Did AWS Just Win the Cloud Deal of the Century?

Editor’s note: This article by Jiri Kram was originally published on LinkedIn on Oct. 27.  Jiri has published several articles here at Cloud Wars over the past 8 months, and as with all of his other insightful and compelling pieces, this article reflects Jiri’s informed views and does not necessarily reflect the views of Cloud Wars. Jiri is a solution architect who studied FinTech at MIT and has a particular emphasis on ML and blockchain, and he’s worked with Salesforce technology for many years. In this piece, Jiri explores the competitive dynamics among (1) CRM category-king Salesforce, (2) Oracle with its new CX strategy that Larry Ellison recently laid out, and (3) AWS, which would love to gain greater presence within Salesforce at the expense of Oracle. In September, Cloud Wars published an article by Jiri called Can Salesforce Become the Next Trillion-Dollar Company? and another called Snowflake: IPO That Made Salesforce and Warren Buffett Bullish.

Something unexpected happened: Larry Ellison announced a frontal attack on Salesforce! According to Cloud Wars, Ellison was the featured speaker at an Oracle CX virtual event. If you are not familiar with the significance of this, let me help you.

What is Oracle CX and why you never heard about it?

For many years CX has been entirely overshadowed by Oracle’s two main product lines: Database and ERP. CX was on the back burner, and many jokingly were saying that “the primary purpose” of CX division was to train salespeople for Marc Benioff. For years this was true because, under Thomas Kurian’s era, CX didn’t get much love.

Why was it like this? Salesforce is one of Oracle’s biggest Exadata and database customers. Until now, Larry never wanted to go ahead with a direct attack towards Salesforce—but something has changed recently. 

Larry Ellison did the keynote at the Oracle CX event – something that never happened before. You may ask what the CX event is? It is Oracle’s attempt to challenge Dreamforce. The most striking difference is quite simple: in the days of face-to-face events, Dreamforce was visited by 150,000 or more people and with millions more watching online and talking about it on social networks. Until recently, Oracle was never able to draw widespread interest in its CX events—so Ellison’s decision to be the keynote speaker shows a new approach and mindset. 

What does it mean for Salesforce?

At least for now, Oracle CX is one of many “me too” competitors suites, one you would rarely see in any RFP. I have been involved in selling and delivering Salesforce for almost eleven years, except for one year when I attempted to sell Oracle. During that decade when I was immersed in Salesforce, I saw hundreds of RFPs. Do you know how many times I saw Oracle CX as a competitor? Zero. When I briefly joined Oracle and saw the firm from the inside, I realized the reason; there was almost non-existent sales team capable of beating Salesforce in deals. 

Why? The best left to join Salesforce, Microsoft and Google and those that stayed had a hard time closing deals, which made my job in pre-sales quite boring and ultimately led to my return to Salesforce. So, I know the only thing that could catapult Oracle CX to the first league would be if Keith Block is joining Oracle. Then the war with Salesforce could become real. But without Block, who can outsell Benioff?

So, who is the real winner here?

Wait for it….

Amazon Web Services 

Why? Let’s fact-check. Would Larry Ellison decided to invade Marc Benioff’s territory, when he would be sure Salesforce renewal contract is closing? I don’t think so, and it’s a gesture or negotiating tactic. 

Don’t you believe me? 

1. When Oracle contract with Salesforce expires? Answer: 2023.
2. What happens when it expires? Answer: Salesforce will have an outdated version of the core database without support.
3. How many customers would be impacted? Answer: Estimate 90-95%. Everyone using any of the following services: Sales Cloud, Service Cloud, Platform, AppExchange and anything that is connected to Salesforce via API. 
4. How complicated is the migration from Oracle? Answer: Extremely, that’s why the decision for 2023 is overdue.
5. Could AWS replace Oracle? Answer: yes, last year Amazon migrated 7,500 databases running Amazon.com. It’s not just been done, it’s currently running the most extensive cloud application in the world – Amazon.com

Conclusion

There are only four (likely) options why Larry Ellison is going against Salesforce.

1. AWS: Salesforce database and Exadata renewal deal is lost, the winner AWS (60%)
2. Deal stalls: Salesforce is not willing to sign a deal under Ellison’s conditions or came with own conditions unacceptable to Oracle (20%)
3. Keith Block: is joining Oracle’s competitor like AWS, Google, Microsoft, Workday and so that Larry lost his leverage against Marc Benioff (15%)
4. Snowflake: Salesforce is acquiring Snowflake and attacking Oracle’s territory (5%)

Anything else missing? Feel free to share your views in discussion.

(Author’s disclosure: I am long CRM, ORCL, AMZN and SNOW. I wrote this article myself, and it expresses my own opinions.)

(Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.)

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