Making The Right ROI Promise On PaaS
Even as the Platform as a Service (PaaS) opportunity is pegged at $14 billion business by 2017, Oracle is expecting that its PaaS business would outgrow its SaaS revenue this fiscal.
In an interaction with CXOTOday, Siddhartha Agarwal, Vice president of product management and strategy for Oracle Fusion Middleware, talks about the opportunities and challenges of PaaS, Oracle’s PaaS goals and the partner strategy.
Can you elaborate on the cloud market and share the opportunities with regard to PaaS?
Siddharth: According to Gartner, in 2014 over 33% of IT spend was done by the line of business, and by 2017, this market is expected to grow 50%. That means the line of business leaders – the CFOs, Chief Human Resource Officer, CMOs, are the ones who are making the decisions. For them, the key drivers are: How do I do things differently and fast? How do I do with reduced cost so that I can free up more budget towards innovation.
That’s where PaaS comes in because it gives the ability to consume the capabilities that you need to build your applications on and build your interaction paradigm with your customers as opposed to having to set up a hardware or software.
An analyst firm said that today 27% of people are looking at PaaS and in the next 5 years, it’ll be 72-74% who’ll be looking to leverage PaaS as a different consumption model. So, we really think PaaS is a huge ground for us to win. We’ve got infrastructure as a service, platform as a service, software as a service and data as a service. So, all of these things working together gives us a unique differentiator. In the next one year, we expect a lot more customers, lot more revenue and the growth of PaaS compared to on premise in terms of percentage of revenue growth.
What are Oracle’s objectives and goals on PaaS?
Siddharth: First of all, the way people look at software is changing because they are now focused on business outcomes. If you can be proactive on the service cost as opposed to reactive on the service cost, you save 50%. The whole thought process around how you consume software and why you consume software is now going towards business outcomes.
Now our goal is tap into new markets and attract more new customers, it can be from large enterprises or SMBs. Secondly, improve our operating margins because we are doing this in more sort of a service based manner where you would be able to consume the software. So more revenue and improved profitability is what we are looking at.
Anyone who builds on mobile can think of mobile cloud service, IoT cloud service but they don’t have any on-premise prevalent in the Oracle portfolio, so we are actually building new capabilities to be able to go and address new markets both on the high end and both medium and small size businesses.
How do you make the ROI promise to your customers?
Siddharth: The cost element of managing software today consists of four things– the data center, hardware, software license and the operations. We put tremendous automation on the back-end. When we do the upgrade we do it across the entire stack so that the whole cost equation is taken out. We did this analysis where we looked at the cost to do this on-premise versus AWS versus Oracle Public Cloud. And in Oracle public cloud, the cost of managing a core was about 50-60% cheaper between AWS and on premise.
How were you able to do that?
Siddharth: It was the automation in the management of the software. For example AWS is going to give you the infrastructure, upon which you have to install the Oracle database, Oracle App Server Web and then integrate and manage it. But we do the backup and management. That’s the key secret driving the cost out of the equation because we’re doing that across thousands of customers and we’re doing it with automation, not with people.
What are the opportunities for your partners?
Siddharth: When someone buys the software, even if the subscription is for 6-12 months, they want to see value in 3-4 months. Our partners understand customer’ problems. We have invested in educating our partners in using our cloud services so that they can help customer success in 3 months.
Secondly, we have created a program for partners to be able to resell software in the cloud. A lot of partners in the past did not want to resell because they felt they might be in conflict with the Oracle sales cloud. So we have removed those conflicts and we have given them the ability to have the annuity stream so that they can actually make these applications available in the cloud marketplace. That means we have been promoting the content in the cloud marketplace and their applications get a market to go to and people can just consume the software from the cloud market in a subscription format.
How are customer expectations changing in India? What are the challenges in dealing with them?
Siddharth: The challenges are mostly around the scale of demand, getting all the systems up and running but it’s just more demand than supply, that’s the only challenge and that is easily fixable because you’ve got automation and things like that.
Also, I think it is more of an education issue than the gap between expectations and solutions. The customer is very concerned about security. We’re able to support this in many regions. We are also soliciting feedback from our customers in terms of work they want and putting that into a product road map.
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