Is Oracle Strangling EBS for Cloud?

Oracle E-Business Suite
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Is Oracle Strangling EBS for Cloud?

With a vast customer base, E-Business Suite is Oracle’s comprehensive suite of enterprise applications. It is an on-premise solution evolved over the years by integrating features from many other ERP’s, that Oracle owned/acquired. On-premise solutions are the primary source of revenue for Oracle with the highest share of 72% in the last five years. During the same period, Oracle started implementing Fusion Cloud. It wants to offer the best of its ERP features on the cloud, control most aspects to ensure simplicity for customers, assuring mobility and many more. Oracle took Fusion cloud as a high priority over others and started executing cloud ERP modules for customers. Due to ambiguity in Oracle’s focus on on-premise solutions & a strong focus on Cloud, most of the customers were miscommunicated about Cloud Apps and panicked many EBS & other on-premise customers.

“Is Oracle jeopardising On-premise solutions for the growth of Cloud?”

Oracle has moved a majority of its sales teams from on-premise solutions to focus heavily on the sales of Cloud ERP. Also, Oracle is tossing a lot of incentives to push customers to the cloud with little to no incentive to sell on-premise solutions. Those incentives indeed are leading salespeople to sow seeds of doubt about the future of on-premise solutions.

See: Oracle announces Oracle soar 

The numbers from Oracle’s Financial statements prove that right.

  • Software license updates & product support from On-premise solutions increased from USD 17142 millions in 2013 to USD 19229 millions in 2017.
  • The revenue from new licenses of On-premise solutions fell from USD 9411 milions in 2013 to USD 6418 millions in 2017.
  • Cloud revenue is soaring at a compunded annual growth rate (CAGR) of 27.3 percent.
  • The overall percentage share of revenue from On-premise solutions is trending downwards.

source:www.oracle.com

Does it mean that Oracle Cloud is Mature? No. Cloud applications have different levels of maturity. Much of the growth Oracle Cloud is getting is from new customers. Customers are moving to Cloud to obtain the first mover advantage and to cut down cost & maintenance aspects. HCM Cloud is the most all components that customers would expect. ERP cloud still lacks some essential functionalities. Cloud is not recommended for every industry as some of the areas are still in development. In addition, many CIOs are tempted to ignore Oracle Cloud Applications “until they are mature,” because understanding the impact of adopting these applications can be difficult.

Should I continue with Oracle EBS & wait? YES.

Exisiting customers need not worry as oracle is pushing mainly its new customers to opt for Cloud.

E-Business Suite offers the best of ERP components, data security & customisations that customers need. If there is no new functionality that you are looking and are getting a good value out of your investment, let’s be where you are. With the features and updates that EBS is getting, it surely has a life beyond 2030.

See: June 29th 2018 – Oracle reaffirms commitment towards Oracle EBS customers

There is a buzz that R13 in EBS is also on the cards to cater customisations as the cloud isn’t beneficial there besides standard configuration cloud has many limitations on this front. For instance, mobility for Cloud is still in its infant stages with the lack of customizations & availability of API’s needed to transfer data.

Besides, much of the growth that Oracle Cloud is seeing is from new customers. By that, the number of Oracle EBS customers who shifted to Cloud is very less. Let me bring in what Oracle CEO, Mark Hurd said in the announcement of Q3 FY18 financial results.

“Less than 15 per cent of our on-premise[s] applications customers have begun to migrate their applications to the cloud.”

So, if you are looking for new functionalities and other benefits that Oracle EBS cannot provide, evaluate and compare third party vendors that can integrate their solutions with your EBS instead of taking a leap towards Cloud. Partners such as Algarytm offer Mobile apps and other digital solutions to help Oracle EBS customers in digital transformation.

Know about the Future of Oracle EBS

So, Is Oracle Jeopardizing E-Business Suite?

Oracle will not jeopardise EBS as many of its users still finding value out of it and with the lack of customisations available in Oracle cloud. As said earlier, we are hearing that R13 is also on cards as Cloud cannot offer customizations that meet business requirements & offer competitive advantage.
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Besides, profits from on-premise solutions are enormous that Oracle cannot avoid on-premise solutions so easily.   Maintenance & support services for existing on-premise customers generated a 51% of Oracle’s total revenue in 2017. Also, this revenue increased from USD 18861 millions in 2016 to USD 19229 millions in 2017. So, Oracle will not jeopardize its existing on-premise users especially EBS users for the sake of Cloud. Oracle will continue offering newer functionalities & support existing customers using On-premise solutions especially Oracle EBS. Oracle EBS users can make best use of their ERP by investing in third party solutions that integrate with EBS for specific functionalities instead of leaping towards Cloud.

With excerpts taken from Gartner

Ravi Jasti is the Vice President of Marketing & Sales at Algarytm. He has immense interest in Mobile Technologies and in helping businesses with his thought leadership articles.

Comments (3)

  • True. Also, Oracle needs to rewrite its code made for Cloud as it is not truly compatible.

    Naveen
    Reply
  • Ok. When is the Q$ result coming?

    Narasimhan
    Reply
    • It was released on June 19th.

      Ravi Jasti
      Reply

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