The Oracle-Salesforce Cloud Schism

A lot went down at Oracle OpenWorld. Some very good reporting and analysis has come out of it all, and you can easily find it online if you wish. I was impressed with several things that Oracle did, including making strides in sales and marketing software and in introducing two new lines of compute servers.

First off, the company said it was beefing up its marketing software because too many customers were looking elsewhere for marketing solutions. This is generally in line with its acquisition of Market2Lead in May. Until now, marketing has remained a place where independent software developers could plant a flag and pretty much be left alone by the big guys. They were too busy making sales and service suites.

Then too, marketing has always been a suite in itself. You don’t build marketing the way you build sales, for instance. There are many more moving parts in marketing for campaigns, for lead generation, for market intelligence and for social media inputs. No doubt about it, marketing is a big deal, and when a major vendor like Oracle says it’s putting its focus on it, it is remarkable. Marketing also represents relative white space for Oracle, which makes it doubly interesting.

It’s early days, as far as I am concerned with Oracle’s marketing solution. It’s even a challenge defining what is included. For instance, Oracle’s very fine loyalty application — marketing or service or sales? Ditto territory planning and white space analysis — sales or marketing?

I know what you might be thinking: Some of these are clearly not marketing. But hold on, they aren’t marketing today, maybe, but what happens with the economy in the next couple of years will seriously change the CRM suite. Consider one thing: Suppose demand remains sluggish in the sense that we’re not in recession but neither are we in a robust recovery.

Under these conditions, many companies double down on their existing customers, which changes the sales dynamic and necessarily the underpinnings for what software solutions need to do. My reading of Oracle OpenWorld is that the company is hedging its bets and building products that can prosper in the slow-growth scenario.

Religious Conversion

But the most interesting part of the show for me was observing the transition of Oracle from cloud skeptic to cloud believer. As with any religious conversion, the newly believing are, shall we say, an acquired taste. A year ago, CEO Larry Ellison questioned the need for the designation, but this year he had cloud religion. Of course, religious beliefs span a spectrum, and the Oracle version of cloud computing can best be described as Amazon EC2 Reformed.

Simply put, Oracle’s approach is Infrastructure as a Service (IaaS). Nothing wrong with that, but it brings to mind something Ellison said a year ago (paraphrasing now): Cloud computing isn’t new; it’s what we’ve always done.

Certainly IaaS is what we’ve been doing or what’s been done before. It consists of selling compute time and storage made available on the Internet with a side order of your favorite licensed software. Nothing wrong with that either except for Oracle’s other big announcement of Exalogic, a beast of a fault-tolerant computer that Ellison referred to as a cloud in a box. Rule One of selling is to sell what you’ve got, and Ellison certainly did that is his conception of “Hardware. Software. Complete.”

Marc Benioff, CEO of Salesforce.com and advocate of cloud computing as a transformative innovation that he calls “Cloud 2,” sold what he has too. Benioff gave a keynote extolling the virtues of all things Cloud 2 including multitenancy and Chatter, a new category of collaborative tool that leverages crowd wisdom to enhance company performance.

In the process, Ellison and Benioff each used their keynotes to one-up the other while advocating for their favorite definitions of cloud computing. I have to say it was entertaining and a bit silly. The publicity heat given off by the back and forth gave each company free coverage but did little to settle the argument.

Battle of Ideas

It is an argument that will rage for a long time because the market actually needs both forms of cloud computing. For big companies with deep investments in software licenses, the Oracle cloud is a good way to lower the overhead incurred with running a data center. Lower those costs and you’ve made computing more affordable, and the details about how you achieved the results is almost immaterial — until you need something new.

The Salesforce idea of cloud computing better fits the needs of any company looking to build net new solutions or to take advantage of new applications from other vendors and new application types. A company is less likely to convert its Oracle general ledger to Salesforce, but many are very open-minded about moving to the Salesforce cloud for net new and new category applications like Chatter. I didn’t hear any talk about the Oracle development platform because that’s Fusion, and it won’t be generally available until next year. When it becomes available, things could change.

I have seen Unix computers running converted mainframe applications complete with green screens, and I see no reason why the Oracle cloud won’t look like that — i.e. a place for legacy applications — in the future. It’s a huge market, and for a long time I expect to see both forms of cloud computing to co-exist and flourish. But eventually, the Oracle form of cloud computing will need to bend to the inevitable and begin to resemble Salesforce in the multitenant aspect.

So my big take-away from Open World? As always, it’s an industry in transition, and the number and kind of solutions are huge. Oracle is doing some neat things at the application level and protecting its flank where needed. All told, it was illuminating and fun.