 Live from San Francisco, it's the Cube. Covering Oracle OpenWorld 2016. Brought to you by Oracle. Now, here's your host, John Furrier and Peter Burris. Okay, when we are here live in San Francisco for the Cube SiliconANGLES flagship program, we go out to the events and expect the signal from noise. This is Oracle OpenWorld's seventh year coverage of the Cube, now we get the big stage. I'm John Furrier, my co-host Peter Burris, head of research for SiliconANGLE Media Inc. As well as general manager wikipon.com and our next guest is Rebecca Wettemann, co-founder and VP of research at Nucleus Research. Welcome to the Cube. Thank you. So we'd love to get the analysis. So you can do a lot of research. First, tell us about the firm that you co-founded and what you guys specialize in. Sure, so Nucleus is about 16 years old. Founded with the goal of providing that base level research to vendors and users of technology that's focused on value. So we've published more than 600 return on investment case studies over the past decade and a half. We'll actually go out and calculate the real value that customers have gotten from technology. We're registered with the National Association of State Boards of Accountancy, which is a long-winded way to say when we look at ROI, we're looking at the way the CFO wants to see it. So we do a lot of work with customers and help them to build the business case. So business modeling, looking at project investments, did it pay back, all that kind of finance kind of equation too? Exactly, and what it's been able to do with 15 years of data is really see some interesting trends in the way we see return on investment from technology. So if we look at cloud, for example, looking at our data, we find that cloud delivers 2.1 times the return on investment of on-premise. That's up from 1.7 times a couple of years ago. So while cloud applications are getting more complex and bigger, the value is getting greater. So take a step back and take a minute to just explain the concept of how you guys look at the on-prem cloud modeling because we've heard many different studies. Jeff Frick, our GM, heard some stats saying for every dollar spent in the cloud, it's $3 spent on-premise. So there's all those different things. So how do you guys look at that? Because you talked to the customers, what's the main variables? What's the general modeling between on-prem and cloud? What are some of the dynamics? Sure, so I think we often talk about while the lower initial cost of cloud. It's a really lot bigger picture than that. And what we find looking at it is yes, you have lower initial costs and faster time to value, but also it's the ability to get more value over time. The fact that I don't just set it and forget it like I often do with an on-premise application. I can take those upgrades, those vendor enhancements, investments and new features, add them to my portfolio. So I'm getting greater benefit over time with a relatively fat cost structure. So we tell clients, if you don't ever want to change, grow or expand your business, on-premise is a great place for you to be. If you have other aspirations, cloud is a great way to get there. Peter and I always talk about some of his previous days in research and you've been around the block, obviously, and seen cycles of innovation. And the joke is always around, the TCO calculator, total cost of ownership. Everyone had a TCO calculator. In fact, you did some for Sun back in the day, some business boys around that. But that was a way for people to understand, okay, I'm going to make a purchase investment, what's the total cost of ownership? The shark fin, the iceberg, whatever metaphor is used in IT. How is the total cost of ownership changing? Because this is something that has a whole new dynamic. So how do you compare and contrast TCO from the old days to today? Because Larry Ellison on his last keynote actually used the word total cost of ownership in comparing to Amazon. But what is the new equation? Well, you know, it's important for budgeting still, TCO, what we've got to look at the whole picture. If we made all of our decisions based on TCO, we'd never buy anything. That said, when we look at the comparative TCO of Oracle ERP file, for example, versus traditional on-premise ERP, traditional on-premise ERP is 2.1 times the cost of Oracle ERP. So that's a lot of money on the table. On an upfront purchase. But then do they make that on amortize over time, and also the capex piece? That's a three-year over, that's over three years time. Over three years. Yeah. So here's one of the challenges I would say, John, is historically, the workload was known. Or you could pretty much normalize it. So you would have a particular set of database transactions or a particular ERP class of application. The processes were known. And then the question was, who had the better cost profile to get that same amount of work? As technology has evolved to where it's part of the revenue side of the equation, it's driving new styles of engagement, it's making possible not only new business models, but wholly new businesses. It means that the process is unknown. The workloads are unknown. The workloads are an experiment. And we have to go find them. And it's going to be highly iterative. So the challenge is, we have more insight in what the cost profile looks like, less insight into what the revenue or workload size can look like. And that has a significant bearing ultimately on how we use TCO to position different types of choices. Well, that's a good point. I mean, Vishal Sika was giving the pre-game or the warm-up band, if you will, for Larry. And he's awesome. He's always has his finger on the pulse. He has been probably, of all the executives, very directionally correct in everything he, he always sees that the future direction. He has a slide that said, here's your core business existing. And then in the new business model, it's different. So on that thread, Rebecca, what is the data that customers should squint through? I mean, we looked at the, I saw the earnings report on Thursday. Yeah, declining on-prem, but yeah, we're faster growth marker, it said on the cloud. Still, numbers are still not that massive. How should customers squint through the data? What do you advise, what data do you have that you could share to try to figure out their impact on how they should continue to upgrade with Oracle and move forward? Well, I think they have to look at the data, but also the other factors as well. How easy is it to acquire the technology? And what investments has Oracle really made in making it lower risk for them? So if we look at CX cloud, for example, that's a great example where Oracle is invested in vertical industry solutions. I mean, faster time to value, less consulting costs, lower risk, better availability to upgrade over time without disruption. A lot of investments that Oracle has made to reduce the risk to customers. And that's a great example of an area where it's making great technology accessible to a broader group of customers than before. And also if you're reducing the risk, you can take on some of those uncertainties associated with what will the returns be. So it comes back to this notion of businesses have more visibility into the cost now. They're still struggling to understand what the benefits are gonna be. They know they're there, but they also know it's gonna be a journey. And by moderating some of those risks at the infrastructure level, business can focus more time and attention on making sure we have the right function. But very importantly, making sure that we reconfigure our business to take advantage and apply that function. What's a good point? We actually had a conversation with Laura Ibsen and Steve Krause from the marketing cloud group. And Peter was saying, you guys should just do a reset. But what Steve had said, reset, meaning, hey, customers have so much stuff now. They're drowning in complexity around too many point solutions. So I think the CX is an interesting center of gravity that Oracle has an opportunity. And so Steve Krause using analogy like, they're buying stuff and trying to build a skyscraper with no foreman. Like they got to know everything about their buying. And so you have application sprawl or cloud sprawl now. So this brings up the point from the buyer's perspective that the cloud has a new dynamic around how they should look at the architecture. Does that factor into your data because two trends we're seeing, one point solutions are still gonna be bought. Land and expand is a key dynamic in the cloud. So the unknown sprawl or architecture is changing. How do you talk about that in the modeling? How do you talk to customers? And what does Oracle say? Well, I think the risk, the financial risk associated with going out of an application has been dramatically reduced, which is good news for customers, right? Cloud ERP, 43% faster payback than traditional ERP, which is great news. It means less time spent waiting to get that money back in my pocket, a lot greater flexibility. But what it also means is customers have to think about how am I managing those different pieces of the portfolio? And how do I look at what is a phased deployment of those point pieces with an overall view in mind of what that overall strategy looks like? Do you guys factor in a buffer for like a swag number saying, well, we can estimate that there might be some other. Of course they don't. They don't put in a buffer or a swag number. No, but I mean, it brings up the question, you must have to factor in some growth. I mean, there is a growth factor. Financial terms, it's called the worst case scenario and every CFO does it. You know, if I'm buying an oil tanker, I don't know what the price of oil is going to be any year, how many icebergs there may be and how many AA meetings my skipper has attended. Same thing, it's true with technology. I've got to have those expectations knowing that the ROI project from a project is never going to be what I actually get. So here's another one more interesting thing that John is that we had, we had Accenture on the queue and historically on premise an integrator would develop expertise about how to make the combination of hardware and software work. And many years ago I did a piece of research that suggested that the ratio was about 1996. The ratio was for every dollar software purchase, $7 of services were purchased. By 2001, 2002 that had jumped from $1 of software, to $17 of services to essentially get the same product. People made money on that. Now, what was happening? Why is it historically? Unicost have always gone down as you gain experience. Well the integrators were discovering all these new ways that they could increase billings. So one of the other things that's happening on the ROI side and improving the risk is a cloud is forcing a recalibration and Accenture was very clear about this. They're introducing templates. They're introducing machine learning. So it's in delivery. That's, they are finding ways to streamline the delivery process so it doesn't look like it did 15 years ago. So even the integrators are talking about entering into this new world to attend to the risks of adding new functionality. Everybody wants to apply technology to make the business better. And everybody's stepping up and adjusting their business models at least a little bit so they can participate in that. Yeah, the ROI is such an important thing. We've seen it everywhere. That's the number one question that we get asked all the time. What's the ROI? How, how big do you see the industry in terms of really having their arms around ROI on a scale of one to 10, 10 being completely baked out? I mean, it's always the ROI models. I mean, some will say in certain areas like social for instance, the ROI is all elusive. It's hard to get your hands on a lot of failed projects. But it's some of these core business processes where they have to kind of keep the ship running straight not to any icebergs, but yet go the next level. You know, I think there's still a big gap between IT and finance and understanding how we make decisions. Really, if we're looking at a business case, there are only two or three benefits that drive a good business case. And it's a matter of thinking about ROI, not as the justification for writing a check, but as a roadmap for say, how do we get value? Six months, 12 months, even three years out. And make comparisons. How much does the top line matter now? Because obviously that's a big driver. Now the cloud has to the point Peter was making and you were highlighting earlier is that the agility factor allows developers and DevOps in the cloud to be much more agile on the app side. App's dry value, value is revenue. So there's clear visibility on the revenue side versus IT cuts costs, you know, manage a data center, 70% keep the lights on, that kind of thing. How much of that revenue piece is in focus and how do you back to that in or how relevant is it? Well, I think certainly if we think of it in the context of the Oracle footprint, bringing marketing, CPQ and sales together gives us a much clearer focus on where those pieces actually work. The great news with things like marketing cloud, sales cloud and some of these CPQ technologies is there is a lot of room for business users to be able to invent on the edge. And I think we'll continue to see Oracle invest in enabling marketers, sales people and those on the CPQ front to be able to do more with what IT gives them on a daily basis, to be able to turn to capture those new revenue opportunities as they are identified. And the operating model will be nice lift for that revenue observation, if you will. Rebecca, we've got a couple of minutes left on the segment. I want to just get your perspectives on the show this year. What's your thoughts, observations on messaging, the delivery of some of the content, the reality of how that's fitting into the playbook that you've seen and compare and contrast, is this a new Oracle? What's the vibe, what's your overall thoughts? You know, I'd say there was some great announcements here today. There have been some interesting announcements from areas you might not expect like great usability investments on the JD Edwards front. Folks who haven't looked at JD Edwards take a look because there's some very interesting stuff going on where they're focusing on continuing to deliver value to customers. The customer engagement cloud is a great new perspective that Oracle is bringing to the whole CX marketplace. Certainly the efforts that Oracle has made in making it easier for customers to buy, simplifying the contract negotiation process, gonna make it a lot easier to do business with Oracle. There are things that Oracle could certainly be talking about more. A lot of the things that they've done around integration, a lot of the things that they've done in the platform as a service are still a little bit too technical for people to really get their hands around. The Amazon story is much easier for the press, I think, to handle. But I think they've made some real progress. Is Amazon a red herring or is that kind of a strategic competitor for Oracle, you mentioned the headlines. Is that really in play for them? I mean their core business is pretty solid, Oracle. It's a very different player. With Oracle I'm looking at the entire application stack as well as platforms as a service and an existing customer base that's really delivering not just infrastructure projects but real value in financials, accounting, supply chains, CRM across the board. Well thanks so much for sharing your insight and data. The cloud has got a lot of advantages on the ROI side. Certainly going to be top of mind of every single executive out there to really be an Oracle customer. Thanks for sharing, Rebecca. My pleasure, thanks for inviting me. Okay, you're watching theCUBE here live in San Francisco, in San Francisco for Oracle Open World 2016. I'm John Furrier, Peter Burris. Be right back with more after this short break.