Oracle Ups The Ante - Does the Salesforce Empire Strike Back?

Clash of the Titans

The fall conference season is in full swing. Of the big 4 we had Oracle Open World and the SAP Hybris Summit, with Dreamforce, SAPPHIRE, and Microsoft Connect() still to come.

I have covered the SAP Hybris Summit, so do not need to say much about it anymore. The event was short on great announcements – maybe they will come at SAPPHIRE – but certainly contributed to showing the clear vision forward that SAP has.

And it is a compelling and consistent vision.

OOW 17 was a different beast, most notably with the announcement of Oracle 18c.

A year ago Oracle took Amazon full on, declaring it enemy number 1. Many analysts, including myself, were confused about this. Why Amazon and not Microsoft? After all Microsoft is the company that has a very credible IaaS, PaaS, and SaaS. Add the operating system and productivity software and you have a company with a formidable software stack that can be on the winning side of a Clash of Titans.

While CTO Larry Ellison still took pot shots at Amazon in his keynotes, one can come to the conclusion that these are a kind of diversion, and that Oracle is back in best Musashi style.

Oracle steps up its IaaS game

The AI driven automation of Oracle 18c is game changing in the database play, and hence in IaaS.

The new container engines should bring Oracle’s cloud on par with AWS and Azure.

All three, Microsoft, Salesforce, and SAP now have something to chew upon.

SAP, because their databases are now lacking a real important argument. And that has an impact. SAP, for example, should feel more heat when it comes to HANA, the only database that is supported for S/4.

Salesforce, being a big Oracle customer itself should feel some pressure when it comes to who they partner with when deciding about additional data centers. Faster and cheaper than AWS is a pretty compelling argument.

Along with the full software stack and the IaaS capabilities Microsoft is taken full on. After all Microsoft is Oracle’s competition when it comes to business workloads.

Oracle has arrived in the Cloud world

It looks like Oracle’s Fusion project has finally brought a suite of cloud native business applications. This means that all big vendors now can concentrate on coercing their customers from an on premise world into the cloud world – not that Salesforce needs to do that, but you get the point. And with the claim that business applications run fastest (and cheapest) in the Oracle cloud there is quite an interesting argument out there.

This is less a problem for Microsoft and SAP, as they have customers using their suites, which tends to be a good defensive line.

However, it is a real problem for Salesforce with a focus on the wider area of CRM, without own database capabilities and with a low focus on IaaS.

Oracle has understood that AI in itself is not of value

Oracle now seems to consequently put the business purpose of AI and machine learning into the foreground. AI in itself is nothing. It is a tool that needs to be brought to a use. There are more and more ‘prebuilt’ AI (and IoT) applications that are intended to deliver business value. This gets emphasized by applying machine learning to the database itself and to the security software. Add conversational capabilities to the software and a story emerges.

Oracle has closed the gap to the competition in this area and is at least ahead of SAP in the conversational department. SAP still relies on partnerships although it has the technology in place.

Now, what does this mean for Salesforce?

Last year’s big thing was Einstein, which was a clear statement about the importance of transparently embedding AI into business applications. Salesforce being a company that time and again proved that it is able to set the pace for the whole industry, it can be expected that there will be some relevant announcements.

And there need to be, because Salesforce is in a tight spot. Probably for the first time in its history.

·      The platform needs a renewal

·      The company does not have the infrastructure capabilities that the competition has. Here clearly Microsoft and Oracle have the edge.

·      Salesforce depends on Oracle’s database, which means subsidizing the competition. On top of this Oracle just announced that Salesforce applications will not run on their best performance, as they are not running on Oracle hardware (AWS is not using Oracle HW, as far as I know).

·      At the core Salesforce is a CRM company. This leaves a lot of important processes out of scope. And, being a CRM guy myself, I’d argue that it is far simpler to replace a CRM system than an ERP system.

·      With its focus on CRM a lot of the data that is necessary for well running, AI driven IoT applications is missing. I’d say that SAP has the lead here with a staggering 76 per cent of all transactions touching SAP systems. Salesforce is comparatively week in first party data management.

·      Salesforce lost out on LinkedIn, didn’t pull through with Twitter (the price was agreeable too high), and now additionally got put on the back foot with SAP acquiring Gigya. This seriously limits their profiling and therefore recommendation capabilities.

·      The company buys growth on the expense of profitability. Sooner or later investors will not accept this anymore.

Given this, ‘ticking off accomplishments promised and now delivered’ will not be enough.

A Way Forward

In my eyes, Salesforce’s biggest strength is the ecosystem, which the company probably let erode somewhat. At least I heard a few statements of Salesforce software partners that Salesforce doesn’t really seem to care anymore. If the same company then says that it is easier to deal with SAP that is telling.

So, I would expect Salesforce doing something around partnership, probably getting closer to the gold standard: Microsoft. There also could be some partnership announcements around strengthening industry solutions, also to cover the challenge described next.

Supporting this, there should need some strong moves in the platform area. The big 4, as well as some other companies, are striving to become the fabric that permeates a business, and connects it to its suppliers and customers. Salesforce is strong on the customer side only, which opens up a weak spot that needs to be guarded.

Second, up to now Einstein seems to be embedded mainly in point solutions. What in this case is missing is a number of engines. For example an engine that can power profiling and recommendations across clouds. But one can think of a good number of intelligent helpers for salespeople as well.

In general I’d expect some high profile announcements around machine learning, bots and, hopefully, conversational interfaces – ideally interactive voice interfaces. I didn’t hear much of Bob Stutz in the past 1.5 years, and cannot imagine that he idled.

Maybe we are in for a surprise. So, lets look forward to Dreamforce 2017.