Oracle and Salesforce partnership offers less than meets the eye

Carter Lusher, Research Fellow & Chief Analyst: Enterprise Applications Ecosystem

On June 25, 2013, Oracle and Salesforce.com sent out press releases about how they had agreed to a strategic partnership to integrate their Salesforce.com and Oracle clouds. The press release was followed up on June 27 with a press conference held by both CEOs. The announcement generated a considerable amount of press and blogosphere buzz, with the general tone being that it is game-changing.

However, nothing in the announcement amounted to a significant change in either company’s strategy. Instead, what was offered was only just above “press release-ware” level, because no proof points were provided. In addition, the cross-vendor application integrations, Salesforce’s commitment to Oracle technology such as Database 12c, and internal usage of each other’s applications, are not unique or surprising.

It is Ovum’s opinion that this announcement neither shifts the dynamics of the IT industry nor should it change any IT organization’s IT strategy or procurement plans.

Nothing unusual in what was announced

The announcement had three core messages: Salesforce.com plans to standardize on Oracle’s Linux, Exadata, Oracle Database, and Java Middleware; there will be integration between salesforce.com with Oracle HCM Cloud and Oracle Financial Cloud; and Salesforce.com will implement for its own internal use Oracle HCM Cloud and Oracle Financial Cloud. None of these announcements is surprising or important, or signals a shift in either vendor’s strategy or essential market position.

Salesforce has always been a heavy user of Oracle technology. For example, it has used Oracle Database since the beginning, so 12c is a mere continuation of a long-established strategy. Adopting Exadata over Dell’s hardware is totally logical because Exadata is fine-tuned for Oracle Database.

However, Salesforce switching its hardware provider from Dell to Oracle is hardly news and won’t impact customers. While deploying Exadata will give Salesforce a performance boost in its data center and might reduce total cost of ownership (TCO), it will not in any way affect in a practical manner the pricing or service-level agreements for performance promised to salesforce customers in contracts.

Integration between salesforce.com with Oracle HCM Cloud and Oracle Financial Cloud is not news. Every major vendor has to provide these levels of cross-application integration merely because large enterprises customers demand it to accommodate their diverse installed base of applications. For example, salesforce announced a similar integration partnership with SAP at Dreamforce 2011.

Salesforce.com will implement for its own internal use Oracle HCM Cloud and Oracle Financial Cloud, but it is already a customer of Oracle’s on-premise financial management application so going to Oracle HCM Cloud is just an upgrade and another continuation of its established infrastructure. A move to Oracle HCM Cloud would be interesting because Salesforce is currently using Workday. While an adoption of Oracle HCM Cloud is explicitly mentioned in the press release, Salesforce has not released critical information that would make the statement more credible.

What was not said is more interesting

One aspect that makes this announcement non-news regardless of the flurry of activity in the press and tech blogs is the lack of detail on issues such as:

  • When Salesforce will start deploying Exadata, and whether its installed base of hardware will be retired faster than planned.
  • When or even if Salesforce’s incumbent HCM and financial applications will be fully displaced by Oracle HCM Cloud and Oracle Financials Cloud, and why the integration between salesforce.com and Oracle HCM Cloud and Oracle Financials Cloud is anything other than what is typically done with other partners.
  • What were the investments in engineering that were unusually high or difficult. This is important because both Oracle and salesforce tout how their platforms have been engineered to facilitate integration of this nature, with the implication that the salesforce.com-Oracle HCM Cloud Oracle Financials Cloud integration should be relatively easy.
  • What reduction in cost customers can expect to achieve by having out-of-the-box integration available between these applications.
  • Exclusivity over other vendors with similar products.
  • Timelines for any of the elements of the announcement.

Other important indicators that might signal a strategic partnership were expressly ruled out by the two CEOs. These include the fact that Oracle and Salesforce will not be jointly selling an integrated salesforce.com-Oracle HCM Cloud Oracle Financial Cloud package, but instead the integration packages will be SKUs (stock keeping units). In addition, Oracle and Salesforce will not share leads.

Recommendations for enterprises and public sector organizations

Ovum recommends that enterprises and public sector organization continue with a business-as-usual attitude for their IT strategies and procurement plans. There is nothing in this Oracle-Salesforce announcement that would indicate a shift in the marketplace for enterprise applications or data center hardware.

Even using Salesforce as a “referenceable customer” for Database 12c and Exadata should be taken with a grain of salt. This is because of Salesforce’s unique technical environment and business model, the tie-in with Oracle for marketing, and unknown pricing and other concessions that Oracle made to Salesforce, which would not be available to the average enterprise or public sector organization.

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