Oracle co-CEO Mark Hurd cites HR cloud for innovation, cost

Enjoying the limelight at Oracle HCM World in Chicago, Oracle co-CEO Mark Hurd heralds company's fastest-ever quarterly growth in key cloud products and criticizes rivals SAP and Workday.

Oracle co-CEO Mark Hurd on Wednesday declared that human resources is an organization's lifeblood and that HR cloud products are a special opportunity to improve operations.

Hurd gave the keynote speech at Oracle HCM World in Chicago and then held a roundtable with reporters and analysts, during which he bluntly criticized rivals SAP and Workday. At the roundtable, Hurd also extolled Oracle's fastest-ever growth in HR cloud sales during the most recent quarter.

During his the keynote, Hurd said HR is critical because it includes processes such as recruiting, onboarding, learning, performance management and compensation.

"It touches every single thing we do," Hurd said. "It's the company's lifeblood. It drives the company."

Hurd said HR cloud software is such an important trend that Oracle, based in Redwood City, Calif., has 2,000 developers working just on cloud HCM.

Hurd said Oracle would continue to maintain PeopleSoft, the company's legacy on-premises software, for years, but he said the cloud is "an irresistible force," mainly because it reduces costs, increases innovation and is fully secure with encryption.

"This does not come around again. You are going to hear this cloud thing over and over again."

Oracle hiring underscores HR value

Hurd said Oracle's hiring shows the importance of HR. Oracle hires more than 20,000 people a year, excluding mergers and acquisitions and receives 500,000 to 600,000 resumes a year. The company interviews 60,000 to 70,000 candidates.

Oracle  has 140,000 employees including 18% baby boomers, 38% millennials and 44% Generation X. It hires about 3,000 new college graduates every year.

"I don’t think people appreciate how complex HR is," he said.

Hurd said HR also is key for increasing employee engagement, which in turn is key to productivity. Processes such as learning and performance management and even onboarding can improve engagement.

"This is how you drive performance," he told the crowd. "Hire engaged employees. They do more work; they do better work; they care more about the results of the business."

Oracle SaaS and PaaS grows by about 60%

Hurd spoke after Oracle reported on March 15 that cloud revenues in software as a service (SaaS) and platform as a service (PaaS) grew by 57% for the quarter ending in February, from $372 million to $583 million.

During the roundtable, Hurd said it was Oracle's fastest quarterly growth rate in the cloud and its most cloud revenues for a quarter. He added that Oracle won 213 new HR cloud customers in the third quarter.

HCM analyst doubts attacks on SAP, Workday

A top HCM analyst on Wednesday voiced skepticism about the Oracle co-CEO's criticism of SAP.

Holger Mueller, a vice president and principal analyst at Constellation Research in Cupertino, Calif., said big organizations like Oracle generally don't like to give too much credit to their top rivals. In fact, Oracle co-CEO Mark Hurd likely knows that SAP and Workday are long-term competitors, he said.

"At a certain point, not acknowledging SAP as the main competitor makes them the main competitor," said Mueller, after attending a roundtable with Hurd.

Although Oracle's third quarter revenue growth in SaaS and PaaS was impressive, Oracle's infrastructure as a service, or IaaS, revenues probably should be growing faster because of the huge market potential, he said. IaaS revenues were $152 million in the third quarter, down 2%.

Total cloud revenue for Oracle is only 8% of overall revenues of $9 billion for the quarter.

The big test will be Oracle's fourth quarter, which ends May 31 and often amounts to 40% to 50% of Oracle's annual revenues, Mueller said. Any cloud revenue growth for the fiscal year more than 39% would be a positive for the company, while anything under 30% would take some explaining, he said.

"The on-premises business is shrinking," Mueller said. "The question is, can they grow cloud revenue faster to offset the shrinkage from on-premises licenses?"

Paul Hamerman, a vice president and principal analyst at Forrester Research who attended HCM World, said that the 57% cloud growth rate in the third quarter is impressive given that Oracle's recent quarterly cloud growth rates have been in the range of 29% to 34% over the preceding five quarters. 

"It's very meaningful growth they are seeing in the cloud," Hamerman said. "The growth rate and the numbers are good."

Cloud software is sold via a service subscription while on-premises software is licensed from a vendor after a company installs it on its own computers.

Oracle co-CEO raps SAP, Workday

Saying there are "high stakes" in HCM, Hurd, during the roundtable, also assailed SAP and Workday in response to questions about how he viewed the two competitors.

Strategically, Workday is more on the right track than SAP, because Workday sells a true cloud HR product, Hurd said. But Workday is "subscale" in its ability to execute, he said. "I think their execution is struggling."

 SAP is having a rough run, he said, because it is too financially dependent on licenses from on-premises software. "I think that business model will work for a while but I think it is a train heading into a tunnel and there is not a lot of light in there," Hurd said.

Hurd criticized SAP's in-memory HANA database platform, which is part of SAP's efforts to produce its own cloud software. Hurd said that with S/4HANA, SAP is basically "taking a bunch of things they do on-premises and now running it in their data center, which is really not cloud. It is more hosting."

Hurd suggested it could take SAP until 2022 to get the cloud right.

"[SAP CEO William] McDermott will probably retire before then so he won't have to deal with it," Hurd said.

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