 Okay, welcome back to Oracle Open World. This is theCUBE, our flagship program. We're going to go out to the events. I'm John Furrier, join my co-host Dave Vellante, and our special guest is Analyst, Chairman of Constellation Research and Maverick in the software world. Ray, welcome back to theCUBE. Cube alumni, tech athlete. So what's the take here? Well, they're trying to go for something different here. They are really trying to focus on innovation. They're trying to focus on innovation. They are really trying to focus on innovation. They're thinking about, you know, how to incorporate big data, social, mobile, trying to weave the database story back into hardware. What's a Twitter stream like last night? So Larry gets the keynote, so they won a couple matches. He's feeling good, he has spring in the step. What was your point of view of the whole keynote? Because you were obviously streaming like crazy, streaming your analyst view, point of view at the keynote. What's your take on what Larry said and the reaction? You know, Larry gave a product feature demo. Like no other CEO can. And obviously he knows the technical details. I think the big deal was the fact that you could do these dual in-memory databases and get performance out of it. So I think if he could summarize whatever he did up there, it was like, look, we got in-memory covered. We got performance covered. It's 100x more faster, and you know what? We can do it cheaper than anybody else. That was his message. So Ray, you wrote a great blog post, post day zero and day one. It went around the internet and everybody was referencing it on Twitter. So really calling it to question, can Oracle keep innovating? Your point was that, look at Oracle when it decided to start writing checks, bought a lot of companies, half the attendees here, they're claiming 60,000, half are from companies that Oracle bought. Companies that typically wouldn't, previously wouldn't do business with Oracle, or didn't typically do business with Oracle, went out and did business with companies like PeopleSoft and Oracle Alternatives. And your premise was, or your question was, can Oracle innovate and appeal to that crowd? You know, do you think they're doing really, what did you mean by all that? Yeah, so I think, you know, when you look at the Oracle base, there's a traditional red stack. Those are the folks that came up with database, did middleware, did applications. That's the core of the Oracle base. And for a lot of them, it's about driving down costs, simplifying infrastructure, making sure everything is integrated, and that's what they're looking for. The other sets of customers came in through acquisition or accident. And those Oracle customers by accident, what they're looking for was really innovation, right? They bought the startup. They bought the company that became Siebel. They bought the company that became PeopleSoft. They bought the company that became Oblix. It didn't matter what it was, they were looking for the best of breed sets of applications. And so what's happened in the marketplace is that, you know, those companies all have been subsumed by Oracle, commoditized into the Oracle infrastructure and what we call the red stack. And the question is, can they keep innovating at that same pace? Can they find that next piece? And so, I don't know, we've been walking on the floor trying to figure out how much do Oracle customers want innovation to really need that? Well, and it's an age-old discussion in the software business, do we go best of breed or do we go fully integrated suite? Oracle's trying to do both. Have its cake and eat it too. It's a very difficult thing to do, and I'm not sure if there's an example of any company that's been able to do it. Well, it's kind of unpacked the cloud strategy. So, Oracle has made statements about how they do more cloud business than Workday. And of course, they're adding up right now in Eloqua and Teleo, et cetera, et cetera, et cetera. And so it's factual, but, you know, Workday's got all the wood behind one arrow, so to speak, you know, I guess pun intended in old Scott McNeely-ism. So what's your take on what's going on there? Workday's obviously smoking hot, Oracle doing a lot of business, but there's a classic case of best of breed or, you know, integrated suite. You know, that's a great question. I mean, my colleague, Holger Mueller, we've been actually here trying to understand is Workday really in the lead with HCM or does Oracle have a shot? And one of the things that we've been discovering is that we just talked to a customer that was the CIO of a university. They've put up their whole system, the entire Oracle HCM, Teleo, Talent, a whole bunch of things in 17 weeks. Weeks, not months, right? So we're actually starting to see those deployments come to life. I just think Oracle hasn't done a very good job of telling that story. Well, go ahead, sorry. Go ahead. You wrote, I think, in Constellation in looking at deals, I think you said that the vast majority were going to Workday, like unbelievable number of, you know, let's say you looked at 100 deals. It was like 80 went to Workday, and 19 went to SAP, and one went to Oracle. It wasn't those exact numbers, but rough order of magnitude. It is, and I think part of it is really the clients that we tend to look for are what we call early adopters. They're market leaders and fast followers, and they're the folks that tend to push the limits. They're thinking about an all-cloud strategy. What we didn't really tap into is this marketplace of people that were cautious adopters or fast followers that were now jumping into the cloud. And I think that's Oracle's core base, right? The PeopleSoft user trying to figure out, I'm going to go to 9-1 or 9-2, or I'm going to go to Workday or Oracle Fusion, and that's really the challenge. Yeah, so I want to stay on this theme of Workday for a minute. So has Workday become acquisition-proof in your view, or are they potentially a target for somebody like Oracle? You know, I think Workday has worked very hard to be acquisition-proof as you can, look at the ownership structure, look at where the shares are, look at who owns parts of the company. They definitely want to remain independent. So I want to come back now to innovation. So you also talked a little bit about in one of your previews that I was reading about the customer experience as an area that Oracle needed to innovate, and of course we've heard a little bit about that. I wonder if you could talk about that a little bit. Right, customer experience is picking up. And once again, this is another area where Oracle has the leading CRM vendor, Siebel, and they've got to deal with this issue. Do I stay on Siebel? Do I go to Fusion CRM? Do I upgrade the sales force or upgrade the fusion? I mean, the question is the same problem. So when you look at a broader issue on customer experience, it's just not sales. We're talking about looking at the entire lifecycle from marketing, sales, support, commerce, we're seeing all that come back again. And so acquisitions on social, such as Vitru, acquisitions that were happened around Eloqua, they're all part of this customer experience right now. And so what Oracle has a shot at is really redefining where CRM is. In the CRM world, what happened was lots of focus on management, very little focus on customer, and the relationship piece was completely ignored. And that's what they're trying to address here when we talk about customer experience and customer centricity. Dave and Ray, I want to ask you guys as analysts, you guys both been covering the space for many, many years. We talked about Dave four years ago, the Apple strategy that Oracle had, purpose built, big theme here again. Obviously Apple has some great success. SAP has been talking about Open. Guys, is that playing out, Ray and Dave? What do you guys think? Observations, anecdotes, any data you can share around functionality around this notion of a soft lock-in. Soft lock-in being where, okay, hey, you know what? This isn't lock-in, but it works. Oracle has always seemed to deliver the functionality at the right time to get their customers from switching because it's hard to switch, but they just kind of deliver that last trendy piece of technology. This year it's in memory. What's your take, guys, as analysts? Well, my take is that it comes out, first of all, strategy, magic quadrant strategy execution, right, to quote a bromade, but the strategy is a good one. Oracle basically saying, hey, we're going to try to change the game, we're going to vertically integrate, we're going to go with this red stack of functions. There really aren't a lot of companies that can do that. I would argue IBM can do it, and guys like EMC, VM, we're in Cisco do it through partnerships, but that's what customers want. They want this vertical integration. Now, whether or not Oracle can be best to breed, I think, is the big question in my mind. Are they best to breed in servers? No. Are they best to breed in storage? No. Are they best to breed in apps? Well, not really. Are they best to breed in database? Yes. So what's your take, Ray? I mean, you're right. I mean, we're down to, I mean, the only two companies that can probably deliver this end-to-end or IBM and Oracle, and Oracle has a strategy, basically, you know, high volume, high value, whereas IBM has a strategy of high margin, high value, and it's a different game, and you see that across the board. You know, if you're looking for something that's very deep, customized, able to go best, best in class, everywhere, IBM is there with services to help. If you're really trying to commoditize innovation and infrastructure in the stack, that's where the Oracle Red Stack plays a role, and this is the battle that's been going on in the marketplace, really between these big chess masters, between Steve Mills and Larry Ellison. Yeah, and, of course, John, nobody loves to criticize Oracle more than we do in the queue. We have a lot of fun with it, but you have to give Oracle props, you know, financially, it's working. This company has 39% operating margins, 45% operating margins, last quarter. It's thrown off $14 billion in free cash flow in the last 12 months. That's nearly as much as IBM for a company that's much, much smaller. I mean, you're talking about a $39 billion company versus a $100 billion company. I mean, Ray just talked about Workday. 17 weeks. I mean, the cycle times now for deployment is critical. You've got Sash, you've got Cloud. It was Oracle 17 weeks. Yeah. I mean, it's like, oh my god. Yeah, Workday's 17 days. But, I mean, look at the differences on cycle times. What impact has that had? SAP's been talking about this for a while. They've struggled in the cloud, Ray. What's SAP's comparison here? What's their answer? Well, actually, the long-term competitor for Oracle in this space is really SAP success factors, because end-to-end the payroll option is going to be the big challenge. People are tying things back to payroll, people are tying things back to integration. Workday is probably going to have the partner to build out the rest of the payroll, and that takes time. Payroll is not one of those fun things. I mean, you've got to do with regulatory changes in Brazil and, you know, something changes in Poland where regulations change all the time. That doesn't make it easy. Well, what about core HR for SAP? I mean, they've got success factors for the sort of talent management, but the core HR is still the legacy SAP base, and mashing those two together, I don't see it as trivial. I mean, look at how long it took fusion. So, I frankly think Workday has a big advantage there, don't you? It's really an issue of time. It's a question of who's going to win over the people soft replacements? Who's going to win the replacements over SAP? I mean, these are 20-year cycles when people replace HCM systems. This isn't something you do all the time, and the good news is we're just in the middle of this. What about the big data? You heard Thomas Curian and Mark Hurd this morning talking about big data, almost acting like they invented it. Revision is history. You called it for cloud. I'm calling revision is history of big data. We heard about, you know, key value stores and Hadoop connectors and in-memory databases. Is it window dressing or are they going to be a major player here? So Oracle actually, that's one of their strengths, and it's the fact that the analytics layer is both in the middleware side and also on the app side. And one of the things really about big data, it's not about how you're describing it, what kind of data, how fast it's moving, where it's sitting. There's really this pathway of what we call data to decisions and how we take data and all the different types, translate it back to information, bridge it to upstream and downstream systems, and then tie that back to insights. Really the question is what questions can I answer? What patterns can I surface? What's out there that's important in there? And then of course, how do we take the next best action? As we were talking at the Tableau event, I mean, the visualization piece, that's the place where everybody's weak. But Oracle's got the piece on the back and to be able to bring this information up and really actually make sense of it on a business level. Well, I wanted to ask you about the visualization piece, because we didn't hear much about that this morning in terms of big data. Is that a partnership play? And Oracle really likes to own everything. I doubt that's going to be a partnership play. Right, so what's their play in visualization? Are they there? I just don't know. We had a chance to take a look at the new usability and user experience and I think it's worth taking a look. I think they've done a great job on the UX team to actually change that. It's not at the same ease of use as a Tableau or ClickTech in the marketplace, but the fact that it's getting there. Everybody's spending a lot of time on visual analytics. If you look at SAS, the same thing's been going on there, everyone's making that investment because business users want visual analytics. You guys mentioned IBM, okay, engineered system by Oracle is obviously sun, and IBM just announced a billion dollars donation to Linux. Obviously they have very aggressive and open stack, a different approach on the cloud. How would you grade overall sun role in the Oracle engineering systems? Good, medium, high marks? You know, I think that's one of the crown jewels what's inside sun labs. I mean, you remember going to the sun lab days? All that innovation that was in there. Still a lot of it being untapped inside the sun war chest, but I think the problem is we're going into these 30, 40 year cycles, right? Back then, cloud was really time sharing, main frame time slicing. The AS400 was the box, that's what we're talking about, engineered systems. All this stuff working in one box. But here's the reality, software's getting so complicated that you really just want to buy it in the box or pick it up in the cloud. And I think that's what Larry Ellison's betting on, the fact that customers aren't going to want to put this stuff in themselves, want to manage it, and that they can get the skill. Now, let's be honest, the sun acquisition has been a drag on Oracle earnings. Hardware's a tough business to kind of win. I mean, you look at Dell, you look at HP, you look at sun, it was a slog to the end. And so, I think adding software to this, giving them the margins, and that's really one of those places that we can get some advance forward. Yes, sir John, I wanted to ask you a question because at our editorial meeting the other day, you were talking about some of your developer friends and sort of their perception of Java. We had data stacks on earlier. We were talking about open source and Oracle's open source mojo or maybe lack thereof. But they own Java, they own MySQL. You had made some comments the other day about that. I wonder if you could share with us. Well, I mean, look, we've been looking at a lot of the Amazon work. We've done a lot of research on that. And the young developers essentially are not, that are new school, are new to Java. And Java was built back when the overhead in the language was built to be optimized for the deficiencies in say hardware and integrated systems, or it wasn't as tightly coupled on the operating system side. There's a lot of disparate parts working together. And so Java's kind of like a 40 plus language, you know, if you're over 40, Java's great. But the new kids who are using, say, Amazon stacks like Node.js or Elastic Beans or DynamoDB, these stacks are fully integrated and they're not loading Linux patches. It just works. You can do some like Node programming. You can just load stuff in there. So it's all integrated into the stack. So the young guys aren't into the Java. It's like, hi Java, how are you forced to use that? So it's kind of a cultural graphic profile now developing in the developer community where, hey, I don't really want Java. I've got pythons, I've got traction, other languages. Ruby? Ruby on the front end. So rapid application development needs to be enabled by some of the hardened systems that we talked about. That's why I think this notion of functionality being a requirement over lock-in is going to be driving it. I mean lock-in's okay if it's just completely abstracted away the complexity. If the developer community can be enabled to do whatever they want to roll out apps. They shouldn't have complicated systems based upon this language for this, that language. Give me some rails. I want to program a front-end. I want HTML5 on the edge. And that's kind of the enablement, Dave. And that's kind of what I'm seeing about this new generation. Our generation updating new Linux patches. This isn't happening with all automation. You're seeing automation messages are loud and clear. So again, something to watch for in that. Yeah, so Ray, I got to ask you so, you know, Larry always saves his best stuff for mid-week, right? He's talking about product. He is the best product pitch now that Steve Jobs has gone. He's the best CEO of pitching products. And I think has patterned a lot of his pitch after that. So what do you expect to hear from Larry tomorrow and his big keynote? You know, I'm really looking forward to see where he ties all this together. How the database, the engineered systems, internet of things, big data comes together. So maybe we'll see that. Maybe we'll see a brand new pricing model. I think it's still up in the works. I'm not sure. Maybe he'll bring home the America's Cup. That's what he's going to talk about. If not, who knows. Guys, so final thoughts on the conference. Ray, I want to ask you, you're out talking to all your clients and getting to lay the land on your team. What's your take away right now in terms of the things that are surprising you here and what's not surprising? What did you expect and what didn't you expect? You know, I think when we're in these analysts, media, press community, we tend to be thinking probably three to five years out. And all the things that we're talking about three to five years ago are now realities for the clients and customers here. They're asking about it. You go to the Hoda, the hands-on demo area and they're just going in and saying, hey, how do I try this social thing? You go somewhere else. They're like, how do I get this mobile initiative in place? People are just warming up to all these things that we've been evangelizing and talking about early. And I think that's really a reflection of the Oracle customer base. The cautious adopters are waking up and saying, yeah, it's time to start moving. I've heard about big data. What do you get to show me? Well, they showed three, what, two CEOs this morning and a guy from Thompson Reuters. You had the CEO at NYSE, CEO of Boeing. Oh, you had the guy from Softbank. Hey, Larry. Hey, Mark. I mean, they're talking, you know, CEO speak and that's a big advantage for Oracle in my view. Dave, what's your take so far? I mean, you got in the ground late last night, cut the back into the keynotes and this morning, what's your big take away? Well, I think it's a lot of consistency. Heard said it today. I hope it sounds like repetition because this is kind of what we said last year. This is what we're saying this year. I think they're getting the story together. Certainly better in the whole big data and analytics piece. I think they added a little meat to the bone, but I didn't see a lot of surprises. The customer experience thing is a bit of a surprise to me. That's something that I want to dig into. I haven't actually seen it, so Ray, I'm going to take you up on that suggestion and go poke at that a little bit. How about you, John? Well, to me, it's about the in-memory thing. I think Oracle, to me, is always a Johnny come lately at the right time. They're right at the finish line at the right time. All the startups race in there. They get the new technology. It's almost like Larry just is sitting in a board room coming off the boat going, ah, we got that too. Just make that happen. His customers are big and the switching costs are still large. The cycle times are getting smaller, but still it's hard to rip and replace an Oracle system. Larry just kind of has that sales inhibitor mindset. What? Sales inhibitor? No, I got to drop that in there. They're great at optimizing timing for releases and products and when things are important. Look at that long name backup recovery. What was that? That was a B-R-L-A. I think that's what we're going to call it now. They've got the storage group. They've got some new mojo over there in the storage team. They had a recent executive lead and now they've got kind of a new Scott Jenner over there. XQ Logic Executive and Nervonix. Ray, I also want to answer about some of the things going on in the industry. We saw some news. Gary Bloom is now the CEO of MarkLogic. What's your take on that move? Because he's an old-time Oracle guy and a very tough guy. Well, the MarkLogic guy went to host analytics. So that's a little switching around in the big data world, I think. People are changing their jerseys all the time. What do you expect from him over there? I think it's taking it to the next level. There's the need to grow MarkLogic and to get it out and potentially an OEM strategy, building out analytics further. Do you think the startup community in memory is going to have legs or do you think the bigger players going to co-op that trend? I think they have a lot of legs. We're still early in big data. There are different things happening. The other day we were talking to a company, IASD. Topological data analysis. That's pretty cool in terms of how they're figuring out the connection of endpoints and the closest and how that creates patterns. So they're using that for drug discovery, fraud, and other kinds of uses. So I think we're very early in terms of all these patterns emerging. Ray Wang, tech-athlete, founder, chairman of Constellation Research. I'll say chief analyst over there. Great team developing. Obviously always fun to have you on theCUBE. Thanks for coming in and sharing your perspective. We'll be right back with our next guest here inside theCUBE, our flagship program. We've got the live here in San Francisco for Oracle Open World. We're broadcasting live. CNBC is broadcasting live. We'll have all the students from the noise. Stay with us.