Oracle on the road to decline

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    Amid the hectic rush of the global economy from growth to recession and vice versa, Oracle maintains a dismally monotonous policy in the field of the cost of its hardware, licenses for its software, ensuring its performance and technical support. In the near future, the company will have to dramatically change its familiar strategy, or face a decline that could bury the once-second largest software producer in the world.

    Oracle's revenue for the last quarter has shown a sharp decline, but the situation is by no means new: over the past two years, users have frankly tired of the constant price hikes that have nothing to do with what is happening on the server hardware market. One of the reasons for the recession was also growing concerns about the crisis in the entire IT market, especially since the shares of large companies such as HP, Intel and Texas Instruments also declined in price, although not so much. This is a signal that companies that are falling faster than the market have something seriously wrong. IDC data: www.idc.com/getdoc.jsp?containerId=prUS23179011

    The entire technical sector of the global economy has now stood in alarming expectation: corporations, fearing new rounds of the crisis, have seriously thought about their own expenses in the field of servers, software tools and network equipment. At the same time, they realize that one way or another they will have to spend, it is a matter of maintaining a competitive advantage. Against this background, the market is slowly but growing: server hardware sales in the third quarter of 2011 grew by 4.2% according to IDC. However, all this growth came from rivals Oracle, IBM and HP. Both giants occupy approximately 30% of the market and share first place among themselves, the shares practically coincide. For Oracle, there was no place in the top three, and being in fourth place, the company gradually slides down, having lost half a percent in the market share and 3% in sales over the year. In fairness, it should be noted that in the last quarter the company showed some sales growth in monetary terms - sales grew by 2%, and revenue, compared with the previous financial quarter, by as much as 22%. True, such good numbers in Oracle reports are not common: sales of hardware over the same period dipped by 7%, and annual sales of the company as a whole - by 14% compared with the previous fiscal year.

    If we move away from the dry numbers, this means that the company feels insecure, and there will be even greater upheavals ahead before it can fix the situation, if at all. Sales of key Oracle products, Oracle DB database tools, the Fusion suite of applications, and the Solaris OS are also shaky. The growth in sales of new software licenses, the company's main source of income, its key livelihood, was almost imperceptible against the general background of 2%.

    The company's senior vice president, Safra Catz, links the decline in revenue growth to "the increase in unanticipated costs associated with previously agreed and anticipated transactions." In practice, this most likely means that Oracle has significantly underestimated the previously announced figures in favor of a favorable assessment of the company's position by analysts. More precisely, the expected costs "unexpectedly" became higher than previously announced. But Larry Ellison refers to another reason for the slowdown - "customers are just waiting for a new generation of processors, T4, instead of the T3 offered today." The company's management has high hopes for the hardware complex for working with Oracle Exadata databases, whose sales now account for only 5% of the total.

    If you take a closer look at the situation in Oracle, you will see some, let's say, roughnesses, if not cause for concern. The main one is the fact that Oracle customers, those on whom the company's prosperity rests, are fed up with price spikes for key products - SPARC architecture servers inherited from Sun Microsystems and Solaris OS licenses. MySQL users are also seriously concerned about Oracle’s current policy, the state of uncertainty.

    Changes in the policy pursued by the company over the past two years have benefited anyone, but not its customers. Most of the changes, if not all, cause a noticeable increase in user costs for obtaining new and supporting existing licenses. For example, Oracle now requires customers to purchase technical support services for each of the purchased hardware products. And if the company does not renew the support contract on time, it will have to pay one and a half times more to renew it and achieve compliance. But the above misfortunes of Oracle clients do not end there. How about, for example, the fact that support contracts begin to be counted from the moment the equipment is sent by the supplier or Oracle partner? Previously, such contracts, especially for large companies, the main buyers of Oracle, began to be counted from the moment the equipment was deployed at the customer’s site. Now, buyers have to pay, even if the servers are idle in some kind of intermediate warehouse.

    Of course, not one Oracle raises prices. Many manufacturers had to rewrite price tags and conduct difficult negotiations with customers. But this bitter pill would be much sweeter if higher prices would lead to higher levels of support and customer service, which, unfortunately, does not happen. User dissatisfaction was reflected in dozens of publications, reflecting the growing perplexity of the audience regarding Oracle's pricing, service and technical support policies for its products, the lack of a clear product release schedule and a clear position regarding the SPARC architecture and further development of MySQL.

    Gabriel Consulting specialists interviewed 450 representatives of the corporate sector, the vast majority of whom, namely 94%, are regular customers of Oracle products. When answering the question of whether their attitude towards the company has changed recently due to the actions of Oracle itself, two thirds (65%) of the respondents indicated that their opinion has changed for the worse. In addition to this, some respondents indicated that their attitude towards the company did not change, because it was already negative. Such terrifying results should have long been a clear signal for decisive action for Oracle managers at all levels, but this, again, for some reason does not happen. They have a different course of action: according to another study from the same Gabriel Consultinggabrielconsultinggroup.com/gcg-press-room-mainmenu-50/274-oracle-survey-whats-next.html , 85% of respondents believe that Oracle “does and will do everything possible to force its customers to switch to using only Oracle products (exclude solutions from other vendors from their systems). ” From the point of view of “linking” customers to themselves, this would probably make sense (although such methods do not fit into the fair play concept) if customer loyalty were already at a high level. However, the same studies show that, in addition to the factors already mentioned above, the quality of Oracle products, according to real users, received the lowest ratings among large vendors www.itic-corp.com/itic_analysts.html. Half of the reviews indicate that the quality of Oracle hardware solutions has dropped significantly over the past two years, and 18% of respondents rate the maintenance, support and warranty level on Oracle server equipment as “weak” and “unsatisfactory”. At the same time, only 1% think that the service has improved and 32% gave the company good and excellent marks. This is very different from IBM (85%), HP (76%) and DELL (70%).

    At the same time, in the traditionally key sector for Oracle, database management systems, the company also failed to achieve primacy: Mirosoft received brilliant marks for its SQL Server.
    It is simply amazing how much time it took for user dissatisfaction to come to the surface and affect the financial performance of Oracle, given that the first "loud calls" were made back in 2010.

    “Ever since Larry bought Sun, the level of technical support has fallen even lower, although there would seem to be nowhere to go,” said the system administrator for a large healthcare organization. His colleagues from large and medium-sized enterprises echo him: “for the time that has passed since the purchase of Sun, the future of systems built on Solaris has not been clarified unless it has become completely unenviable. Many companies have invested fortunes to build native RISC systems for Solaris, which will turn into a bunch of unnecessary hardware from the end of support. Having spent our money, we, of course, expect a constant stream of updates and extensions of the product line, but, apparently, it is already aimless. ”

    Getting rid of the anchor in the form of Sun servers that have become unnecessary will cost a lot to companies where key business applications are spinning on them. Their specialists will be faced with the need to port a huge amount of code to other databases, processor architectures and OS. And, of course, they stop by sooner rather than later. This thesis is confirmed in practice: IBM has already made about 250 replacements, and about 750 are planned for the coming year.

    If Oracle wants to somehow influence the situation, it will have to take decisive and costly measures. Urgently. I wonder how well they understand this in the company itself?

    Abridged translation by jazzman . The original with full text is here: www.crmbuyer.com/story/Oracles-Downward-Spiral-74110.html

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