a little bit more, Safra, would be really, really helpful.
Yes. I mean, I think I tried to explain it. I'll try again. I don't know, maybe I shouldn't explain it. Maybe you should explain it because I already did.
Again, I'm not sure because I think I tried to explain it, but obviously I didn't do a very good job. It basically is you can now buy a license and you can bring it to the cloud. You buy the license and you bring it to it. Then you have to procure the services in the cloud you need to run your license on. So think of it this way.
Let's pretend you had an Oracle license. And you said, I don't want to run it on Oracle, but I want to run it on the cloud. I could bring my license and run it on in certain name here, cloud. I would then have to procure infrastructure from that cloud provider, some automation from that cloud provider, a suite of services, whatever they might be, in addition to the license that I'm bringing. And I would procure that from that cloud provider.
And I would then bring my license, I would continue to pay support to Oracle for that license. All we're saying here is you now have the exact same model with Oracle, you're bringing that license, continuing to pay support for that license and you're now procuring all of those services also from us. So what you would do in the financial model to your question is, you would keep support exactly where it was. You might increase your license if you wanted to buy those features as licenses and pay more support. And then you would add the services you procured from Oracle and the cloud.
And then you would add those together and that would be the impact on the income statement. I don't know if that helped you or more I'd help continue. Okay. Thank you, sir.
Because the alternative would have been to rent your license on past and that would have been what you would have canceled your database license support and you would have rented it. Our customers don't want to do that. I mean, some want to rent it. That's fine.
But you could. You can. We're going to say, fine, you can do that. We just don't think they want to pay twice. So we're trying to make it as simple as we can.
This is the perfect analog. You can now take this bill of materials from this cloud provider. You can bring your license to that one or you can bring it to us and compare our situation with our SLA, with our performance, our cost, our security against this provider. And let me just if it isn't clear enough, we think we're going to win like every time. And the impact on the income statement is those services from the cloud will then show up in our income statement as opposed to somebody else's.
But if a customer by the way, we're not dictating again, I want to make sure it's clear. We're not telling the customer you got to do it this way. If the customer says, I'm willing to give up the support and repurchase the license, so to speak, in a service in the cloud, God be with you.
Hi guys, it's Adam Holt from MoffettNathanson.
Gosh, hi Adam.
How are you?
I'm good.
You look good.
See you. That's very nice of you. Thank you.
Don't let us bother you.
So a lot of great detail on the different elements of the model transitioning, if you will. If I could just boil it down to 2 simple questions. Throughout this shift, would you expect your core maintenance business to continue to grow? And over the next 3 to 5 years, would you expect the IAS and PaaS business to grow faster than the SaaS business or vice versa?
Can I get the first one?
Sure.
Support is going to go up. Is that your question? Is support going
to go up?
Yes. Yes. We believe support goes up.
Okay. What
was the second question again? Is infrastructure going to go faster than SaaS? Yes. Yes. Yes.
Listen, I think that I don't always like the compare the intramural competition, because I think we're going to continue to do really, really well in SaaS. I Sanford is always because I go on and on about our apps business. I am so positive on our applications position. It's not easy for me to I'm probably not getting my enthusiasm across to you because we're winning and our people feel it. And we see it in our pipeline and that's going to we're getting better.
Listen, I told I think I told the same crowd or at least the majority were here 3 or 4 years ago. We're making a lot of mistakes. Every day we're learning. We made a lot of mistakes. And we learned in fact, Larry and I'd be on the phone, sometimes I'd say, listen, this is how this works.
And he'd be like, geez, never thought of that. I can't, me neither. And we learned these lessons the hard way. We learned it through acquisitions. We learned it for trying.
We're past the learning phase and we're on offense. So I don't want to make the statement one that I think somehow I said infrastructure is growing and SaaS is not. I think our application business is going to gain significant market share. I believe at a point in time, we will pass SAP as the number one applications company in the world, burn on. I believe that to my core.
Now do I think we're going to sell more SaaS than SaaS? Yes, I do. I think we're going to sell more infrastructure, yes, because of the very nature of the value proposition that we just described with Sarah. It's too attractive of a value proposition over time. Now just remember one thing about the support point.
The support point in apps is still a different point to a degree than it is in tech. Because in apps, if you could ask me to wave a magic wand, I would move it to SaaS. And we're going to make a hell of a lot of money in doing that. And I think our customers I think that'll take time though. If we look at our pipeline, I don't think that happens next week.
I don't think it happens next month. I don't think it happens next year. But I think you will see a continual flow of our customers as we get to every new release, you will see a percentage of our user base moving more and more to SaaS and that's not a bad thing. That's a good thing for us.
Hey guys, Alex Zukin with Piper Jaffray. Maybe to your last point, Mark, when
do you how
do you expect the slope of that curve in terms of new customers versus conversion to trend over the next 1 to 2 years? And then with respect to BYOL, you're giving customers a significant amount of choice. And I'm wondering how do you expect them to deploy public cloud versus cloud to customer?
Yes. A couple of points, I think. First on your point about this percentage in our cloud, I think we're going to attract continue to attract a lot of upper mid market new customers. Most of that market sits on the application platform of others. We talk a lot about the names you all know and hear about.
Most of the almost 50% of the market in apps is others. Names of what's the in for? They have like, I don't know, 10 brands that are underneath that umbrella. And it's a blizzard of brands just in there, plus a whole bunch of other brands. And most of those are very old legacy applications.
I think all of those move, all of those move. It might be 2, might be 3, might be 4, all of those will move. And who's in the best shape to get those? I mean, we have an entire automated fleet of ground up modern applications. So I think we continue with a pretty strong new logo cadence.
Do I think our customers will move? Yes, I think You'll see a lot of our big customers moving part of an application at a time. A lot of people like, for example, in ERP moving budgeting and planning. A lot of people in our base moving procurement and moving at a piece at a time as they roll out. The truth of the matter is, I'm not trying to lock it into a certain percentage.
We're trying to get into a position where we get the breadth of awareness. Our reference base, particularly in this country, is now so deep on financials. We're at 5,000 customers now, roughly speaking. So the depth of our references is such that we had a mid market roundtable. I mean, to some degree, I wish you guys could see some of these roundtables that we go into with customers.
I mean the thought that they can now not do the work and they can pass that work to us. I mean, are you kidding? I don't have we had the founder of Lyft in my keynote. No data center, no IP. I mean, this is it.
It is like with the Oracle. That's what we do. This is what's in the Marzog. I think we'll continue a very strong new logo cadence. You had one more question as well.
My belief is what Saffra said. I think and I know we've been trying to get us to repeat it over and over again. I think what cut what I think customers will do on average is more of them will say, let me buy a multi tenant, let me buy Data Guard, half our base, a little less has rack, be a lot of people buy the rest of the base buying rack, then I want to take that with the cloud. I need to procure the services to go run. That's what I think the average persona will be of the customer that will do it.
But as we just described, I mean, you'll see all sorts of stuff that will occur. I think customers will go while trying to get this SLA. The fact I can buy Data Guard and get this SLA, what? Are you kidding? I think this will be a no brainer.
The second that I can get, I can get rack and I can get multi tenant and now I can get you're telling me you're now going to patch all of this for me. Do I think some people will choose to do customer cloud? That will depend a little bit on geography and a little bit on industry. As you get to more of these regulated industries where there's a regulator that's got a thesis on how IT should work, you'll see Thanks. Kirk,
Thanks. Kirk Materne with Evercore ISI. Mark, just to double click a little bit on the ERP and financials in particular, it's been a very fragmented market for a long time and it's been very difficult to get a customer to move off a financial system onto another alternative. What's going on that's sort of spurring customers to, I guess, relook at Oracle or reinvestigate what you all have going on versus their prior decision in the last cycle, in the on premise cycle? And then just really quickly for Safra, if I can, you were pushing up against prior peak margins pretty soon.
A lot of people would push back and say in a cloud business, you can't get sort past where you guys were. Just sort of a quick response to that if that's someone's sort of impression. Thanks.
Sure. I'll start. It turns out like in financials, when you talk to CFOs, it turns out that CFOs actually would love to spend less money. That turns out to be actually a motivator for them. 2nd, getting out of the systems integrator hook is a really big deal.
Most of these customers haven't had a new feature in years years years. Their ability to get mobility, their ability to get reporting severely limited the opportunity to apply anything like machine learning, any of the new features coming not present in their existing system. Most of those systems have been customized. Any of those customers that are facing a release, an upgrade that then have to repay for the same customizations they had to pay for before, the opportunity to have cost avoidance, the ability now to move into a modern ground up application where I get integrated analytics, I get and I get somebody else doing the features for me and it costs less all at the same time, very attractive. I would tell you that's probably something that's excited us.
If I dialed it back 3 or 4 years, I think the speed Jeff is here, Jeff makes a lot of sales calls with us. I mean, the speed and the number of people talking about this probably as high as we've seen it. So but those are the core drivers.
I think you're going to have to watch this play out. The economies of scale that we bring to this are very profound, frankly. I mean, you've seen it with other companies and it's very important for us to continue to invest in the growth, but we can do both. I think for years upon years, we have told you margin goals and plans, and we have always gotten to them, always, always. I really don't think there's ever been a time where we've told you about a target of getting to a gross margin where we haven't gotten to it.
And we believe that part is a lot easier for us to control because the whole cost of goods sold, the whole cost envelope, we understand it well enough so that when we mix that with the bookings and have a clear line of sight to the revenue, we think we can get there. And we transitioned from the license business in the application side to the SaaS business. And yes, the margins were lower at one point and got to where we said were going to get to. And really, I mean, I don't think any of you really thought we would get there in this time frame. Now in the BYOL and the PaaS, IaaS ecosystem, there is a large pool of money for us to work with.
And we are bringing so much value for our customers that it is quite obvious to them. I mean, you got to ask a question today. And I think it was Merck that happened to get the question. How much of your installed base are you going to bring to the Oracle Cloud, your installed base of your databases? I think she said substantially all, okay?
So that's what we're talking about. And when you think about the world's most important data and all of that, let's not say all, substantially all of it coming to us, you have to understand that the economies of scale will really spin out of control at that point. And that's why we're so excited about this. That's why Larry is so excited about this.
Brad Zelnick with Credit Suisse. My question is for Mark. Mark, I'm hoping you can help us to frame how big of an opportunity of an incremental opportunity Autonomous Database really is. Because I think the perception over time is that Oracle releases a new version of its database, most customers are on maintenance. But this time, if I'm correct, this is the first time in 4 decades that you have this kind of vessel A around the database.
And if I'm also correct, those three options together are equal to about the price of Enterprise Edition of the core database. So when I put those together, can you maybe just give us a sense, I don't expect you have numbers at the ready, but the penetration of those three options today within the base to see where the headroom is? And maybe in addition to that, if you can just share any feedback, you've been doing customer meetings all week. What are some of the wild responses and reactions that you've been getting? Thanks.
Well, first of all, I'm not falling for the modeling question. So I think at the end, we need to I'm really a big believer, we need to do stuff as opposed
to say stuff. And so I really don't like the
The best thing we can do is just go do it and just go execute. And that's what we're focused on. It's just we're not trying to I mean, I reflect back. Mean, we've had 2 quarters of double digit EPS growth. We've had whatever was in Q3, I think was 8%, 9% EPS.
We've moved the company forward. And to Sanford's point, I think a lot of people didn't know if we'd make this transition, what we have. And we're now in yet another one of these exciting place. SaaS was a big, big opportunity for us to transition our applications business. And now look at the broken field running we have ahead of us.
And I don't even want to prognosticate that because I'm so if I actually told you what was in my head, you wouldn't believe me. So I'm just not going to say it because I think we are going to wind up I've already said what I thought earlier. On the infrastructure side, what I believe will happen, without getting into numbers and by the way, I think your view is roughly right. It might even be a little better than what you described, okay? But those are the core features and you're in the right direction of what I think will happen.
I think those will become standard features that people will go out to buy. I believe again, as the average persona of our data customer database customers, I would go buy those features. I would then bring them to the Oracle Cloud. And I would then buy the services I want a la carte as I brought my licenses to the Oracle Cloud. I would make a decision if I had to that said I've got a regulator who's breathing down my back, who's making life tough for me.
And I'd say, okay, Oracle come do it for me in my data center. And if I didn't have a regulator around my back, I'd go to the Oracle public cloud. And I wouldn't even mess with that. Many of our customers, I showed a stat earlier in the week, year over year number of corporate data centers is down 15%. Customers want to get out of all of this infrastructure.
They want somebody else doing the work for them. So it isn't just the fact that they'll get these features and get the SLA. The fact they transfer, Brett, I mean, I can't emphasize enough, all of this patching, all of this work to us is as big a benefit as anything else we could talk about. So are they the customers today? I'd say, listen, I get the opportunity.
I think, without exception of all my speeches, I think I probably touched 7, 650 customers this week, in various roundtables. And they mix between our apps business and our tech business. And I think the most enthusiastic thing is exactly what we're talking about. Both people that have old, old applications that want to move and they get the opportunity for somebody else to do the work And these applications are really old. On the tech side of our business, the fact that I can get out of doing all this damn work, lower my TCO and get a better service while I do it.
And let's face it, I haven't said their name much today, but Amazon can't do this. They can't do it. It's not a question of how close they can't do it.
Back here.
Hi, Walter Pritchard from Citi. Just following up on the earlier question about the management goals. I think one of the elements is you're talking about IaaS and PaaS growing by about 5 fold over the period to $10,000,000,000 But the margins, the gross margins actually the goal is quite low, I think 30%, which we look at those businesses and probably expect that as you get scale, substantial scale, you would get actually margin uplift from here. And I'm wondering what are the conditions or drivers that would bring those margins actually lower as you get substantial scale in IOs and PaaS?
Lower than 30? Yes.
They're substantially above 30 today. So we would expect if they're at almost twice 30 today and you're going to get 5 times bigger that your margins would go up from where they are today, not down towards 30?
Yes. They will. It will.
You're saying it's okay. You'd like us to beat the goal?
Yes. We'd like to beat the goal.
We would too.
There are a few that All the we're in. Yes. It's going to be at any one time as we're doing. It really is dependent on how fast we grow. And so there could be a period of really hyper growth where the margins are very close to 30.
And then frankly, as we slow down, the margins will in fact increase. So there is that battle between it. But the reality is that even at our fastest growth rates, we should be at a point where they are 30 should be something we should be able to hit most of the time.
But I agree with you that there's some goals in there that are higher and so forth than others. I mean, we expect to make them all.
Yes. Can I comment on one other thing though that we got a question earlier about when customers are in their own and all of that? I just want to talk about Oracle's own use of financials. And I was going through an operations review with our financial team. And we had see, many of you don't realize, but often we deploy something inside in our own private cloud really often years before it's available in the public cloud.
And one of the applications that we had deployed privately a few years ago now was planning and budgeting. And my own finance team, we have a lot of priorities, internal technical priorities, etcetera. But this particular team very much wanted to go to the public cloud. And let me tell you what happened when we did. Not only did our performance did the performance of the system improve by basically 100%.
But because we were now in the most modern version and it was implemented in the most vanilla straightforward way and it was the most current. We got so many additional features that we were able to deploy 90 one full time equivalents. So people who had been working on the system doing different things with the numbers to make them easily accessible and understandable by the management team, 91 full time equivalents were released to go do other things. Now that's the kind of experience our customers are having. This year, we decided to put a PaaS, IaaS group of customers.
Last year, I think we had a SaaS group for you all. So that's what's going on. And I think I got we got a question about how SaaS is going. Let me just make sure we're clear. Tom has talked about version 13.
This is an extremely, extremely important version. And I'll tell you why, because now it includes a lot of sophistication in the supply chain manufacturing piece of our cloud SaaS applications. Why do those matter so much? Because many, not all, but many of Oracle E Business Suite customers are discrete manufacturers. They have self selected that they like sweets, e business suite.
Also JD Edwards customers, they like it all packaged up together. They like it to work well together. This should be an extremely big year for those customers. So many of them have been waiting for this release. They've been fooling around, around the edges, but they're looking at deploying in the next couple of years.
So this is a very big so even though all we're doing around here is talking about ISM PaaS because our database installed base is so enormous and so important. Do not take your eye off the fact that the E Business Suite crowd has not all shifted yet because some of them have been waiting for things and that bell is ringing right now.
What would happen if we converted them from their support revenue, we would get 3x their support revenue in SaaS revenue. Just if I didn't make that point clear earlier, so this would be a good thing. And in Q1, to Sanford's point, we closed a lot of those many of those deals we closed in ERP, some very important logos were Supply Chain. And this Release 13 is now the 2nd release of manufacturing in the U. S, which is always a very important release for us.
So now we're into a different dialogue with the rest of our ERP user base. Now with Release 14, now you get everything in Release 13 now goes global. So you start to begin to get this ripple effect through our entire install base. You just wonder what a double digit $1,000,000,000 apps company doing what we're doing in the marketplace is worth standalone. But we're not doing that, right?
But just we could.
We told these guys a long time ago, many of you have come back for more agony today, just like last year, and you've been coming for the past 10 plus years. And we told you that we're terrible losers. And we tried to explain to you how we want to be number 1 in every market. And the reality is SAP has about 22% market share and we got 20%. Now many of you remember when they were 5 times our size.
That is the only market in which we're in really where we had been in, in which we weren't number 1. This is our move. Remember, sitting here with the same really expensive terrible lunch and us telling you how we would be number 1 in apps and that we were going to do it with this move to the cloud. This is what we were talking about, okay?
By the way, I'd add X, I
can't say. Their model will work for a while. The license the licensing up your base, we know how to do that. That will work for a while. Long run, these customers have to move to next generation of applications.
They have to move.
Maybe time for one last question.
Yes, this thing here next to me says 0. That's it. So you've made the decision, Ken. Okay.
I'll take 0 time. Okay.
Thank you. Yes, exactly.
Hi, Mark and Safford. It's John DiFucci from Jefferies.
Hi, John.
So Mark, thanks for going through the cloud model, the steps for the cloud model today. And I have a sort of tactical question because I've been asked this question ever since you guys reported results. And it has to do with the guidance for cloud revenue for next quarter. Can you talk about why maybe the guidance is less of a sequential uptick than many of us may have had in our models? And then I have a quick follow-up after that.
I think you hinted towards it when you talked about some latency sometimes between ARR and revenue recognition.
Well, you have lots of moving factors. So again, I wouldn't try to get to if you've got a spreadsheet, okay, I'm not going to do it. But if you've got something out there and you're trying to just fill this in and map every number, there are variables you have to deal with, So let me go back through the variables again. If we book, we don't everything doesn't auto provision at the time of a book. So depending on what get what got booked and what pillar where, there can be more implementation to do to get something and the more ERP that we sell.
This is good news by the way, but short term, it is a longer provisioning time to provision ERP. It can also hit to some degree in HCM. For example, it's shorter to provision in something like marketing, some aspects of sales automation are faster. But for example, what Doug demoed CPQ that takes longer to implement. So there's different provisioning times.
Cloud of customer, for example, much longer to provision. We got to get data centers ready and all this stuff. So it's not a perfect science. Then you get the impact of the seasonality of our renewals. So our biggest ARR quarter is still typically Q4 ARR.
And so when the ARR comes back, if we have 1 year renewals or 2 year renewals, depending on when those are, you would see the most renewals, the cancellation rate potentially would see its highest. It's very different from the support model would hit sort of in that Q end of Q4, Q1, Q2 time frame. But again, I just caution you to try to make too perfect a science out of this because there's still a number of variables that go on. The big issue is if you just end of day look at our ARR over a couple of 3 years, go look at our revenue base over a couple of 3 years, go look at the renewal rate over a couple of 3 years, the revenue is roughly right. And I mean, it's within chump change of being right.
It may go up or down seasonally quarter to quarter, but that model is the flow. So after careful analysis, my determination of the best thing for applications business is just to sell more.
Thanks. Thanks. Okay.
I think Ken is
going to let me
follow-up. There
you go. This is absurd. No, it's not.
It's not at all. I'm sorry. But so should we be thinking about this too, especially with that latency issue?
Wait a second. This is
version 2 of the same question. No, no. Okay.
Because it's just quick. 3 years ago, there was a sales incentive thing where you would sign ARR. Sales incentive thing. You'd sign ARR, but then you didn't start recognize the revenue for like 6 to 9 months.
We had these are called promotions, not a sales thing. So this is a promotion, yes.
Sales promotions. So what happened for those of us who because we don't we model with all of the information we have. We got less revenue than we thought and then all of a sudden we got more revenue than we thought we could get a few quarters down. Should we sort of expect to see something like that this time around too? Again, let
me try one more time. Over the long run being defined as over several quarters, this will smooth. I'm trying to give you the caveats that occur within any given quarter. I'm just looking over here. Am I doing this effective?
Thank you very much. I just like to look to the team to say, yes, oh, no, you're doing exactly the way. It goes this way. We have a revenue base. 1% of our revenue base is up I did it on an annual basis is up for renewal.
The percent of ATR available to renew will fluctuate in a quarter and it typically anniversaries relative to the ARR we sold in prior periods. So if you know the ARR, what you don't know is the length of contract. The length of contract inside our SaaS space is lengthening. It's getting longer. Why?
Because ERP is a and HCM, very sticky applications are a bigger and bigger percentage of what is in our ARR. So contract length is going longer. So to be able to figure out how the revenue works, you would have to know the ATR by quarter and frankly, you'd have to know it by pillar, because each pillar has a little different dynamic. And then you layer on any new and expansion ARR on top of the revenue base minus whatever is not renewed plus the ARR. Then you have the dynamic in the ARR of how quickly that's provisioned.
That could be different based on pillar and different based on cloud of customer. All of that though over the course of a year should 18 months move out. So that even though you could have some dips and valleys and so forth based on these variables, it all works out. Thank you.
Thank you. Bye, guys.
The great thing about not being CEO anymore is I don't have to dress up. So whatever you guys want to talk about. Yes, sir. The lights are pretty can you dim the lights a little bit? I really can't see any faces out there.
Okay.
All right.
I'm good.
Hi, Larry. Karl Keirstead at Deutsche Bank. Thanks for coming. I know a lot of this event has been about the move to the cloud. But actually I wanted to talk to you about the on premise space.
One of the interesting things I think about Oracle's numbers in the last couple of quarters is that it's actually been the on prem license numbers that have surprised on the upside. And I'm curious as you're talking to customers, Larry, do you think there's any change in behavior or maybe the pace of cloud migration is slowing at all? And maybe you could explain what's happening because we're seeing it not just with your numbers, but with some other infrastructure software and hardware firms.
Okay. So I can speak to our numbers. Our applications migration to the cloud and our database migration to the cloud are is totally different. I mean, it couldn't be more different. In the database migration to the cloud, we're expecting you to take your existing versions of Oracle and we'll keep upgrading them obviously, we just came up with a big announcement, the autonomous version of Oracle.
We're expecting you to migrate your Oracle database workloads to the cloud.
So just maybe lift up
what you're currently doing on premise and move it to the cloud. We're not expecting any technology change whatsoever, any migration from X to Y, where you go from Oracle on prem to Oracle in the cloud. Let me describe our application migration. We're expecting you to stop using SAP, well, actually, let me just talk about Oracle. You stop using PeopleSoft and you implement Fusion Financials.
You stop using Oracle E Business Suite, you stop paying support on Oracle E Business Suite and you migrate and you move to a totally new product Fusion Financials. You stop using JD Edwards, and you stop paying support on JD Edwards and you migrate to a totally new financial suite, Fusion Financials. Nothing could be more different. We expect EBIT we'd be thrilled if E Business Suite support went to 0 and all of those customers moved to Fusion Financials, our revenue would approximately triple and our profits would probably double. So more than double probably.
So again, couldn't be more different. There is no reason why our database support numbers should ever go down. They should go up forever. Especially now, you're going to take your you own the database, you own the database and you can take it if you want to, you can take it to Amazon. And if you take it to Amazon, you continue paying us support for those licenses.
Or you can take it to Oracle, we'll bring your own license and if you and you continue paying us support for those licenses. There's really not much of a migration going on on the text on the database side of the business, not a business migration. You're just moving your Oracle workloads from your data center to our data center. We're adding more value. Therefore, you're paying us more rather than building your own data center, you're renting our data center rather than buying your servers from HP, you're renting servers from us rather than getting disk storage from EMC, you're getting disk storage from us.
But you're not stopping anything. You're not stopping using the Oracle database. You're not stopping paying support. In fact, theoretically, you're going to need more. And you're going to need more options.
You're going to need you want to run the autonomous database, you're going to need the multi tenant option. If you want to run the autonomous database, you're going to need the rack option. If you want 99.995 reliability, you're going to need our disaster recovery option called Active Data Guard. And by the way, Amazon doesn't have RAC and they don't have Active Data Guard. They don't have these kinds of things.
So we think they're going to come to our cloud, not to someone else's cloud. We think we can run the Oracle workloads a lot better than anybody else. By better, I mean, clearly more reliably, clearly more securely, clearly faster. And then everyone said, yes, yes, but you guys are really expensive. Well, if you run 5 times faster and we tested a whole bunch of Oracle workloads at Amazon and these are real workloads from real customers whose names you've seen up here.
These are not made up database benchmarks. These are real workloads customers give us to test our database. And we average 7 times faster than Amazon and 5 times less expensive. In other words, Amazon's 5 costs you 5x to run the same workload, the same database, the same queries, the same everything. You run it at Amazon, your Amazon bill will be 5 times your Oracle bill.
Because if we run it 7 times faster, for every compute second we charge you for, Amazon charges you for 7. So this performance difference translates into a gigantic cost differential. So they're not competitive. They're not close to competitive. I read articles and say, well, Amazon's got this RDS service and they can automatically patch.
They can automatically patch Oracle 2. Well, it depends what you mean by automatically. They can take the database down, take it offline, run some scripts against it to apply a patch and then bring the database back online. They can do
that, they do do
that. That's not what we do. With Oracle, the database never comes down, it never stops running. By the way, there's real cost associated with taking these things down and making services not available. But forget the cost, It takes people also to run these scripts and run and patch the database and bring it down and bring it back up.
With Oracle, it's autonomous. The database patch itself, there are no people involved. That's very inexpensive. There aren't a lot of there's no pilot error because there's no pilots. But the amazing thing is the system never comes down, never comes down.
We patch it while running. It takes the patch of thing takes a fraction of a second. When they do the patches or major upgrades, it can take hours and days. Now, I mean, let me say it again, hours and days. So they're just not competitive.
They're not even close to competitive. And they don't have and they will never have the autonomous database. They'll never have anything like that. So with our BYOL pricing, we don't expect people to go through as a transition. We'd expect them to take their existing Oracle licenses.
They might have to buy a few extra options like multi tenancy. They want to run the Autonomous Database, which is the license business, if you will. And people think of the license business doing well, meaning the on premise business is doing well. It's not exactly they're close, but they're not the same. You buy license options.
If you want to run the autonomous database in our cloud, you buy the multi tenancy license to do it. So we're optimistic about our support going up. Our license business should be fine. We tend to keep selling Oracle database licenses with the bring your own license model. Set that aside.
That is not the case over in applications. There is no Fusion database license. There is nothing like a Fusion database license. There is no support associated with Fusion database license. There you've moved from a purely, if you will, on premise product to a purely cloud product.
Now there is this mid range stopping point that we have, which you can lift up your e business suite product kind of as is, and you can run it on our autonomous database and infrastructure as a service. So you can take SAP applications, for example, and move them to our cloud. And you run the SAP application on our infrastructure as a service. They've certified SAP has. And you run the Oracle database that's behind the SAP application, you run that on our PaaS, our database as a service.
So you can lift and shift existing on premise application workloads and move them to the cloud, but that's not SaaS. That's a combination, turns out to be the application runs on infrastructure as a service and the database runs on PaaS. So I'd just like to distinguish those 2 separate businesses, which have very different transitional characteristics, very, very different characteristics. Our tech business will always have a support component because of PaaS. Our tech business will even if everyone moves to the cloud, everyone moves to the licenses, buying more licenses and buying more options, paying support.
Not the case. If everyone moves to our applications, then there will be no residue from those applications. There'll be no more support fees, nothing. They'll all disappear. And so and we moved into the SaaS business long before we moved into the PaaS business.
We started working on our SaaS more than a decade ago. In fact, the very first we were now with the acquisition of NetSuite, we were the 1st cloud company on the planet Earth. The 1st SaaS company on the planet Earth was NetSuite. The 2nd major SaaS company on the planet Earth was salesforce.com. And I was involved with starting both of them.
But that was the first NetSuite was the first cloud company. And it's got to say 20 years old now, close. And Amazon started about 10 years ago, but very different. I mean, you really can divide the cloud into 2 major segments. The people who wrote applications for the cloud where NetSuite was the pioneer and then people who were renting infrastructure on the cloud where Amazon was the pioneer about a decade ago.
But there are very separate businesses. We entered one long before we entered the other. The transitional characteristics are very, very different. Sorry, that was a very long answer to your question. Yes.
Larry, Kash Rangan with Bank of America Merrill Lynch. How are you?
Good. Thank you. Good to see you, Kash.
Excellent. With all the shifts in the database technology landscape over the last 20 years or so, with this autonomous database theme that you're pivoting yourself around, when you look at AWS, Google, Microsoft, they've made big investments in AI as well. Truly how truly differentiating could this
be for Oracle relative to
the other guys? Thank you.
Okay. So there's 2 parts. You're absolutely right. In fact, Google is really good at machine learning, I think. Amazon is really good at machine learning.
Tesla is really good at machine learning. There are a lot of people that are really good at machine learning, Amazon is one of them. But you know the problem, Kash, You know the problem? They don't have a database to automate. What's their database?
Redshift? Aurora? We developed Aurora. They don't? Aurora is MySQL.
We develop Aurora. And they just picked up a chunk of open source stuff that is 20 years I think 20 years out of date and they rent it on Amazon, that's called Redshift. And they could they can't really automate Redshift. Let me tell you some of the problems. One of the things that's very important, I think, is being able to upgrade or put in security patch automate security patching while the database is still running.
That's a database that's a combination of a security feature and a database feature. For us to do that, we have to have RAC and our automated security patching. You need 2 features to do that. You need to be able to change something while it's running. The way we do it, the way we do it is we quiesce you by the way, RAC is real application clusters, it's taking a bunch of non shared memory computers and having them operate on the same database.
No one else has this. One of the unique things we have. In fact, the closest company to have something like that is IBM and they had it with their mainframe version of DB2. They had something like RAC. But Microsoft sure doesn't have it and Amazon, oh my God, I mean Microsoft's 10 years ahead of Amazon in database.
Amazon doesn't have databases. Amazon took a public domain, 2 couple of public domain databases They were that were open source, they made them closed source. They basically forked them and rent them. That's what they do. That's what Redshift is.
These are not no one's invested in these systems for a decade. So to patch a database online, you have to have this feature called RAC where you have multiple computers accessing the same data. That's a very and changing the same data and running at the same time. It's a very tricky problem. It's a very tricky what's called the locking problem distributed locking problem.
Anyways, very hard computer science. We've done it for a long time. Amazon doesn't have it. They have nothing like it. And if it ever showed up, it would be developed by us as part of MySQL, not certainly not by part of Amazon.
Amazon has no expertise in database. Amazon runs their entire operation on Oracle. Do you think they run on Aurora or Redshift? They're one of our biggest customers in the world. They gave us $60,000,000 last year support and license.
They've been one of our biggest customers forever. They've had Aurora they've had the cloud for a decade. They haven't gotten to you know who's not on Amazon? Amazon's not on Amazon. I know they're going to kill us.
Everyone else is going to go to Amazon, but Amazon sure isn't. They that technology, yes, they've got the, you're totally right. They're really good at machine learning. By the way, and so is Tesla. They're a bunch of new companies that are very good at machine learning.
And they've applied the machine learning for digital assistance or self driving cars or what have you. But applying it to database, you have to have a database. And to be able to patch while the system is running, you have to have something like RAC to be able to provide real disaster recovery. You have to have something like Active Data Guard. They don't have anything remotely like this.
They don't have good query processing. We took workloads off of Redshift and ran them on Oracle and Redshift took 15 times longer. I know you didn't believe me when I said this about exited, exited 50 times faster or 10 times faster and all that. But we published the benchmarks there on our website, go look at them there. They come from real companies.
You take a Redshift workload and you run it on Oracle, it's 15 times faster. I said, who cares? When you're charging by the second, you care. 15 times faster means Amazon's we're 15 times faster, Amazon's 15 times more expensive because they're about the same price per second. Actually, we're more per second, but not 15 times more.
They the problem isn't that they don't have the machine learning half of the equation. They don't have the database half of the equation. And not many people use Redshift or Aurora anyway. That's not our concern Redshift and Aurora. Our concern is people taking Oracle workloads to Amazon.
That's our worry. If you say, do we think people are going to move an Oracle workload to Redshift or Aurora? No. No, a new don't get me wrong. A new developer who wants everything for free the 1st year and Amazon has done a very good job at tracking new developers, they're starting over and can they use some of these technologies and work around some of the limitations?
Sure, I got it. That's not our primary concern. Our primary concern is preserving our majority market share in the database business. In fact, increasing the market share, our market share at a higher rate than we're currently increasing at. Our database business continues to grow.
We think it should be growing much faster. We're more than half of the market. We'd like to be we'd like to have what I used to call gate share. Gate share is nice. And in the era of the Internet, that's it's possible.
You see network effects and the possibility of getting very, very large market shares. So our concern was people taking Oracle workloads to Amazon because Oracle is a very sophisticated database. But we just do our cloud, we've made a bunch of investments in our cloud, added a lot of AI to our cloud, added a lot of features to our cloud, where we now run our database 5 times faster in our cloud than Amazon can run it. It's not 15 times, not Redshift. And then Oracle is a lot better than Redshift.
But we run our database or the Oracle database 5 times faster. They can't compete with that. We patch when the database is running. They can't compete with that. We upgrade the database while it's running.
They can't compete with that. We have a 99.995 availability guarantee. They can't compete with that and we will sign a contract. You can take any Oracle workload, you can take any Redshift workload and when we come out with it in June, any Aurora workload, we don't even look at it, bring your bill from Amazon and we will cut that bill in half, guaranteed, we'll put it in a contract to all comers. And they can't compete because their systems are primitive and slow.
I mean, you ask yourself, when did Amazon build Redshift anyway? How many people does Amazon have working on Redshift? Where did it come from? Where did Redshift did they the Amazon engineering team build Redshift? No.
The Amazon engineering team, are they investing huge amounts in Aurora? How did they get this great data Oracle killer? From Oracle. I mean, it's we own MySQL. We are not worried about MySQL.
So again, the there are 3 pretty good databases on the planet Earth, relational databases on the planet Earth. 1 belongs to us, 1 belongs to IBM and 1 belongs to Microsoft. Amazon doesn't have any. Being good at AI, you can help them solve this problem. Yes, sir.
Larry, Alex Zugan from Piper Jaffray. I wanted to ask a question. Safra made a comment that Oracle is finally ready to take on the application side mission critical production workloads to the cloud and that's a big deal. I wanted to ask you what percentage as you look at your application customers over what time period and what percentage do you expect to take you up on that value prop?
No, it's really very interesting. We've seen huge companies take their HCM workloads. So you have to mention the application specifically, which application you're talking. We've seen very, very large companies. We compete with Workday.
You can argue they're a little in front of us. We're a little in front of them. We think we beat them a lot more than they beat us, but what have you. They're a formidable competitor. We compete with them very aggressively.
We both have significant market share in the HCM business and lots of big companies are putting HCM in the cloud. And that's been going on for a couple of years now. HCM is a rather simple product compared with ERP, financials, supply chain, manufacturing, procurement. I mean, this is a very an order of magnitude more complex set of processes than HCM. And right now we are the world leader in ERP and the cloud with no one remotely close, right?
I think in the cloud and ERP our closest competitor is Workday. And I would almost describe their product is not really being out yet. They have some place between almost none depending on how you count it to 200 a couple of 100 a few 100 customers. We have more than 5,000 Fusion ERP customers Fusion Financials ERP customers. And then on NetSuite, which is lower end of the market, we have another, what, 13,000 customers.
So
we think Oracle moving to Fusion Financials is a very big deal because we think and there are other big companies that are also in the middle of migrating to Fusion Financials, if you will Fusion ERP. We think that is a gigantic market because the incumbent doesn't have anything. SAP is just bowed out of that. I mean, I'm not trying to keep, but I mean, they don't have a cloud really. They have this thing called S4HANA for the cloud, which really is their old on premise system that they host.
I mean, they can try to pull some of the people some of the time, but it's not going to work. We complete every line of code of Fusion Financials was rewritten for the cloud. Every line of Fusion HCM and Fusion Sales and Fusion Service, they were all we had to start over and rebuild them on cloud middleware, the cloud versions of our database, all of those things. It was a long process for us. I thought it would take us 5 years.
It took us 8. And SAP has yet to start. They had a project that they canceled, the project aimed kind of aimed at NetSuite, is called Business by Design. They ran it, it didn't work and they canceled it. So they're gone.
So I mean, I'll almost be curious to ask you guys, who do you think in the SaaS world and enterprise applications, manufacturing, supply chain, ERP, financials. But okay, let's just keep going marketing, sales, service, all of those things. We have all those products. We're the only company on the planet Earth that has all those products. Who do you think is going to win?
5 years now, is there going to be a dominant enterprise SaaS company? And who do you and it varies 1, who do you think it's going to be? I mean, seriously, who? Salesforce? They're the only ones that are still have a large have a larger SaaS business than us.
They're the last guy, but we're growing more than twice as fast as they are. But that's not their problem. They don't have an ERP product. They're not playing in most of the market. They have nothing in manufacturing, nothing in supply chain, nothing in ERP, nothing in HCM.
They're a have a powerful position in sales automation, it's in the name of their company. They have a service offering, we're their primary competitor and we're about even against them in service. They're really not a big player in marketing. They play in marketing. Adobe is a bigger player in marketing.
We're their biggest competitor. We're the biggest we have big play in marketing. We're in all of these. So who is going to be number 1 in SaaS? We have no competition in ERP.
ERP is more than half of the total enterprise market. The last generation winner was an ERP company called SAP and the 2nd place finisher was an ERP company called Oracle. And then you had Siebel and some PeopleSoft and some others. I'm serious, I mean just curious, who do you think is going to beat us in enterprise SaaS? And it's a gigantic business with phenomenal margins.
It's much better than the on premise business, the cloud business, because you're adding much more value and you really can't count the users. So I think we're the big winner in SaaS. But by the way, this will be the 3rd year in a row this year that we've sold more new ARR than salesforce.com. So yes, they started 20 years, well, 15 years before we did. And we haven't passed them quite yet, but very close.
And but last 3 years, we've been the biggest seller of SaaS applications on earth, last 2 years and this will be the 3rd year. So I'm not talking about percent growth or anything, I mean, just dollar for dollar, we sell more SaaS than they do if they're 3rd year in a row. And they don't have a lot of products. They don't have a lot of presence outside the United States. So who's going to beat us?
Who's trying? I can only find one company Workday. And our ERP is, I don't know, years in front of them. So and their strong suit their real strong suit is HCM, but we're beating them badly in HCM in the middle market right now and let me explain why, because there's no such a thing as an HCM middle market. HCM and ERP go together in the mid market.
You don't make a separate HCM decision and a separate ERP decision. And whenever it's an ERP HCM bake off, they don't have anything much in ERP. We win, all of them. So can Workday survive just selling some number of higher high end HCM systems. Let's say they're even with us in high end HCM system.
We get half, they get half. We get all the mid market. And we get all the high end ERP and all the mid market ERP. How do they continue to invest? They have a huge they have lots of problems.
They need a platform because people if you want to have any if you really want to be the ERP business, people write extensions to they write special reports, they write extensions to ERP. They add to the SaaS. So you need to provide those tools in your cloud to let your customer add to your ERP suite. Well, we have a platform. They don't have a platform.
What are they going to do? Securities become a bigger and bigger deal, securing the data, having an autonomous system that make sure that your cloud is protected, your computers are defending your data against their computers. What is Workday going to do or any of these really small companies going to do in the era of cloud? So I think we're going to win in SaaS. I think we're already winning in SaaS.
I think we're all we're so close to being the largest SaaS company, we're already selling every year we sell more than anybody else. We have with the autonomous database now, we've taken a huge leap forward in the database application. Let me anyone see the article? I mean, I was actually shocked when I read it, but it made complete sense to me. Anyone see where Satya Nadella was asked?
What if he could have any technology on the planet Earth, what would he take? Yes, take our database. Because it's called the information age. It isn't called the web search age. Isn't called the cloud age, not called any of that.
And we right now have the most sophisticated applications, technologies for managing information. Most of the world's precious information is already stored in an Oracle database. Do you think it's going to move to Aurora? Let me tell you who we competed against. IBM the relational data the relational model came out of IBM.
IBM in those days, I mean IBM today not what it used to be. But IBM in those days was a pretty powerful company with an incredible track record of things. They invented the disk drive. They invented core memory. They AT and T did the little thing called the transistor.
Those were formidable companies AT and T and IBM back in the day. And they were the dominant database company and we killed them. We killed them. And then along came Microsoft, the most valuable company of the day and a software company, not a bookstore. I love my Kindle.
I love Alexa. Alexa, play something. Machine learning, there you go at its best. It kind of knows what I like. All right.
So, we killed Microsoft in the database business. All these technologies over the years, we've been working on this problem for a long time. We have a lot of good people. We when Oracle's fault tolerant database, we lose a server, we keep running. And people said, gee, Larry Ellison said that if company X had used Oracle technology, they wouldn't be testifying before Congress today.
It's true. It's true. I mean, our stuff is secure. It's reliable. It's robust.
We've been working on it forever. There are all of these companies' products that were going to kill us. But the most ridiculous are Amazon Redshift and Aurora. Those are really because we've already beaten them in the past. That was that they're just renamed old stuff, old open source stuff that's Marina oh, by the way, open source was going to kill us too.
All these things were going to kill us. Object databases were going to kill us, blah, blah, blah. It didn't happen. What Amazon came up with was this fabulous way to become deliver computer services, lots of them and they compute utility, brilliant, great idea. We're on board.
We think it's a fantastic idea. Absolutely great idea. Great way to deliver applications. We think we're going to win there in SaaS and a great way to deliver data services. But you still have to have a database and they don't have one.
And then if they don't have one, then they have to figure out a way, okay, let's get the Oracle customers to come to Amazon rather than going to Oracle. Oracle is late to the cloud. Oracle is late to the cloud. Okay. All right.
You want to say we're late to cloud? Fine. They will guarantee ours is half price. Will guarantee ours is 100 times more reliable and that's what we do. 90 to 30 minutes of downtime a year, 100 times better reliability than Amazon, half the price.
We never go down. We never ever go down, guaranteed half the price. It's actually the reason we can guarantee half the price because it's probably 20% the price. They're probably 5 times more expensive. Put in a contract, I think we're going to be just fine.
We're the number one database on the planet Earth. We've been the number one database company for a very, very long time and Amazon doesn't even have a database. So how are they going to beat us? Okay. Yes, sir.
Thanks. Hi, Larry. Michael Turits from Raymond James. So you rolled out security monitoring and analytics. So I want to talk about security.
Many people discussing what happens to security in a cloud world, what happens to that whole universe of firewalls and endpoints, etcetera, when workloads move to the cloud. So tell us how you see all of that changing and how Oracle participates?
Well, Oracle is unique in the cloud world that we offer our cloud in 2 locations. We offer our cloud in our own data centers and we offer our cloud behind your firewall. Now let me be clear, it really is our cloud. Those are our computers that we own, you don't own them. You don't buy them, we own them.
That's our software on those computers. You don't buy it, we own it. Well, BYOL is a little bit, sure. Okay. But we manage it.
That is literally a small a version of the Oracle Cloud that we plunk behind your firewall for security reasons. We're the only ones that do that, because and we do it for lots and lots of reasons. There are some security there are some industries that are highly regulated where the regulators prefer that kind of configuration. And that's fine, makes no difference to us. By the way, we manage our labor, we still have the centrally our labor still accesses that portion of our cloud.
It just looks like another Oracle data center if you will to us. So this is another thing everyone said well I got Amazon's way ahead in data centers Microsoft's way ahead in data centers. But will we ever catch up in data centers? Oh, yes. We'll have way more data centers than they have, because we're taking advantage of our some of our largest customers are electing to say, why don't you build put a data center in behind our firewall on our floor.
You own the hardware, you it really is an extension just an extension of your cloud. We call that cloud a customer. Now that's very different than people talk about all these I take my existing HP or IBM mainframe and you make that part of the cloud. That's not what we're talking about. This is not a fake cloud behind your firewall.
This is the same exact software, the same exact hardware that we have in our public cloud. It's not a private cloud, but we put that cloud to customer. And we think that will allow us to have large installations at banks, at governments, at telecommunications companies that otherwise would be hesitant to put all of their basically some people would argue a phone company is just a big computer. Some people would argue a bank is just a big computer. That's their primary business.
So we are going to build lots and lots of data centers on top of our customers' floors. And that's proved a very popular option amongst some of our largest customers. And that's one thing. The other is who should be better again in my speech about cyber defense and that's what we're playing a cyber defense. Who's playing offense?
I mean, I know about cyber criminals, but we're talking about state actors. We're talking about nation states going after your data. Now, if you're a medium large company and you're in a cyber war with the People's Republic of China, who did it is going to win? So I think a lot of people are going to feel a degree of comfort that they have outsourced a lot of their cybersecurity to Oracle on the Oracle Cloud as opposed to trying to do it themselves. Now that may not be true at AT and T, maybe AT and T says, no, no, no, no, we're on it, we're good at this, we'll do this.
So some of the large our largest customers, the JPMorgan Chase's, the AT and Ts, who pay a lot of attention to this, maybe you can afford to engage in the be a participant in the cyber wars, but most people can't. So I'm going to say most companies, most companies are going to have much better security, much better reliability by relying on somebody else to protect their data. And we're very good at this. Again, going back in history, Oracle's very first customer, the Central Intelligence Agency Oracle's second customer, the National Security Agency Oracle's 3rd customer, the Defense Intelligence Agency. So we paid a lot of attention to building security into our database from day 1.
And we think we've done a pretty good job. Is it perfect? Nothing's perfect. Is it unbreakable? Nothing's unbreakable.
But it's closer than anybody else. And again, we think the vast majority of our customers will be more comfort and will be more comfortable and actually feel safer if someone else is protecting that data against that as opposed to them. Our very largest customers, we give them the option. You can run some of this stuff some of your stuff in the public cloud and some of the stuff at cloud to customer or you put everything in cloud to customer. We really don't care.
We're happy to locate the computers anyplace. You want them behind your firewall, we'll put them behind your firewall. It's still part of the Oracle Cloud. We own it. We upgrade the software.
We manage it. You pay by the drink. And we think having those options which Amazon doesn't have and Microsoft doesn't have gives us a big advantage especially with the largest customers in the world. Governments, especially governments outside the United States are all looking for that kind of thing, clouded customer.
Thanks very much. Hey, Larry. It's Brad Zelnick with Credit Suisse. So Larry, over the course of 4 decades, Oracle has defied the natural forces of obsolescence in enterprise technology. You've had once for significant competitors either out of business or completely irrelevant.
Meanwhile, today, you sustain your relevance. And my question is, why do you think that is? Why do you think it persists over the coming decade? Because as we sat here this morning, personally, I don't know, I can't speak for the whole room, I was blown away seeing Thomas' presentation, listening to Steve, really appreciating all of the innovation. But last I checked, you're a pretty large shareholder.
What gives you the comfort that there's not a generational effect that it's just if we look around, you look at the average age who's walking on the show floor, our customers even if you have the best technology, because we've seen the best technology lose in this game in the past. So even with the best innovation, how do we get comfortable that Oracle sustains its relevance?
Well, I'll start with let's look at the SaaS business. I'll argue we embedded it. It's not like we play catch up in SaaS. I started NetSuite. It was my idea.
And Salesforce then it's my idea, okay, whatever. So we didn't miss that one. I said, people say, we I kind of missed the cloud. I felt slightly different about that. I mean, I thought I invented the 1st cloud company.
I thought NetSuite was the 1st cloud company I thought invented. So missing it and inventing it are quite different. So but that was 20 years ago. It's a long time ago. And it's just coming kind of I mean everyone would agree obviously right now everyone thinks that applications on the Internet are better than application on premise, it's 20 year old technology.
I was just with Elon Musk and saying now everyone pretty much agrees, including the Chinese and who are pushing their car manufacturers, electric cars are the way to go. And so I think this whole new wave of information utilities, I mean, I talked about the network computer, the idea of hiding all the complexity should be in the network and you should have a simple appliance to access your data and access your applications and carry it around with you. Or even if you're on desktop, it should be a simple appliance. You shouldn't have a complicated device to get it all this stuff. And that was computing catching up with all of the other networks on Earth.
The electric power networks, ungodly complicated. There are nuclear power plants and thermal plants and solar plants and all different kinds of solar plants. Are the grid, one way, two way grids, the fail safes and the grids. The water networks, water procure, capturing the water, purifying the water, but ultimately, a simple device at the end, a faucet and a plug to tap into these enormously complicated networks. And lo and behold, finally, computing catches notices that's the right way to build networks.
And with the Internet, all of the complexity is going to push in the back and we have simple appliances. These network computers, whether they're smartphones or tablets or what have you are now the way to go or even your PC has become primarily a web device for running a web browser. Yes, you have some local tools, you have a word processor and a presentation and spreadsheets. But by and large, most of the complexity is not in your desktop, all your data, your files are probably stored in a Microsoft Cloud unless you're a gambler. And so the world's IT networks have kind of become all of the other networks with the complexity in the network, the capital investment in the network and consumers of data and consumers of applications paying the utility for those services.
I think that's the final state. I don't think there's another state. That's been going on since the Internet. Nothing has changed about that as far as I can tell for the last 20 years or so. The relational model, which we've been working on, we had the 1st commercial relational database.
And we're constantly looking at there are lots of these new technologies. People said Hadoop is going to replace relational, not Oracle specifically, relational. Then they even had something that was really right in our face called NoSQL databases, like NoSQL, NoSQL allowed, NoSQL. And then if they change the word no from the word meaning no, no, not any SQL. They said, oh no, no, no, you understand.
That means not only SQL. It means yes SQL, but other stuff too. Oh! That's what NoSQL meant. Okay.
So they changed the name. There is no database technology I know of not Hadoop, not Apache Struts, not that replace that has the power and the resilience and the ability to migrate schemas, I don't go into all of it. It is there's a reason why today there's nothing that's taken its place. There's nothing really that's taken its place. And our version of that relational database is just much more much better than IBM's or Microsoft's or whatever is available in open source, what have you.
So there is no obvious successor technology. So when more than a decade ago, we decided as a company that we had to rewrite all of our applications for the cloud, if you will, for SaaS. At the same time, we said we had to put a bunch of new features into our database, like multi tenancy features into the database, like the latest autonomy features into the with machine learning into the database. It was really just absorbing these next generations of technology into the same underlying idea for modeling data and storing data. And we have successfully we do store objects.
When object storage became very popular, we say, okay, no problem. We'll handle we'll solve the object problem for you inside of the relational model because you want all of your data together. It's not like all of your data is going to be modeled like objects. Some is going to be modeled like objects. Some is going to be modeled like tables, sometimes called relations, that's where relational model comes from.
What about these NoSQL databases, the really fast stream being able to have these key value pairs for very fast streaming. Well, guess what, we put that into the Oracle database too. And we can now you got key value we have a key value NoSQL database in Oracle that's faster and more reliable and more secure than the open source stuff that's around. And the idea is to have one unified, you don't want to I don't think you want to have 20 different databases that you're managing in your shop. I think there's only one asset that's really important inside of an IT and it's not the servers, it's not the network, the asset is the data.
And you better make sure it's secure and reliable. And if you have 20 different databases, good luck. You have a separate NoSQL database, a separate object store, a separate this, a separate that. You got all the different Hadoop databases. I mean, God bless, if you want to do that, go ahead and do that.
I think that's a very expensive strategy.
You have
to have people who then are experts in all of these things. I mean, it was kind of funny to see Apache get blamed for a data loss. There was the patch was available. The team just didn't patch all the instances of struts. And that caught and that made the system vulnerable for data theft.
And I think as cyber warfare increases, more there are more actors going after your data. I think having a highly robust, highly secure way to store that data, it gets becomes more and more important. So we have a big lead over everybody. I think we tried to I think we proved that again by just running these benchmarks against Amazon. And by the way, I think not only are we much cheaper, our point the whole point of running those benchmarks is not to say that we're faster, more secure, blah, blah.
It's because everyone would say, yes, probably, probably. Who cares? Amazon is really cheap. Amazon is really cheap. You go there to save money.
No, we're much, much cheaper than that. And security that comes got to be willing to pay less. 99.995 percent uptime, got to be willing to pay less. Having all of those features is and all of those capabilities are the best way to deal with obsolescence that I know of. Yes, sir.
Hi, Larry. Just had a question about AI and ML. This is Phil Winslow from Wells Fargo. Obviously, you talked about it from sort of a platform side, but I want to really want to focus on the applications front and sort of how AI and ML can get integrated in there. Because when I think back to the launch of Fusion, you guys talked about integrated business intelligence and visualization of data.
And when you think about AI sort of taking that sort of a step further sort of automating the analytics next best action. How do you think this plays out? And then how does Oracle monetize this? Is this because the applications are better, is it more share gain? Is it the churn is reduced?
Yes, I
think it's more share just share gain. I think I answered that right. Well, for example, in our competition with I'll let you go. Did I cut you off? Is there more to the question?
Okay. So, I think it all becomes share gain. I don't think it suddenly means we can double our price. We're interested in gaining share. And that's our primary focus.
And of course, we like making money too. We think EPS should go up a little bit, but we think when you gain share, that happens quite naturally. One of the things we're doing in HCM, for example, was we compete with Workday. So as I said, Workday needs a platform, Workday needs security. Workday also needs to have machine learning, just going to get harder and harder for them to do that, because what we want, we hire a lot of people.
We've hired 5,000, we're building this huge hub in Austin, Texas, right in the Colorado River. We're building another huge hub in Santa Monica, where we're selling rather than having branch offices everywhere, we're selling out of these hubs, providing support out of these hubs, providing implementation services out of these hubs, because by having the hubs, we can train our employees every day. So we do a lot of recruiting, a lot of recruiting directly out of colleges and we have for a very long time. We would love for our HR system to tell us when they look at the background of different people, okay, which of all the people who are applying for jobs, who should we put at the top of the queue? Who what are the backgrounds that have been most successful?
A lot of people say, well, gee, athletes make great sales. If you participated in college sports, you have a great competitive spirit and that's ideal for selling. Is that really true? I've heard that. Is that true?
I don't know. It's got to be in the data, right? We got all this data, all these people we've recruited. We know their backgrounds. We know what works.
We'd love to I would love to know the answer to that. Is that a good thing? I don't know. So I think machine learning is going to help us enormously to prioritize the different resumes that we look at and kind also help us figure out the people inside of Oracle who've been successful. What are their common characteristics?
And forget their background. I mean, what groups did they work in? How much did they have more? How many days of training that they have? Where were they located in a hub, a regional office?
Were they close to their manager, not close to their manager. There are a whole bunch of other things we can discover about, okay, we've hired you. Now, some people are successful after they've been hired, some people are not, might have nothing to do with their backgrounds, it might be have to do with how we manage them, how we train them, where we put them, how and we'd like to know what our about our onboarding process, starting with the onboarding process, the measuring process, the management process, all the different processes we have in place for helping to make our employees successful, which are the ones that are really adding a lot of value and which are the ones that actually make no difference and which are the ones that hurt. So I think that's just one that's one example, but it's an important example. That's one example of how machine learning can change fundamentally change HCM.
And but and there are a whole bunch of other picking suppliers, there are a whole bunch of other examples throughout our application suite where we're using machine learning. And I think it's going to make our applications more valuable, make them more competitive versus the competition, allow us to gain share. And when you gain share in this business, I mean, obviously, our development, our engineering costs are kind of a fixed cost, which then get amortized across our community of users. So the long yes, the more users we have, the more money we make. Share is important.
Yes, sir?
Larry, it's John DiFucci from Jefferies. Putting aside NetSuite, which you had obviously a hand in not only I assume had a hand in how that was architected from the start And maybe some of the other acquisitions you've made, SaaS acquisitions. It seems that most of the infrastructure for the Oracle Cloud is architected as a single instance for each customer. And I'm going into maybe some terminology that I know is very
Just not true.
Just okay.
Just not true. The Oracle Autonomous Database runs on huge Exadata machines that are partitioned among users. Okay. But that the Time sliced among users. One of the reasons that we're it's so fast and so cheap at the same time is that we can take a resource, a compute resource that one user is using and literally the moment they stop using it, another user we reassign that resource to another user.
So we don't sequester. I mean we can't you can't you can't at Amazon too. I mean you can have a dedicated instances and there are good reasons to have dedicated instances because you don't want any noisy neighbors. You want to look, I want to know I get all the resources of this box. And for security reasons, my own sense of comfort and the fact that I don't want to compete for IO channels, I want this whole box dedicated to me.
So we will do that. We will certainly allow you to do that and we think that's an advantage. Our bare metal architecture is an advantage. And we think it's an advantage not to have any of our software in the control plane running on your computer, which is a security vulnerability. We think this again, one huge difference between us and Amazon is our control plane software runs on these separate control computers, these Cavium cards that we have.
And you as a consumer, when you get rent a computer from us, you get the whole computer. When you rent a computer from Amazon, you get almost the whole computer except for the code that's running that belongs to Amazon. And that is a security vulnerability. We don't have that. Our control plane, our control plane runs in separate memory, on a separate processor, not on the computer that you're renting.
So our architect and we will say this computer is entirely yours, no one else is allowed to put one put anything on that computer but you for security reasons. We offer that. Amazon does not offer that. I mean security is a very big deal for us. And I mean this may seem like a trivial point, but the fact that we went to the effort of putting all of our control software on a separate computer, so no one can get into your computer is a very big we think is a very big deal on security.
We talked to a lot of people who are paying a lot of attention to security that that's a that alone has caused them to say, Oracle, once I can get this from you, this is what I want. But continue.
I think you may have answered it. But so the control is my computer as customer of Oracle. But the back end, the database layer is with the autonomous database can be a truly multi tenant architecture across customers?
You have to buy the multi tenant feature. It actually uses we put multi tenancy into the database. Most people if you go back to the early days of NetSuite and salesforce.com and those were the first two multi tenant application companies on the planet Earth. And you had no choice because we didn't have a multi tenant database. There was no so you had to put multi tenancy at the application layer.
Not a good place to put it, but you had no choice. When you have no choice, when it's the only place to put it, it's a good place to put it because you do put it there or you don't have it. So we move multi tenancy out we don't think multi tenancy should ever be
in the
application, Though there's a reason historically why people put it there because they had no choice. We think multi tenancy should be down at the database layer because we can then provide secure walls between the different consumers. That's not true. A typical multi tenant data application, there are lots of security vulnerabilities. Your data is commingled in the same address space as other people other customers' data.
And I'm not going to go into it. Ethical hacking, I mean, there are real problems that we avoid with a multi tenant database, with our bare metal architecture to make sure that people can't get malware into the same computer that you're renting from us.
Okay. So I guess this is the last point on here. So the existing customer base of Oracle Cloud, are they because the Autonomous Database, and maybe I'm misunderstanding, is something that is relatively new, the way it's described today?
It's even worse than that. It's not fully released until December. Okay. So that's so but it's running and people can try it, but it will be production released, mass released in December of this year.
Okay. So in the current customer base, are they essentially single instance and you'll see that migrate over time to this greater efficiency of a multi tenant across customers and the database layer?
At the database layer, are they well, no, I mean, you can run again, Oracle has a multi tenancy feature. So you can run multi tenant. But let me say, I think you're asking multi customer, which is slightly different than multi tenant. So for security reasons right now, we have we allow lots of tenants. But if you want maximum security today on Exadata, I'll just pick Exadata is my is the example on Exadata, which is different than our bare metal architecture.
Let me just talk about Exadata. If you want multi tenancy today on Exadata, you can have it. But we won't give that to multiple customers because we think there are that is not secure to our standards. There are a bunch of things about multi there are a bunch of things we won't allow in our data center. We won't set it up that way because of security issues.
And we think we're making the right choice. With the autonomous database now, you can we think we've solved all of those problems. And you can mix customers on the same Exadata machine. Up until now, we have not been able to mix customers on an Exadata. We don't want to.
Customer has to commit to kind of a minimum size Exadata machine, then they get that machine. It's kind of a minimum fee if you want the Exadata service. That is not true if you want like the bare metal service or just if you want what Amazon has, you're just a VM one VM running on a machine that's shared with somebody else. You can have that on our cloud. Today, the only case that you can't the only thing that changes with the autonomous database is now you can partition up an Exadata, not just conventional Intel infrastructure.
But we have the same ability that Amazon has today to say, you get a VM on this machine and that share and you can have a one customer gets a VM on this machine, another customer going to have a VM on the same machine. One more question. Okay. Let me see. Back there.
Thank you, Larry. This is Keith Weiss for Morgan Stanley. Oracle recently released a proxy with the named executive officer compensation program that caught a lot of investors in attention, because essentially you guys gave 5 year targets and we've never really seen 5 year targets out of Oracle. In particular, when we looked at like SaaS revenues, dollars 10,000,000,000 in SaaS revenues in 5 years, That aligns to the trend line that we're seeing in SaaS. That makes a lot of sense.
Infrastructure
as a Service
Platform I think we're going to get there way well, this is just one versus opinion. I think we're going to get there way before 5 years.
So the infrastructure service platform as a service getting to $10,000,000,000 that's harder. You're starting from a smaller base. It seems to imply an inflection like what do you think causes that inflection in infrastructure service, platform service? Because like you're saying, database isn't going to migrate. It's not going to be a database migration.
It's net new business that's going to drive that $10,000,000,000 Yes.
Well, I think the autonomous database, I mean, how much of our workload, I mean, most of the world's data is in Oracle. I mean $10,000,000,000 is not a lot of money for something like that. This is very different business than licensing software. It's a much it's a much bigger business providing all the computers, all the storage, all the network, all the labor. I mean, think about We used to say, okay, here's here download this software and run it.
And you had to hire lots of people and you had to hire you had to buy all this stuff and communication stuff and all this. And that's why we're going to do that. I don't think $10,000,000,000 is a lot. I think we get to and we this is early days for us in Infrastructure as a Service and PaaS. I mean, this is our first the first time we have the kind of the entire database team now for a couple of years focused on the cloud And what we came up with, was the Oracle Autonomous Database.
That's really pretty good. Why would you tiny fraction of the cost of Amazon or anybody else? By the way, tiny fraction of the cost of what it would cost you to run it in your data center. I mean, just not pick on running Oracle in your data center, we run it much cheaper. I mean, there's no surprise here.
I mean, we're using Exadata technology. We're using our best technology. We have highly specialized labor. We fully automated the whole thing to get the labor out. Automatic provisioning never goes down.
What percentage how many of our customers do you think will take us up on that? They save a fortune. It's more secure. It's more reliable. It's faster.
No one else can do it but us. So yes, we are looking for an inflection point. There are 2 inflection points that I think are important. 1 is our bare metal offering, where again, we can just look at where we're where it's really apples to apples with Amazon, this is how fast our network is, this is how fast our storage is, this is how fast our computers are, all of that, where we think we have a big lead on them, where we're cheaper and faster, just on that. And then we can look at our purpose built infrastructure like Exadata and all of the machine learning around it.
And that's where we're not twice as good as Amazon, but 10 times as good as Amazon. And we think the combination of those two things, the autonomous database, bare metal infrastructure, is going to allow us to grow this business very, very, very rapidly. I don't I really don't understand unless it doesn't work, why someone would one of our customers, an Oracle customer would run an Oracle workload in a place that's going to cost them more, be less reliable, etcetera, etcetera, etcetera. I don't know why they wouldn't pick us. So I expect a huge inflection point.
And everyone said, well, Amazon is so much bigger than we are and there's whether so much bigger than Microsoft and yes, Microsoft and Google as well. But this is really early days of this.
And
we think we're so much better at this than they are that at least for database workloads, for Oracle database workloads, we're going to get the lion's share of it. And by the way, that's most of the data on earth, most of the valuable data on Earth.
Okay.
Okay. Thank you very much.