Oracle on the way to decline

image - (c) Reuters
Against the background of the feverish rush of the global economy from growth to recession and back, Oracle maintains a depressingly uniform policy in terms of the cost of its hardware, licenses for its software, ensuring its efficiency and technical support. In the near future, the company will have to drastically change its usual strategy, or face a decline that can bury the once-second largest software maker in the world.

Oracle's revenues for the last quarter show a sharp decline, but the situation is not new: over the past two years, users have been fed up with constantly raising prices, which are not related to what is happening in 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 stocks of large companies such as HP, Intel and Texas Instruments also declined in price, although not so much. This is a signal that companies falling faster than the market have something seriously wrong. IDC information: www.idc.com/getdoc.jsp?containerId=prUS23179011

The entire technical sector of the global economy is now frozen in alarming expectation: corporations, fearing new rounds of crisis, have seriously thought about their own spending in the area of ​​servers, software tools and network equipment. At the same time, they realize that they will have to spend anyway, this is a matter of maintaining a competitive advantage. Against this background, the market is slowly but growing: the sales of server equipment in the third quarter of 2011 grew by 4.2%, according to IDC. However, all this growth fell on rivals Oracle, IBM and HP. Both giants occupy about 30% of the market and share the 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 slips down, losing half a percent in the market share and 3% in sales volume over the year. To be fair, it should be noted that in the last quarter, the company showed some growth in sales in terms of money - sales grew by 2%, and revenue, compared to the previous financial quarter, by as much as 22%. True, such good numbers in Oracle reports are rare: hardware sales for the same period sank by 7%, and annual sales of the company as a whole - by 14% compared with the previous financial year.

If you move away from dry numbers, this means that the company feels insecure, and even more shocks await it ahead of you before you can correct the situation, if you can. Sales of Oracle's key products, Oracle DB database tools, the Fusion application suite, and the Solaris OS are also shaky. Growth in sales of new software licenses, the main source of income for the company, its key livelihood, was almost imperceptible against the general background of 2%.
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The company's senior vice president, Safra Katz (Safra Catz) attributes the decline in revenue growth to the “increase in unforeseen costs associated with previously agreed and pending transactions.” In practice, this most likely means that Oracle has significantly understated the previously announced figures in favor of a favorable assessment by analysts of the company's position. More precisely, the expected costs “unexpectedly” have become higher than what was previously announced. But Larry Ellison refers to another reason for the slowdown - "just buyers are waiting for a new generation of processors, T4, instead of T3, proposed today." The company's management has pinned great hopes on 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, rough edges, if not reasons for concern. Chief among them is the fact that Oracle customers, those who are responsible for the company's well-being, are fed up with price spikes on key products — SPARC servers inherited from Sun Microsystems and licenses for the Solaris OS. MySQL users are also seriously concerned about the current policy of Oracle, 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 significant 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 extend the support contract on time, it will have to pay one and a half times more to renew it and achieve compliance. But the Oracle customer misadventures don't end there. How do you, for example, have the fact that support contracts begin to run from the moment equipment is sent by an Oracle supplier or partner? Previously, such contracts, especially for large companies, major Oracle buyers, began to run out from the moment equipment was deployed at the customer’s site. Now, buyers have to pay, even if the servers are idle in some 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 the increase in prices would lead to an increase in the level of support and customer service, which, unfortunately, does not occur. User dissatisfaction is reflected in dozens of publications, reflecting the growing perplexity of the audience regarding Oracle's pricing policy, service and technical support for the products being produced, the lack of a clear product release schedule and a clear position regarding the SPARC architecture and the further development of MySQL.

Gabriel Consulting experts 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 lately 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, a part of the respondents indicated that their attitude towards the company has not changed, because it was already negative. Such terrifying results should have long ago become an unequivocal signal for decisive action for Oracle managers at all levels, but for some reason this does not happen again. They have a different course of action: according to another study from the same Gabriel Consulting gabrielconsultinggroup.com/gcg-press-room-mainmenu-50/274-oracle-survey-whats-next.html , 85% of respondents are sure that Oracle "does and will do everything possible to force its customers to use only Oracle products (exclude other vendors' solutions from their systems). ” From the point of view of “tying up” customers to themselves, this would probably make sense (although such methods do not fit into the concept of fair play) 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 reviews by real users, received the lowest marks among the major vendors of www.itic-corp.com/itic_analysts.html . Half of the reviews indicate that the quality of Oracle hardware solutions over the past two years has declined significantly, and 18% of respondents rate the maintenance, support and warranty level for Oracle server hardware as “weak” and “unsatisfactory”. At the same time, only 1% thought that the service had 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 superiority: Mirosoft received brilliant marks for its SQL Server.
It's amazing how much time it took for users to dissatisfy come to the surface and affect the financial performance of Oracle, given that the first "loud calls" sounded in 2010m year.

"Since Larry bought out Sun, the level of technical support has fallen even lower, although it would seem that there is nowhere to go," said the system administrator of a large organization in the field of health. He is echoed by his colleagues from large and medium-sized enterprises: “for the entire time that has passed since Sun’s purchase, the future of systems built on Solaris has not cleared up unless it has become completely unenviable. Many companies have invested fortunes to build native RISC systems under Solaris, which will turn into a bunch of unnecessary hardware from the moment support ends. Having spent our money, we, of course, expect a constant stream of updates and product line extensions, but, apparently, it’s already aimless. ”

Getting rid of the anchor in the form of unnecessary Sun servers will be costly for companies where key business applications run on them. Their experts will be faced with the need to port a huge amount of code to other databases, processor architectures and operating systems. And, of course, they come to do it sooner rather than later. This thesis is confirmed in practice: IBM has already made about 250 substitutions, and approximately 750 are planned for the coming year.

If Oracle wants to somehow influence the situation, it will have to take drastic and costly measures. Urgently. I wonder how well this is understood in the company?

Abbreviated translation by jazzman . Original full text here: www.crmbuyer.com/story/Oracles-Downward-Spiral-74110.html