HP’s Comeback Continues, Low-end Wants to Be Mainstream

Hewlett-Packard, Co. announced quarterly performance slips that were in line with projections and generally viewed as inroads in the company’s return. Elsewhere, tablet sales are on track to outpace all PC sales this year while touch-screen PCs are poised to increase. Lastly, Intel Corp.'s new "Bay Trail" processor is a sign of things to come across multiple platforms.

Focal Points:

Despite significant market, strategic, and management turmoil at HP over the last few years, the company's CEO Meg Whitman remains optimistic about her five-year turnaround plan and...

%%%%%

Software and Cloud Up, Hardware Down

Dell Inc. and NetApp Inc. reported revenue declines and general weakness in sales while CommVault Systems Inc. and Salesforce.com Inc. saw record growth in revenues.

Focal Points:

In what may be the last publicly reported quarter of financial results, Dell fared poorly in the PC market as expected but exceeded expectations in the networking, server, and services markets. Dell reported first quarter 2014 revenues of $14.1 billion, down a mere two percent...

%%%%%

CEOs CIOs not in Sync

According to a post on the Harvard Business Review blog CEOs and CIOs are not in sync when it comes to the new challenges and issues CEOs are facing. Study findings point to the fact that CIOs do not understand where the business needs to go, and CIOs do not have a strategy to address business challenges or opportunities.

Focal Points:

Key findings from their research are almost half of the CEOs feel IT should be a commodity service purchased as needed. Almost half of the CEOs rate their CIOs negatively in terms of understanding the business and how to apply IT in new ways to...

%%%%%

Troubling IT Financials

EMC Corp. and VMware Inc. reported solid first quarter 2013 revenues but lower earnings while IBM Corp. failed to meet expectations on both sides.

Focal Points:

EMC reported first quarter 2013 revenues of $5.39 billion, up six percent year-over-year from the previous year's $5.09 billion. Net income on a GAAP basis was $615 million, down two percent from $626 million in the year ago quarter. EMC saw 12 percent growth in its RSA division and 13 percent from its VMware subsidiary. Information Intelligence Group (IIG) expanded seven percent but the core information storage business only grew three percent year-over-year. However, the high-end storage sales jumped 10 percent...

%%%%%

Disruptive Changes

Amazon Inc. and Microsoft Corp. lowered their pricing for certain cloud offerings in attempts to maintain leadership and/or preserve customers. Similarly, Hewlett-Packard Co. (HP) launched its next-generation Moonshot hyperscale servers. Meanwhile, IDG Connect, the demand generation division of International Data Group (IDG), released its survey findings that show there may be a skills shortage when it comes to the soft skills required when communicating beyond the IT walls.

Focal Points:

Earlier this month Amazon...

%%%%%

PC Sales Fall Off the Cliff

The precipitous drop in PC sales is taking its toll throughout the supply chain as Microsoft Corp., Intel Corp., and virtually all of the hardware manufacturers saw revenues and profits tumble nastily.

Focal Points:

The disastrous effects of tablet popularity and new Microsoft's Windows 8 operating system have wrecked PC sales. Representing a nearly 14 percent slide in sales, vendors worldwide PC shipments have fallen year-over-year from 88.6 million to 76.3 million in the first quarter. Acer Inc. felt the hardest...

%%%%%

Oracle and Research in Motion – On the Cusp?

Oracle Corp. reported disappointing third quarter revenues, especially on the hardware side; additionally, the company announced two new lines of Sparc servers. In other news, Research in Motion Ltd., (RIM) now doing business as BlackBerry, saw its fiscal fourth quarter revenues drop but the company made a profit and shipped more than one million BlackBerry z10 smartphones.

Focal Points:

Oracle released its third quarter 2013 financials, which showed little overall change in revenues from the previous year's quarter. Total revenues for the quarter were $8.96...

%%%%%

Experts On Demand

RSS Experton Group on Twitter Experton Group Blog Experton Group on YouTube

Oracle and SAP – Vastly Different Strategies

Two long-term rivals, Oracle Corp. and SAP AG, are embarked on very divergent growth strategies, one of which has a higher probability of success than the other. Oracle, which has had slow growth for the past three fiscal years, is attempting to reinvent itself by creating an operational troika and revamping its technology. On the other hand, SAP – also a slow growth company over the past two fiscal years – is acquiring Concur Technologies, Inc., a fast growing SaaS provider to form the second largest cloud services provider.

At the turn of the millennium the traditional software market was a growth market and a good place for Oracle and SAP to be. But today the major software growth is in the cloud, analytics, mobility, social, and security sub-markets. When cloud computing first became a buzzword, Larry Ellison, Oracle CEO, scoffed at the concept but has since declared Oracle is a cloud computing company. But it is clear that Oracle and SAP see the markets very differently and their strategies for growth have them heading in opposite directions.

Oracle

To hear Oracle tell it the company is doing fabulously in the cloud space - Software-as-a-service (SaaS) and Platform-as-a-service (PaaS) cloud revenues were up 32 percent to $337 million while Infrastructure-as-a-service (IaaS) cloud revenues rose 26 percent to $138 million in first quarter of 2015. But these numbers represent less than six percent of total quarterly revenues of $8.6 billion. For the 2014 fiscal year Oracle grew three percent while over the past three years the annual revenue increase has not exceeded 4.2 percent. One quarter of its revenues came from new software licenses last year and more than 50 percent came from license annuities (updates and support). The ever shrinking hardware and hardware-related revenues accounts for 14 and 10 percent of the revenues respectively.

The plan, according to Ellison, was to grow according to the old IBM vertically integrated model of the 1960s. That plan is being executed but the results are not good. Most customers are not buying into the model and sales of its integrated (and expensive) hardware solutions are not gaining momentum. Moreover, in keeping with the plan, the cloud platform is not open, and Oracle is doing all it can to make sure that buyers use only Oracle stack components. Additionally, Oracle's cloud acquisitions have been small players while the non-cloud purchases have been more significant (Sun Microsystems in 2010 and recently MICROS Systems).

This month Larry Ellison announced he is stepping down as CEO after four decades leading the company. He is altering his management structure so that he runs the technology side as CTO while Safra Catz and Mark Hurd become CEOs. Larry will also be executive Chairman of the Board. Mark Hurd continues handling sales, service, and global business units while Ms. Catz remains in charge of manufacturing, finance, and legal operations.

The troika is not really something new, so the change is far less dramatic than it sounds. In fact in the analyst call Oracle stressed that the announcements do not represent any real change so the overall impact on strategic direction and revenue drivers most likely will be minimal. Mr. Ellison may tinker with the software and the software strategy but unless he is massively changing directions and accelerating the emphasis to clouds and unstructured databases, the needle on growth and market share will not improve. Moreover, the sales side of the house is under duress with a number of major departures and the customer buying pattern shifts. If the sales culture does not change, there will be more problems on that side as well. Thus, overall Experton Group expects further problems ahead for Oracle – rather than the smooth sailing Ellison is hoping for.

SAP

Now consider the SAP strategic moves. Since 2010 SAP has invested more than $12 billion in cloud purchases. It just acquired Concur Technologies, the travel and expense management software as a service (SaaS) company for $7.3 billion. Earlier this year it bought Fieldglass, a vendor management systems provider, for $1.0 billion. Previously it acquired leading cloud providers Ariba, hybris, and SuccessFactors for a total cost of $9.4 billion. SAP is not just moving into the cloud but attempting to become a top tier player in each space it moves into.

By acquiring Concur SAP got a B2B network with 23,000 customers, 4,200 employees, and 25 million active users across 150 countries. Significantly, there is little overlap between SAP's and Concur's customer bases. This purchase gives SAP the largest business network with transactions exceeding $600 billion annually across 25 different industries and an entrée into the $1.2 trillion annual corporate travel market. Moreover, Concur has seen revenue growth rates of 31.8 and 24.1 percent over the past two years; and SAP hopes to leverage that across its customer base, which could yield nice double digit growth. Furthermore, with the integration of the corporate travel ecosystem to the Ariba and Fieldglass networks, SAP's business network has the capability to drive more than $10 trillion of global spend annually. Now that is a cloud strategy with great potential for continued growth.

Summary

Oracle has never been a customer-oriented company and under the "new management" Experton Group does not expect anything to change. This is not compatible with the new realities and the demands of a cloud model. All this could translate to the company's slippage continuing – or bigger changes to come. Conversely, SAP is showing it can walk the line between its existing software and services model and the new world of clouds. It has struggled to do it organically by bifurcating its market but it hurt its revenue stream and business partners. But now by going after acquisitions in adjacent spaces, it is able to leverage both worlds.

Experton Group POV: Cloud computing is transforming the software business model and those firms that do not adapt will struggle to survive and grow. It is clear Oracle has not adapted to the open, customer-first demands of the cloud model and past history and leanings of its executives suggest that there will be no short-term changes to its model. On the other hand, SAP is adapting and has successfully shifted a good part of its revenues to the cloud, with opportunities for significant growth and cross-pollination. IT executives should carefully consider their requirements, the provider's business and technology models, and select solutions that best meet their business and technical requirements.

About us

Experton Group is the leading fully integrated research, advisory and consulting company for mid-sized and large organizations, maximizing the business value of their ICT investments through innovative, neutral and independent expert advice.

Experton Group offers consulting services, market surveys, conferences, seminars and publications related to information and communications technology issues.

Our consulting portfolio includes technology, business processes, management and business co operations, investments and mergers.