Oracle Has a Fair Shot at the ‘$10 Billion From SaaS’ Target

Oracle's SaaS Push

Oracle recently crossed a crucial billion-dollars-a-quarter revenue milestone from its Software as a Service (SaaS) and Platform as a Service (PaaS) segments. Revenues from SaaS and PaaS touched $1.01 billion for the third quarter, 73% growth compared to the prior quarter. The growth of cloud revenues was good enough to offset the declining on-premise software revenues for Oracle, allowing for some breathing space to keep pushing their cloud-delivered products.

For several years Oracle sat on the sidelines, watching cloud service providers like Amazon and Microsoft add hundreds of millions of dollars in revenue to their coffers. Yet, the refusal to join the cloud bandwagon was completely understandable because Oracle was selling software and hardware products to companies so that they can manage their own IT Infrastructure. The Infrastructure-as-a-Service segment was out to disrupt their traditional business lines, and Oracle sat there, hoping they will be able to withstand the cloud onslaught.

Unfortunately for them, cloud adoption picked up pace, with Amazon and Microsoft racing past $13 billion in annual revenues from cloud, and still growing at double-digit rates. Oracle soon realised that it cannot afford to wait any longer, because every customer using Amazon or Microsoft is one customer less for Oracle. And if cloud was growing at double-digit rates, it implied that their own potential market was shrinking just as fast.

Oracle then decided to play to its strengths, and doubled down on the SaaS market with a clear focus to capture the enterprise management software that includes CRM (Customer Relationship Management) and ERP (Enterprise Relationship Management). Both these segments are worth tens of billions of dollars and are expected to grow at steady pace over the next several years.

Oracle is now targeting $10 billion in annual revenues from SaaS, and their third quarter results show that they are starting to see some results. At current levels their annual revenue run rate from SaaS is nearly $4 billion. If Oracle can maintain its current above-50% growth rate, in two years’ time the company should be able to hit $2.5 billion a quarter in revenues from their SaaS and PaaS segments.

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Source: Oracle Q3-17 Press Release