Oracle bundles cloud revenues, claiming it reflects hybrid approach

Database vendor combines figures for SaaS, PaaS and IaaS, but why?

Oracle has changed the way it reports cloud revenue figures every quarter by only offering up a combined figure for SaaS, PaaS and IaaS.

The database vendor used to report SaaS numbers on their own, and a combined figure for PaaS and IaaS, but it is now reporting just one figure for all of these, lumped in with license support. It's also combined new cloud licenses and new on-premise licenses under 'new software licenses', not breaking either out.

Oracle co-CEO Safra Katz explained the change in a conference call with analysts last week, transcribed by Seeking Alpha.

"We have now labelled new software licenses as cloud license and on-premise license, and we've combined cloud SaaS plus cloud PaaS and IaaS, plus software license updates and product support, into cloud services and license support," she said.

Katz said the changes were justified because of the company's recent introduction of the option for on-premise customers to use a bring your own licence (BYOL) model when shifting to Oracle's cloud.

"BYOL allows customers to move their existing on-premise licenses to the Oracle cloud so long as they continue to pay support for those licenses," she said.

"BYOL also makes it cost effective for customers to buy new licenses, even if those licenses are only going to be used in the cloud. So some of our customers are buying new licenses and immediately deploying them in the cloud."

Her argument is that customers are adopting a hybrid approach to buying Oracle kit, where revenues can't be broken out neatly as cloud or on-premise, so instead, Oracle's decided to bundle them together.

"To say it another way," Katz added, "customers are entering into large database contracts where some of those database licences are to be deployed on-premise, while other database licenses are used in the cloud.

"Previously, all of those licenses and its related support revenue would have been counted entirely as on-premise, which clearly it isn't."

However, Oracle has doubled down on its cloud strategy over the last few years, aiming to outgrow rivals like Workday and Salesforce, making this a significant change.

Results a year ago saw cloud revenues grow a huge 60% year-on-year to $1.36 billion across SaaS, PaaS and IaaS. SaaS alone grew 75%.

This year Oracle's financials painted a very different picture. Its bundled cloud services and license support category grew just 8% year-on-year to $6.8 billion, and its license revenues were down 5% to $2.5 billion.

CTO Larry Ellison cited AT&T's decision to move thousands of databases into Oracle Cloud, saying: "We think that these large scale migrations of Oracle database to the cloud will drive our PaaS and IaaS businesses throughout FY19."

But in Oracle's third quarter for the three months up to the end of February 2018, when it was still listing SaaS separately, and IaaS and PaaS together, growth had slowed. SaaS grew 33% year-on-year (compared to 75% in June 2017) and IaaS and PaaS together grew 28%. Overall cloud grew 32%, almost half that 60% figure it recorded in June 2017.

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