 Okay, welcome back everybody, this is theCUBE's SiliconANGLE's flagship program. We go out to the events. Extract a scene from the noise. This is day three of exclusive Oracle Open World coverage. SiliconANGLE theCUBE, this is our flagship program. And I'm John Furrier, the founder of SiliconANGLE. I'm joined with my co-host, Dave Vellante. Back for day three, big story this week is obviously Oracle Open World, all the announcements. Larry Allison's keynote was amazing yesterday because he didn't show up, he was at his boat. Oracle had the seven wins in a row to tie up the America's Cup. Big story, big scandal, a lot of people were kind of blown away. LA Times had a very scathing, critical analysis. I personally said, that's a grateful Larry. I honestly think, you know what? Once in a lifetime opportunity, this kind of comeback in sports, obviously it's sailing, people may not know how mainstream it is. Still a niche sailing, Dave, but you know, this rivals the Red Sox comeback against the Yankees when they were down, down and out in the ALCS and they ended up going on the table on the Yankees and then won their first World Series and since what, you know, many, many years. So obviously great comeback. Dave, day three, what are you expecting for day three? Well, we've heard a lot this week of course about engineered systems and hardware and software running together and in-memory databases and 12C and the like, human capital management. We're hearing a lot today about the customer experience. You know, it's something that Oracle has been criticized on a lot. We've seen a lot of demonstrations today, some of the keynotes, big injection of social with some of the acquisitions Oracle has made. So, you know, I think Oracle realizes, it's a typical classic case of Oracle. They do a good job of at least understanding where the warts are and then spending some money on R&D and eventually catching up to the state of the art. So I expect to hear a lot of that today and of course today we're going to be unpacking a lot of what we've heard all week but we're also going to do a deep dive segment right now. Elizabeth Headstrom-Henland is here. She's an analyst at TBR. She specializes in enterprise software. Elizabeth, welcome to theCUBE. Thanks, Dave. Very happy to be here. First time on theCUBE. First time on theCUBE, hopefully not the last. So you just rolled in. You're going to catch the tail end of the conference and you're going to be at the financial analyst conference. You guys got a unique model, you and your firm in particular, really at the intersection of technology and finance. Talk about that a little bit. Absolutely, so technology business research is an analyst firm based up in Hampton, New Hampshire and we really look at the intersection of business and technology, as Dave noted. It's about understanding how vendors are making money in technology and using that analysis to then start projecting where vendors are going for next steps. So it's a busy time of year for me in particular. We're wrapping up our second quarter 2013 coverage of Workday, which publishes this week and ramping up our third quarter coverage of Oracle, which publishes October 9th and our third quarter coverage of Red Hat, which publishes in October 15th, I think. Yep, had to divide and conquer this week but I have to compliment Oracle on their simulcasting because it let me kind of divide and conquer until I actually got here physically. So we're going to unpack a lot of this. We should have a little time, we only have like 15, 20 minutes, but we could go probably an hour on just those topics alone. No question. Let's start with why we're here, Oracle, Oracle Open World. What's your take on Oracle? I mean, here's the company, let's say roughly 40 billion in revenue, $160 billion market cap, throwing off cash flow like unbelievable $14 billion in pre-cash flow in the last 12 months. Yet at the same time, there's a drag. There's a drag on the hardware business, there's a drag from the Sun acquisition. But the flip side of that is they had 45% operating margins last quarter. So it's an amazing story, but there's still some big questions. What's your take on Oracle? So Oracle is a company where I can't ever underestimate the power of command and control from the executive team. And by that, I include Larry Ellison, the CEO, co-presidents Mark Hurd and Safra Katz and executive vice president Tom Currian. And their ability to really evaluate where the company is and change the direction. And I have to borrow one of Larry's quotes from Last Open World that it takes time to turn a battleship. And I think that's really where Oracle is right now. They understand that they've got a portfolio full of point products, they're all good, but they can't really get to the point of telling a business value story. And that's where they're at right now. You noticed back in April at their industry analyst summit, they started telling a story about simplifying IT. And when you look at launches like the customer experience suite, as well as the rising slow penetration of the engineered systems business, it's really comes down to how Oracle can take this deep broad portfolio integrated on the R&D side. And candidly, I think they're probably among the stronger in that R&D side in terms of performance and execution. But then get it packaged and sold to the customer. And that's really where they've been struggling. Though this quarter they started to show some returns to growth in the 7% growth in the core business. So Cloud is still helping that, but right now they've got the right pieces in the right place at the right time and now it comes down to sales. So talk about the following. So we know that Oracle in 2005 made a huge acquisition with PeopleSoft, changed the game on the software business and then did it again with Sun. Is Oracle in your view better off post-Sun acquisition? Not yet. I have to call a little bit of the recent language into question from Oracle executives. They call it the most profitable acquisition they ever made. The numbers don't bear that out yet, but I think what they've gained from it is the ability to package some of their higher value applications and databases, because in the end Oracle is a software company still on some of these systems to get them out to market in a plug and play appeal to the line of business buyer as well as the IT buyer point of view. Elizabeth, on the Oracle engineered systems, a great segue into my question, which is obviously Oracle engineered systems is their big phrase. Obviously they don't really break up databases anymore. They talk about business software. Okay, great. Talk about what you think the advantages are for this Oracle engineered system. We've always talked about the iPhone model, the Apple model, be vertically integrated and leverage the software. So comment on that, what's your take on that? How does that look into the business? Is it driving it? Herd still talks about subscriptions and licenses and how will that change the business model? And then two, talk about the ecosystem. We had EMC on and just four years ago EMC was looking at essentially pre-exadata storage. Now they're thriving. Joe Ducci called the best friend up there on the keynote yesterday. So talk about the Oracle engineered systems and how you see that translating into the business model, licenses, et cetera. And then also the impact of the ecosystem as this scale out open source still influences the RedStack model. When we look, I'll use some of our research as an example. When we look at technology business research as BI benchmark we do model revenue and performance for some select engineered systems vendors in that segment. And the way we define that is how much of a company's revenue, software revenue is being delivered on top of a box. And right now for me that's where I see the strength of Oracle's engineered systems business is for those customers that want an appliance driven sell a business applications and databases, Oracle will give it to you. And now with their recent partnership with Dell, if you're a mid-market customer, Oracle will give you that too. It really comes down to how do you effectively maximize distribution in my opinion and that's where the best value for the engineered systems case is. To your other question about ecosystem and channels, I think Oracle knows how to build a program, template resources and really take them out to market. The Oracle Partner Network at this point is in excess of 25,000 partners and they understand that it doesn't have to be an exclusive relationship. So I think right now Oracle's ecosystem and channels program really still is table stakes. You've got to be in it and you've got to be in it with attractive incentives and they're doing the right things with cloud and engineered systems incentives. Though I'm still curious that we have yet to hear some really high profile conversations from the replacement for Judson Althoff who was the head of the Oracle Partner Network left in March to go to Microsoft and since then that team has been very, very quiet which I find surprising. So the other question I have, you also cover the competitors, we're talking Workday, Oracle, SAP, Red Hat and a variety of others. Let's talk about SAP and Workday. OrcDy, obviously having a success at an event here last week, obviously they're doing well. Little chip on the shoulder from the X people soft guys kind of making a name for themselves back again. Thorne in the side for Oracle or yes, no. How's it impacting Oracle's business? And SAP's movement to the cloud has been kind of bumpy. And how has that changed Oracle's behavior, if any? So I'll take Workday first. I think Workday is a Thorne in everybody's side right now but it's worth noting that Workday's install base is still only about 500 customers. So what Workday's doing right in my opinion is an integrated platform approach to keeping its install base protected and defended. You update everybody three times a year, you migrate everybody all at once every time and that makes it a lot harder for Oracle or SAP to throw in competitive HCM offerings. For SAP's movement to the cloud, I think when you run a separate business like they did with the SuccessFactors business, that makes it a little more difficult to really tell an integrated story. You're integrating business by design which was their legacy product with a lot of offerings that came in via the SuccessFactors acquisition and I think it took them time to get their narrative together. When you look at how they've integrated on and off-premise development under Vishal Sika in the last six months, I think that's where you really see the opportunity for SAP in the balance of this year. It's not just a cloud story anymore, it's how do you tell an on-to-off-premise migration story which honestly I think Oracle for all of the discussion of them being late to the cloud relatively, they got out in front in my opinion with the idea of a seamless customer experience. It doesn't matter where the customer is accessing its data on or off-premise, the customer shouldn't see any disruption and so I think that message and that package is where everybody's going to be chasing them for a little while. So follow up on the Workday piece. Workday might claim that with regard to SuccessFactors, that's really talent management, the core HR piece is in SAP classic and they got to bolt those two together. Good luck, we're going to mop that up and they would say about Oracle, Oracle's not real cloud, we're real cloud. Oracle's taking ERP and stuffing it into the cloud. Fair criticisms, valid, somewhere in between. I think it's definitely somewhere in between. At this point we're still really in a case of cloud washing from the traditional enterprise software vendors and when you look at the breadth of the companies that we cover at TBR, I'll borrow my teammate, Jillian Miranda, for a moment who leads our pure play cloud coverage and I'll say that right now it's all about are you satisfying your customers and she and I both agree on this. It doesn't matter where the apps came from in the first place, as long as they work when it comes down to deployment and it doesn't disrupt a broader business application play. So we met actually, we met at Legal Seafoods, we were heading out to VMworld, that was as well. Legal Seafoods will plug, my brother's big executive deals, but anyway, juxtapose the VMware, EMC, horizontal ecosystem approach to the Oracle red stack from a customer perspective. Where are the landmines, what's the allure, what's your advice to customers, which way should they go and what are the benefits and drawbacks of each? I think when you look at the approach like this it really comes down to, is your environment heterogeneous and when you look at the vendors that are talking to you, whether it's a vertical play or a horizontal play, what's the real world exposure of their applications to working across other environments because if a vendor can't prove to you that your Oracle database is going to work with their application, then I wouldn't blame you as a customer for wanting to stick with Oracle because at least you know that performance is guaranteed. I think, Dave, when it comes down to it, customers are dealing with heterogeneous environments and that's where vendors are going to be looking in the next six months around business apps, around industry apps, is how do we plug and play with everyone? I mean, look at Oracle playing with Microsoft. I don't think anybody ever saw that coming, let alone Oracle playing with Salesforce. Pigs are flying. Okay, let's talk about VMware a little bit more and OpenStack. So what's your outlook on VMware and the OpenStack momentum, VMware's embracing OpenStack, a lot of people are concerned that they're trying to poison the waters. What's your take on VMware as a company first, adding value beyond the hypervisor, into management, more focused now, Pat Gelsinger at the helm, and what about the OpenStack factor? So I think when you look at VMware, you can't at this point separate VMware from EMC, which full disclosure, before technology business research, I worked at EMC and- So you know the inside baseball. Well, I've been surprised in the last 12 months to watch the public engagement between EMC and VMware as allies increasing, in terms of how they engage with one another, where Joe Tucci will stand up there at an EMC stage and say that VMware is leading our software-defined data center strategy. When you look back at 2006, 2007, I don't think anyone ever saw the walls falling between these two companies quite that much. So when I look at the value that VMware is bringing to OpenStack, VMware's got to play with OpenStack. That's just what it comes down to. I think with the acquisition of Nasirah, with Martin Casado, you've got a team in place that understands how to engage with the open source community, and it's going to give VMware a chance to talk to customers that are longtime Red Hat loyalists, longtime Citrix loyalists that are really already well ahead of the curve in terms of playing with open source. Do I think that VMware is going to spoil the waters? No, because it's not in their best interest to do that. So I think you're going to see VMware changing its game a little bit to really demonstrate to the open source community who can freely go elsewhere that they want to play ball. So I got to ask you about, since you brought up VMware, we talked a little bit about OpenStack. The cloud has been amazing innovation, and as we've always discussed in theCUBE four years ago, Amazon really set the standard. Integrated stacks, now you're talking about Joe, you're talking about we have a stack too. So under the hood and the cloud is changing the game, is commoditizing the business on the infrastructure side as well as innovating like crazy and disrupting it. So obviously Amazon has their event coming up, re-invent. What has the big guys learned from Amazon, both on the business model side of their offerings, and where are they weak? I mean, and, you know, we're starting to see DevOps starting to creep into here in Oracle OpenWiz. Hasn't come out of the woodwork yet, but you know, Dave and I were commenting yesterday, we're seeing signals of the DevOps agility kind of conversation happening, and you're seeing the social CRM, you're seeing some of these stuff. So, you know, those apps will be funded by a DevOps type infrastructure. So how do you look at the Amazon and how do you talk to the other, the guys trying to set their product portfolios? So looking at the vendors that I'm talking about in my ongoing coverage, Oracle, SAP, Red Hat, I think there's a lot of migration to greater internal agility to compete with Amazon. When you look at what Amazon has brought to the market in terms of commoditizing infrastructure, I think that's where a lot of, candidly, the enterprise software cloud washing has come in. When you look at Oracle's hosted infrastructure as a service where they will deploy engineered systems in a customer's environment, and then manage it for them and bill it, it's how can these enterprise software vendors change how they're doing business to at least tell a competitive pricing model story if they don't have the product portfolio yet to compete? Do I think Oracle is going to be ever head-to-head with Amazon? Probably not, but it's not necessarily in their best interest to do that. If they can demonstrate to a customer evaluating Amazon that the value for performance and integration that Oracle brings, always tying back to the core database, exceeds the price advantages they're going to get from Amazon. And I'll borrow my colleague, Jillian, again, when she looks at Amazon, the more outages happen in these broader cloud-hosted environments, the more the traditional enterprise software vendors have an opportunity to really defend the install base that they have. Elizabeth, we're up against the clock, but so I really want to thank you for coming on. Patrick Rogers is coming up next, John. Patrick Rogers, Vice President at NetApp, has been on theCUBE before. I'm sure we're going to be talking about FlexPod, the relationship with Oracle, see how that's changed over the next couple years, with Elizabeth. Great job, didn't get into so many other areas that we possibly could, but we'll have you back. I'm looking forward to it. Okay, this is theCUBE, this is SiliconANGLES, day three coverage of Oracle Open World. This is John Furrier with Dave Vellante. We'll be right back for the next guest. Day three of exclusive coverage, we'll be right back.