It wasn't so long ago that Oracle dismissed cloud computing as "gibberish." Today, it's singing a different tune.
Through a string of acquisitions, the database giant has been buying a presence in the cloud in much the same way it built up its on-premises portfolio decades ago. What remains to be seen is whether that strategy can work as well in this new setting.
Acquisitions of companies such as PeopleSoft and Siebel played a key role in fleshing out Oracle's traditional applications portfolio back in the mid-2000s, helping the company become a major player in enterprise software.
Today, many of its acquisitions focus on small companies that serve industry verticals with tailored SaaS (software as a service). Just in the past week or so that's included Opower, focusing on the utilities industry, and Textura, which targets engineering and construction.
"As Oracle’s traditional business in software licenses is under pressure, it needs to quickly ramp up cloud subscriptions to make up the difference," said analyst Frank Scavo, president of Computer Economics. "It’s much easier to buy those customers than it is to grow them organically with cloud apps newly developed internally."
There's no reason that strategy can't work as well in the cloud as it did on-premises, Scavo said. "Oracle has been rolling up cloud application providers for years now -- just look at Taleo, RightNow and Eloqua."
SAP has taken a similar route, Forrester analyst John Rymer said.
"Their ability to transition their ERP customers to SaaS has been really limited," Rymer said. "But by buying up SuccessFactors, Concur and other SaaS properties and then expanding them, they've actually begun to pivot the company to become a cloud company."
IBM has followed this strategy to some extent as well, including its purchase of SoftLayer in 2013.
Oracle has made pronouncements about becoming a general provider of cloud infrastructure, a field largely dominated by Amazon Web Services and Microsoft's Azure. But that's probably not where Oracle's real focus lies.
"It's all about the apps," Rymer said. "It's getting the apps into Oracle's cloud that is the object of the game."
Oracle executive chairman and CTO Larry Ellison has said Oracle aims to compete with Amazon. "That's not true," Rymer said. "They're competing with SAP, IBM and Salesforce."
The real money for a player like Oracle is in cloud applications and cloud platforms for application development, Scavo said. "Oracle’s IaaS offerings are simply to ensure that it owns the whole stack, from cloud infrastructure to applications."
The company has also looked to industry verticals to distinguish itself for a long time.
"They've had industry product groups for years," Rymer said. "They're trying to differentiate themselves and get closer to a real solution for these companies."
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