 From San Francisco, it's theCUBE, covering Oracle OpenWorld 2016. Brought to you by Oracle. Now, here's your host, John Furrier. Okay, welcome back everyone. We are here live in San Francisco. This is theCUBE, still getting those flagship program where we go out to the events and extract the signals of noise. We're here at Oracle OpenWorld 2016, our seventh year covering Oracle. We'll get bigger, the bigger stage. We're down on the main floor, breaking it down. Of course, our next guest, Ray Wong, who's the CEO of Constellation Research, has been on seven consecutive years at Oracle OpenWorld, been on other events where he can come on. Great guests to share his insight, analysts and CEO at Constellation, deep into the Oracle coverage for over years, seeing the transformation. Great to see you, welcome back. Hey, thanks a lot for having me. It's been seven years. I mean, I can remember when it was a booth somewhere real small, like really, this is a massive stage. We've made it, not yet, but we're still getting up there. The Oracle's trying to figure out if we're real press or not, but we're getting there. We had 12 interviews yesterday. But one of the things that's great is that we get to get the briefings, get the live interviews. But I miss out on all the briefings. You've been all the briefings. Obviously, you saw the keynote Sunday night. First, impressions on Larry's keynote, heard yesterday, currying today, heard, also spoke with the analysts, you were there. What's going on? What's your take of Oracle this year? What's the vibe? And what's your analysis? Okay, so for the last three open worlds, it's been like, here's our roadmap. Here's where we're going to be. Here's the investments we're making. Here's what happened to Fusion. This one, very, very different. This one was, here are the customers. Let the customers tell the story. And almost every single keynote, every breakout, every session, you saw somebody spend a lot of time on customer references, and you can see exactly, talk to the customers and see what they made. Now, it's not just that they're buying one cloud. It seems like they're buying more than one cloud in every one of these instances. And the customers that are popping up, they're not necessarily all traditional Oracle customers. And that's what makes it very interesting, is there are new customers, new logos that are up here. And so we're seeing a bit of that. Now, there's no question on apps, infrastructure, platform. We're definitely seeing a lot of apps customers, especially from the way we look at our coverage, but the infrastructure piece, especially around data as a service, and what's happening with adaptive intelligence, I think that's a lot of the pieces where people are starting to say, okay, I can see the power of the cloud come together. So I've read in the earnings report I wrote up on Thursday night, Thursday night, on-premise revenues up only 5%, 6.8 billion. Good numbers, 6.8 billion, cloud on-premise, whatever that means. Softwares of service was 798 million, up 77%. Total cloud revenues, 9.69 million. It's up 59% in US dollars. Okay, US dollars. Oracle's been making a big claim about, we're up 77%. I mean, that's like saying, I doubled my market share from one to 2%. I mean, percentages don't speak absolute numbers. Still under a billion on cloud softwares of service, still under a billion in IaaS, they're not clearly where they need to be numbers-wise. Not necessarily a bad thing. It's early on and Allison came out and said, we're playing the long game and he's the master of the long game. So you can almost feel the tampering down the expectations this year. Not a lot of, I mean, Mark Hurd does his normal thing. We're exploding, we're doubling bit more of the cloud than anyone else. Staff are upbeat as well. But this is early on and the numbers aren't that great. Considering, what's your thoughts? You know, we see a lot of different, we see a lot of different market measures that are going on. Some people say like five to 10% of the world's workloads have not moved on. Have only moved on to the cloud. There's like a 90% upside. I don't know. I think like we're probably somewhere between 10 to 15% where the workloads have moved on. So there definitely is upside. The question is, how fast did you want to move? Now, for Oracle to move, right? They had to build the data centers for this to happen. And they did, right? And so if we're starting to see that kind of momentum, 77%, if they can keep 77% up every quarter, you're going to start saying a lot of traction. The challenge is what's happening on the on-premises business, is that going to get reduced? And so they're managing that carefully to the street. And I think that's probably their biggest concern, but they are definitely seeing growth. The managing the street is definitely in play, but I say it's not a bad thing on the numbers because it's still early. They had to build the data centers. They're rounding off the IaaS piece. Very important, certainly from a Korean's thing today, I walked away with the network isolation, some of these little hard to build technologies got to be baked. So that's one thing. Second thing Larry Ellison said on the earnings file, I want to get your thoughts on, Microsoft is moving much faster with their install base to their cloud. And Oracle, not so much, they're holding that back. That's the big game changer, right? So like all this stuff is net new customers, sir, there's a declining revenue on on-prem, but they got a faster growth on cloud to offset that decline. So it's almost as if the army hasn't sieged yet. I mean- I'm sure what's interesting about the Microsoft numbers, those are mostly office people moving to office 365, right? So that's not net new customers from that perspective. And then Hertz had something that was interesting in the Q&A with the analysts. He was also pointing out the fact that a lot of their new logos are actually jumping in, not the old logos. So they're actually getting net new customer traction. And he said something that was really interesting. He had wished that he had gone after the SAP customer base earlier, the ones that were going to areas like HCM because they weren't expecting the SAP customer base to go from people's off to workday. They were actually expecting them to just stick with SAP or go to success. Do you think a blind spot there for Oracle? Well, I think it's discovering these things over time that saying, hey, cloud buying behaviors may not be the same as they were in on-premises. That's a great point. So let me ask you about the buying behavior. So I think Oracle's got an ace up the sleeve here with their install base. The net new customers is an interesting new data point. That's a productive trend. So that you could see Oracle really pour it on. I mean, you see it that way? Your thoughts on that? Well, I think there's a lot of upside, but I don't see the customers making those kind of moves right away. What we're seeing is they're jumping to the cloud on the edge applications. And then they're thinking really hard, do we move cloud finance? And do we move our core ERP into the cloud? They're going to make those changes. They definitely know that. But what's pulling them in is going to be things like adaptive intelligence, all the hyperion, HFM, and the cloud. All this kind of stuff is actually the edge apps are the ones that draw people on the cloud. But the key one is like data as a service. Once you realize I need those records, I can actually master things on the cloud. I'm basically competing on compute power. That's when people realize that, okay, I can see the benefits of the cloud. Your thoughts on Larry's keynote around the slew of announcements. One of the things I observed was the time the clock ran out on him and he had a boatload of slides to go through. He basically blew through them. Data cloud and a lot of some of the core innovations. Are we seeing an Amazon web services like Oracle with the slew of announcements, the pace of the cadence of new product intros? Is that a more agile Oracle? Are we seeing a different company? We saw something interesting in Thomas' presentation that kind of bolstered what Larry was saying is the fact that they're supporting all these open source initiatives in the cloud. And in almost every deal that we see in storage or compute power with Oracle versus Amazon, Oracle has gone head to head with Amazon on pricing and even on service level agreements. And so we're actually seeing a battle because it's like Oracle and Microsoft are ganging up on Amazon right now in the cloud. So what's your take about Oracle's position vis-a-amazon? Larry straight up says it, right there a pioneer, we're targeting them. And he actually said, quote, your lead is over. That was the headline that we had on Silicon Angle. The quote from the keynote. Is there lead over? No, I think it's going to be a good battle for quite some time. The public cloud vendors like Amazon, Google and Microsoft have a pretty good lock on that piece. Oracle's coming at it from an Oracle perspective. I don't think we see them as a public cloud today. I think if that's the place they want to play, they actually have some cost advantages to compete on. Especially back to what you're talking about on the data center construction. The way they built those data centers, the security level that Thomas was talking about, the network level, that's actually a huge innovation, especially some of those performance guarantees they're talking about. Well, that's going to check the box on the moving workloads around. To me, that's going to be a big thing to watch. And no hypervisor. Hello, VMware. It's going to be fun to watch. Okay, so I want to get you a nuanced comment was made. Larry said, our past business has been helping our SaaS business, which will help our infrastructure service. Is that a circular loop that's kind of upside down? I mean, I just don't see the past business helping the SaaS business. Isn't the SaaS business driving the past? And isn't the past driving their infrastructure in their sequence? It's a classic Oracle red stack argument, right? We've got all the stacks from chip to database to infrastructure to platform to software. But what's actually helping is the partners are starting to build on the past layer. So the apps are the pull, but the move from database to cloud is going to be the bigger pull for them. Let's talk about the database. That's my next point. Great, you brought it up. The database, the crown jewel, one of the things I've been hearing internally inside Oracle, some of my sources has been, curry and swim lane of database, don't talk to the other groups. They've always been that way at Oracle. Database has been the crown jewel, whether you put web logic on top, make it sticky and the apps all are happy up top. But now you're seeing the recognition and opening up past outside that swim lane. Your comments, what does this mean for the customer? A more open Oracle? I mean, I saw in a Juan Luisa yesterday they're putting JSON in the database, fully queryable. So this is a new kind of opening up of Oracle. You know, they are opening up a lot of the database capabilities in platform as a service. I think one of the things we're hearing in Larry's Keynotes, if they haven't been announced yet, is really the first set of features. All the new features are being announced in the cloud for the database, not on-premises but in the cloud. And I think that's going to be one of the big announcements as we see the Keynotes. This Keynotes coming up? This Keynotes coming up. Okay, so what was the analyst meeting like with Mark Heard? Was Mark Heard offering any new information? Was he colorful? What's the Heard story? You know, Mark wasn't in a good mood. He was kind of answering questions from everything, from what keeps you up at night, to how do you keep the customer's success and customer experience and the brand, to, you know, what's, we asked him a question of how our company's going to grow. What's their way to jumpstart growth? So I think they hit all these. He talked about, you know, I mean, what keeps him up at night is basically those deals he's missed. And the customer experience piece is they're spending a lot more time on customer success. And he mentioned, the irony is called Pipeline. It's pretty robust. We'll see how that comes out. All right, final question. Obviously, does it matter anymore about Oracle? Whether you call it the marketing cloud, or the HCM cloud, or the ERP cloud, or the data cloud, does it matter anymore? Because you're having a lot of crossover between data, databases, and it's almost as if those siloed names need to kind of go away. It doesn't make any sense if you see that integration play. I mean, kind of a new Oracle. What's your take on this? Is it? I think it's still very important. A lot of customers buy point solutions. They might just buy a piece within the marketing cloud, a piece within the HCM cloud, a piece within, you know, the manufacturing cloud. For each one of these, that's what they identify with. Because there's still a lot of sales happening at the departmental level, not at the suite level. And for Oracle, they've mastered the idea of buying the best of breed, putting them together, giving them a choice on a suite, or a choice on somewhere else. And that's really what they're trying to set up. Your take on the whole Oracle play on hardware, the whole engineered systems, what's your thoughts? You know, over time, you and I, I think we probably know this engineered systems business is all moving into the cloud. It'll be an engineered systems that sit in the Oracle cloud. There might be like something like 1,000 customers in the world that might just buy an Oracle engineered system. I mean, think about it, there's only 5,000 IBM mainframe customers left. And they're all big ticket items too. So the purpose-built appliances seem to be going well, and because people just want to put them somewhere. Oh yeah. Ray, any other observations you'd like to share with the folks here? What's, you know, I think for us really this year is we've noticed that the customers that have come here are a lot more sophisticated. There's case studies and client stories, have a lot more depth. People have actually gone out and actually made this stuff work. And I think what was interesting, especially in Chris Leon's session for HCM was the fact that 80% of their customer features, 80% of the features were customer driven. And we're seeing a lot more of that as the product teams build out their products. So what's new with Constellation? You got an event coming up. What new research are you guys doing? What are you finding in the field? What's your analysis of the entire industry landscape? Watch October 5th. We have an awesome offering. It is free to all buyers. It's a way to revolutionize the way you look at shortlist. And then for a customer event, we've got Vince Cerf. We've got Danny Heath. We've got Doc Searles. We've got Meiling Fung. And we've got Whitney Johnson. All in one place. This is our innovation summit. October 26th to 28th, Constellation Connected Enterprise. You can find it on ConstellationEvents.com. All right, final, final question. What is the most overhyped thing right now in the industry? And what is the most underhyped that needs to be paid more attention to? AI is like hype beyond crazy. All fall, you'll be talking about AI, artificial intelligence, machine learning. We're not there yet. We don't have Jarvis, but you know what? We've got some good recommendations. What's underhyped that actually needs to spend? Integration. Integration is going to be super important, especially when we look at process integration, cloud integration, data integration, because what we're trying to do is access information instead of owning it, and that connectivity is so important. Ray Wong, CEO of Constellation Research here inside theCUBE. Laying down the insight, thank you for taking the time to share the data. Ray, really appreciate it. Good to see you again. It's theCUBE now up Larry Ellison's keynote. We'll have full post keynote analysis, plus Peter Burr's myself going to dig into the developer angle. Where are all the developers here at Oracle Open World? Does Oracle have a coherent developer strategy? And we're going to unpack that. You're watching theCUBE. I'm John Furrier. We'll be right back.