While Oracle, SAP, and ServiceNow all posted impressive gains in their most recent quarters on a key measure of future revenue growth, Salesforce saw its numbers for that same metric fall in both growth rate and volume.
Remaining performance obligation, or RPO, represents contracted business that has not yet been recognized as revenue, and it has become a powerful indicator of future growth capabilities for technology companies.
In today’s analysis, we’ll take a look at the recent RPO numbers for four Cloud Wars Top 10 companies in the enterprise-apps space to gain some insight into their future growth prospects.
As you’ll see, the top-performing company in this RPO comparison is Oracle, but it’s important to note that Oracle’s RPO number includes not only cloud business but also non-cloud business. So bear that in mind as you compare it with the others, whose RPO numbers are all cloud-only. Also, while these companies sometimes break out both “current” and “total” RPO, I am focusing today exclusively on total RPO.
#1 Oracle: total RPO of $61.2 billion, up 68%
For the 12 months ended Nov. 30, CEO Safra Catz said Oracle’s RPO balance was up 68% (constant currency) to $61.2 billion “due to strong cloud bookings” and the acquisition of Cerner. Of that $61.2 billion, 48% — or about $29.4 billion — will be recognized as revenue within 12 months.
Catz added that for the quarter (not the full year) ended Nov. 30, Oracle’s organic RPO growth rate — that is, excluding Cerner’s results — accelerated to 28% from 22%.
So, while all that RPO growth is not totally from Oracle’s cloud business, a huge portion of it clearly is.
#2 SAP: total RPO of $35.7 billion, up 35%
CEO Christian Klein used those RPO figures to support his bullish expectations for the company throughout 2023, particularly considering that the RPO for its hypergrowth cloud ERP suite, S/4HANA Cloud, rose 82% to $3.33 billion.
#3 ServiceNow: total RPO of $14 billion, up 25%
CFO Gina Mastantuono shared those numbers on the company’s Jan. 24 earnings call and said they’re a core factor in ServiceNow’s bullish outlook for 2023.
#4 Salesforce: total RPO of $40 billion, up 10%
For its quarter ended Oct. 31, Salesforce CFO Amy Weaver said total RPO is $40 billion, up 10%. As you can see, that is a much lower RPO growth rate than was reported by its direct competitors —Oracle and SAP — and by its kinda/sorta competitor ServiceNow.
Now, there’s no denying that $40 billion is a huge number, and that CEO Marc Benioff has to feel good about having that volume of business under contract, with probably about half to be reported as revenue within the next 12 months.
But let me add two qualifiers to that, both of which point to the significance of Salesforce’s upcoming earnings results on Wed., March 1, when we’ll get the RPO numbers for the quarter ended Jan. 31:
- SAP’s total cloud RPO of $35 billion is getting awfully close to Salesforce’s total RPO of $40 billion. If you’d go back even one year and certainly two years, most people would have deemed it inconceivable that SAP could narrow that RPO gap at all, let alone so rapidly.
- While some seasonality is to be expected with these RPO numbers, look at the RPO figures Salesforce reported in its previous quarter for the period ended July 31: total RPO of $41.6 billion, up 15%. Again, some seasonality-induced swings in the RPO results is to be expected, and perhaps that rationale explains the drops from the July 31 quarter to the Oct. 31 quarter. But in light of the ugly overall revenue results Salesforce posted for its most recent quarter —revenue growth falling to a 5-year low, two top executives jumping ship, and the decision to not share future revenue guidance — those RPO numbers are certainly not comforting.
Final Thought
One thing these numbers tell us is that business leaders are continuing to have high degrees of confidence in the cloud as an absolutely essential ingredient for success in the acceleration economy. The RPO numbers also reveal that Oracle, SAP, and ServiceNow are winning the hearts, minds, and wallets of customers at very impressive growth rates into the future.
They also tell us — or at least hint — that Salesforce and Marc Benioff are very likely in a different spot from Oracle, SAP, and ServiceNow as the rate of growth for total Salesforce RPO drops as close to single digits as is mathematically possible.
And again, that reveals why the results Salesforce will release in two days on March 1 will be scrutinized as closely as any in the company’s storied 23-year history: will revenue and RPO growth rates bounce back, or fall even lower?
But for Oracle, SAP, and ServiceNow — two seasoned citizens now flourishing in the cloud plus one cloud-native high-flyer — these RPO results indicate that they’re each very well-positioned for the challenging year that 2023 is sure to be.
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