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Vendor don't hurt me ...

Today I ran across this post on the Oracle blog, which in its essence is a statement of success of Oracle's business model, in particular their cloud offerings. While one cannot do other than congratulating them for their success there is some disturbing news in there, too. Disturbing, not from a company- or investor point of view, but from a customer point of view. It is the statement on their existing and targeted gross margin.
Oracle’s cloud business is getting ever-more profitable, as the company’s aggressive spending on data centers and other cloud infrastructure tapers off amid rising revenues. Oracle reported that the gross margin from its SaaS plus PaaS business came to 50% in Q3, up from 45% in the year-earlier quarter, and it’s climbing toward the company’s target of 80%.
While I am aware that gross margin and net margin are different this target raises an interesting question: How much value for the customer does a profitability target like this leave? Or: Can this target be achieved without creating a lock-in that limits the value of the solution for the customer and the customer's flexibility? After all value and flexibility are major original promises of cloud solution providers
  • more flexibility for the customer, nimbly adopt your business processes without being forced into major system changes
  • no lock in - remember SFDC's genial "No Software" slogan and banner?
  • at lower cost to the client
Just thinking ...
Do the same traps lurk in adopting cloud software as as in adopting on-premise solutions after all?


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