Last updated: June 23, 2013 3:57 pm

Oracle moves to embrace cloud upheaval

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Oracle will this week lay out plans to move deeper into the cloud-computing market, as Wall Street worries that the US software company’s traditional business is being disrupted by a technology transition that is bringing a new wave of start-ups to the fore.

The announcements are set to include partnerships with Microsoft and Salesforce.com, two of Oracle’s biggest rivals, in a sign of how extensively the upheaval caused by the move to cloud computing is changing the tech landscape.

Oracle’s stock price fell more than 9 per cent on Friday after it revealed that growth in its sales of new software licences had all but stalled. Claims by Oracle executives that macroeconomic issues had caused the shortfall were widely dismissed, even by analysts who retain positive forecasts for the company.

“Oracle has a growth problem with its core licence business” as the technology market moves to new suppliers of cloud technologies, Rick Sherlund, an analyst at Nomura who rates the company a “buy”, wrote in a report to investors.

Larry Ellison, Oracle’s chief executive officer, promised news this week of what he said would be a “startling” series of partnerships, including those with Salesforce and Microsoft, to put Oracle technology at the heart of their own cloud operations.

Mr Ellison claimed that Oracle was already second only to Salesforce in the market for cloud-based applications. However, he said that a more important feature of the cloud business for his company would involve selling a new version of its database software to act as the platform for other companies that sold cloud applications or infrastructure.

Some analysts questioned whether Oracle would be able to rekindle its slumping growth by moving into these newer markets, since this would mean abandoning the high upfront revenues from traditional sales of software that customers run on their own computers in favour of the lower prices and drawn-out subscriptions of selling a service over the internet.

“There are equivalent or better technologies out there at much lower price points,” said Peter Goldmacher, an analyst at Cowen in San Francisco. As a result, Oracle is facing one of the inevitable transitions in the tech world “where the young disrupt the old,” he said.

The outspoken Mr Ellison has claimed in the past that the rise of cloud computing, which involves the centralisation of computing functions, does not represent anything new for the tech world. By last week, however, with his company announcing disappointing earnings, the rhetoric had changed completely and Oracle executives were at pains to stress the headway their company had made in the cloud market.

Commenting on the deals that he hopes will show that Oracle is repositioning its business, Mr Ellison said: “These partnerships in the cloud ... will reshape the cloud and reshape the perception of Oracle technology in the cloud.”

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