Cooking the books: How Oracle inflates cloud revenue figures and what it means for you

PARIS  

The truth will always out

Technology firms have never been stranger to hyperbole, whether discussing the alleged value their products bring, customer numbers or the size of their business. As I described in my book, High-Tech Planet: Secrets of an IT Road Warrior, being creative with facts is par for the course for most of them. However,  those vendors scrambling frantically to move from a legacy on-premise business to the brave new world of cloud-based systems, find themselves so desperate that creativity with reality takes on new forms.

Oracle, though by no stretch of the imagination the only offender, is doubtlessly the worst one. This is compounded by the fact that it came late and reluctantly to the cloud (watch this video of Oracle's boss Larry Ellison pooh-poohing the cloud). After its on-premise succession product Fusion failed to gain much traction and its Sun hardware acquisition turned out to be in the words of former Oracle Über -VP of Sales, Keith Block, " a dud", Oracle and Larry Ellison (the two are interchangeable) had no other choice but to go down the cloud route.

Unfortunately the software industry, among others, is known for its first-mover advantage meaning that by the time Oracle decided to do something about (in) the cloud, many of its customers had already defected to Salesforce (for CRM) and Workday (for HR.) Resorting to its good old ways, Ellison didn't hesitate to predict quite outlandishly that his company would bury Workday. Post-truth statements and alternative facts didn't premiere with the Trump administration; Oracle had started the ball rolling earlier. However, since "facts are stubborn" as Lenin said, Oracle felt it had to go one step further: falsify its cloud revenue figures.

Last June, a courageous Oracle employee, Svetlana Blackburn, a finance manager, came forward denouncing Oracle for pressuring her to inflate cloud sales figures (here's another report by Reuters). The various tricks used by a vendor trying to inflate its cloud figures include, but are not limited to, the following :

• Lump on-premise and cloud figures together and then pretend it's all cloud
• Give huge credit to customers moving their on-premise license value to the cloud and consider it as booked cloud sales
• Give a cloud product for free and then extrapolate its sales value to other modules
• Sell a cloud subscription for a pilot population but book it as if it were for the whole company headcount.

Of course, Oracle immediately fired the whistleblower claiming she was being terminated for low performance. Yeah, right! Ms. Blackburn went to court, Oracle stood its ground saying it had done nothing wrong until last week it capitulated by offering an out-of court settlement. As we all know, nobody offers a settlement unless they have done something wrong. Oracle hoped to put behind it the embarrassing scandal and avoid more damaging revelations to come forward.

What does this mean for you?

As a customer, you need to get a sense of how serious an offering is, what its long-term prospects are and how likely that a sizable customer base will ensure that continuing investment in the platform is assured. Most of the clients I work with and who include Oracle Fusion in the evaluation, end up not shortlisting it for various reasons including fuzzy economics and product strategy. 

As an employee/candidate, especially from the sales function, you need guarantees that your employer will not fiddle sales figures with the aim to shortchange you. Interestingly, the same week that it was confirmed that Oracle indeed forges its cloud sales figures (last week), the company was on the receiving end of a $150 million class-action lawsuit by sales employees complaining about the company's efforts to avoid paying them their commissions.

Finally, as an investor you want to ensure that your investment dollars are well used and that you are not throwing good money after bad*.  Interestingly, too, when the whistleblower revealed Oracle's accounting shenanigans last June, a group of investors launched another lawsuit against Oracle. And for the past (rolling) year, as the below graph shows, Oracle's stock has been languishing whereas its pure, native cloud competitors' has shot up by 40 to 50%. 

A tale of two vendor types: native and adopted cloud

In summary, we  can see that Oracle's desperate behavior, far from helping it, is making matters worse: customers are not joining in droves, cloud sales remain stubbornly a tiny fraction of its overall revenue, in spite of all the figure massaging, and the stock price evolution reflects that situation. Until and  unless Oracle makes some serious changes to its product strategy/sales approach, and culture, it is no rocket science to see what the end game is likely to be: increasing irrelevance. 

Losing steam

*The blogger's clients include not only end-user organizations evaluating/selecting/ implementing/expanding new HRIS systems, but also investors requesting analysis as to HR system vendors' market potential.

Happy 75th Anniversary, "Gone With The Wind"

PARIS

This rare 1938 one-volume French translation
was the 269th edition by publisher Gallimard
barely two years after  the book was published
in the U.S. It became the blogger's property
when he inherited it from his grandmother
who had bought it in Paris in the late 1940s

In my early teen years I tried a couple of time to read GWTW since I had heard so much about it. Every time I failed to go through the first chapters as I quickly lost interest. Then, I must have been 13 or 14, I caught a bad cold and had to stay in bed for several days. I ransacked my parents' library for reading material, and again came across the 1,400-page, two-volume set of the French-language version of Margaret Mitchell's  Autant en emporte le vent. Third time lucky! The first 100 pages were a bit tough, full of descriptions and moving slowly but, suddenly, I was hooked. Scarlett and her beaux. The Cause. Rakish Rhett. Aunt Pittypat and her smelling salts. Mummy and Prissy. Tara surviving through war. Atlanta in flames. Damn Yankees and Carpetbaggers. No sooner had I finished the first volume than I rushed to pick up the second one and stayed glued to it until I finished it. Do I need to add I was drenched in tears when I reached the end? At that very moment my mother entered my room to check on me and seeing my tears she thought my condition had worsened and would have called the doctor if I hadn't told her there was no need, pointing at the book. "Oh, you've been reading GWTW!" she exclaimed.

Then I realized the movie was even more famous than the book and couldn't wait to see it re-released at a nearby theatre. When I first saw it, I was even more transported and fell under its Technicolor charm and the beauty and talent of Vivien Leigh. How many times had I watched it in movie theatres, on video, DVD, streamlined, pirated? Lost count, but must have been more than twenty. My whole family are big fans, even the bathroom in my mother's family home in Romania had a huge poster of Leigh and Gable's famous embrace splashed on the wall under the title, Per aripile vîntului.

The blogger in the lobby of the Fox Theatre, affectionately
known to Atlantans as the Fabulous Fox, on Dec. 15, 1989
exactly 50 years after the movie's premiere in the same city

I was particularly gratified to find myself studying towards my master's at the University of Georgia in December 1989 as the movie's 50th anniversary celebrations were being held nearby in the city where the premiere took place half a century ago. Now (then) in my twenties I found myself  equally impressed by watching GWTW again at the Fabulous Fox  in Atlanta. And gawking at the cast members still alive, getting autographs and taking pictures galore.

I always laugh when I read in the press, or hear the younger generation boast, that Titanic or Star Wars or Avatar are the top box-office hits of all time. If I remember correctly, the highest-grossing of these movies has not brought in more $1.5 bn when GWTW, in inflation-adjusted dollars, has brought in more than $6.5 bn. And  remember that in the late 30s the movie market was really limited to the wealthy parts of the world, that is North America and Western Europe. and the world's population was much smaller. Actually it took more than a decade for GWTW to come to France, because of the war, something unthinkable these days when blockbusters often open on the same day around the globe. GWTW's popular success is therefore quite stunning. I think that at one point in time half of the whole US public had seen the movie which, as far as I know, is unequaled.

The blogger's' autographed copy of the
book by Herb Bridges, the world's
leading auhority on  GWTW

Among the surviving cast members at the Atlanta "re-premiere",

Butterfly McQueen is fondly remembered for her "I don't know
nothin' 'bout birthin' babies" scene. And, yes, she's
wearing the very dress from the famous scene which she
reprised on the stage for us. 

An interesting piece of trivia  is that of the four main stars, only one is, as of today, still alive. Olivia de Havilland's longevity is a nice echo of the movie's enduring appeal and how it has stood the test of time. Ironically, she is the only one of the four main characters to die in the movie.

As a more mature adult now, and being able to compare it with other great movies I had seen since, what do I make of GWTW? Would I consider it as one of the top 10 movies of all time? As a tribute  to the great picture, which celebrated last week its 75th anniversary, I decided this week, after many years without watching it, to sit again through  its four hours.

Verdict? Still terrific, especially the first part. That wide-shot of the railroad tracks with the thousands of wounded ending with a torn Confederate battle flag flapping  pitifully remains as powerful as ever. I found Vivien Leigh's performance as the feisty Southern Belle as impressive as before. Present in almost every scene of the movie, the British actress is its heart and soul. I still feel, though, that the book is clearly superior, as so often happens with literary adaptations to to the silver screen. One major flaw is, toward the end, when Bonnie Blue and Melanie die in such quick succession giving the movie a soapish air. Always found that too melodramatic. And, sure, it romanticizes the Deep South too much, although I am not one of those who criticize the movie for its depiction of slavery. After all, it was written from the perspective of the plantation owners, and at that time slavery was the norm. Can't judge a story set in the 1860s with late 20th century eyes.

The blogger's admission ticket to the event. 

But the sets are great, some of the great lines made it into the movie, I can still hum Max Steiner' s score, most of the characters (to the notable exception of Leslie Howard's Ashley Wilkes) were exactly as I had imagined them when I read the book (Vivien Leigh, of course, but also Clark Gable and Hattie McDaniel). The cinematography is still brilliant in that gorgeous Technicolor, and it is impossible to believe that three different directors worked on the movie as it seems to be the work of just one single mind. Which it is, but not a director's. GWTW would, of course, not have existed without the single-minded obsession of David O.Selznick.

GWTW was not the only film masterpiece to be released in 1939, which may have marked the beginning of a dark chapter in human history, but is probably the best cinematic year ever. Audiences were regaled with an astonishing number of superb films: The Wizard of Oz (by one of the GWTW co-directors, Victor Fleming), Stagecoach, Lubitsch's Ninotchka ("Garbo Laughs" said the tagline), Wuthering Heights, Jean Renoir's The Rules of the Game. Actually, there have been FULL decades where fewer quality movies were produced than in that single vintage year.


(2014 also saw two of my favorite movies celebrating a major anniversary. Both My Fair Lady -incidentally by George Cukor, one of the GWTW co-directors- and Mary Poppins turned 50. The former is undoubtedly the wittiest musical every produced, although Audrey Hepburn was miscast; the latter, the first movie appearance by Julie Andrews who had been bypassed for the My Fair Lady role which she had created onstage, is still my favorite Disney movie, and the first film to blend live animation with real movie characters. I keep watching both again and again, and never get tired or bored.)

NOTE: All the pictures were taken by the blogger except, obviously, the one he appears in (but taken with his Kodak camera). All rights reserved. No use of the photos can be made without express written agreement by the copyright holder.