Oracle Has 'A Long Journey Ahead' As It Shifts To Cloud

While Oracle Corporation’s ORCL latest OpenWorld conference held in San Francisco was centered on cloud ambitions, it could take a long time to move the company’s massive installed base of on-premise applications to the Oracle Cloud, Pacific Crest’s Brent Bracelin said in a report. He maintained a Sector Weight rating on the company.

IaaS, SaaS, PaaS

Oracle is ambitious about cloud and is aggressively pushing to differentiate its offerings. The company should be able to differentiate itself by “bringing more resources, unmatched database expertise and enterprise-class support,” analyst Bracelin mentioned. He added, however, that Oracle Cloud represented merely ~11 percent of total revenue.

At a $4 billion annualized run-rate, Oracle Cloud currently has about 4.8 percent share of the largest 30 players in SaaS and IaaS, Bracelin added.

Biggest Cloud Uncertainty

When enterprises migrate Oracle workloads from on-premise to the cloud, the payment method shifts from traditional maintenance and support payments to a cloud subscription. Maintenance and support generates $18 billion, contributing 56 percent of Oracle's total sales.

Given this significant contribution, “we would like to have a better understanding of the timing and slope of this decline before turning more bullish on Oracle's prospects in the cloud,” the analyst wrote. He added that some of the hardest enterprise workloads are yet to shift to the cloud, suggesting that the transition is still in early stages.

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