Government // Enterprise Architecture
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2/4/2010
04:52 PM
Bob Evans
Bob Evans
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Global CIO: Oracle And RightNow Have Analysts Bullish On Growth

Analysts are bullish on two very different companies, Oracle and RightNow: what does this tell us about the enterprise IT market?

Despite the vast differences in their sizes and business models, Oracle and RightNow are both inspiring similar dreams in the eyes of some financial analysts: significant revenue growth in 2010. What do those heady growth expectations tell us about the growth prospects for the broader landscape of IT vendors?

Oracle and RightNow represent fairly unique circumstances: for Oracle, the possibility reenergizing the venerable Sun brand within a dramatically more sales-centric culture; and for RightNow, its status among a handful of relatively small but rapidly growing enterprise-software companies offering 100% cloud-based solutions.

While the companies in this set—RightNow, Workday, NetSuite, SuccessFactors, and others—are by no means able to compete with Oracle and SAP for global, enterprisewide ERP and financial systems, they are gaining inroads and experiences with hundreds of customers while working around the margins of the enterprise-applications sector.

During these days when IT spending—like all corporate spending—is being scrutinized rigorously, many CIOs have begun turning to these younger, smaller, and nimbler software firms to get HR, financial, and business-execution apps up and running without massive upfront capital expenditures and with implementation projects framed around weeks rather than years.

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While those feisty and fast-moving players will no doubt deepen their penetrations within big corporations and begin nibbling away on business that Oracle and SAP previously won by default, Oracle is enthusiastically embracing its new Sun-enhanced status as a provider of complete and optimized business systems. And it's that new combination that will drive unexpected growth for Oracle as previously skittish Sun customers take heart in the extensive commitments Oracle CEO Larry Ellison has made to Sun and its products and technologies.

From a Piper Jaffray analyst's research note cited in a streetinsider.com article:

Oracle will receive the benefit of one month's contribution from Sun in Q3, and we suspect the commentary may reveal that pent-up demand in the Sun ecosystem is starting to be released as customers gain incremental comfort with the commitment level of Sun's new ownership.

I want to emphasize that the Oracle/Sun bullishness expressed by the Piper Jaffray report is not necessarily shared widely among other market watchers, a point that the Piper Jaffray analyst underscores in the note:

We maintain our uniquely bullish stance on the Sun acquisition, and foresee Oracle becoming a beat and raise story in 2010, as growth opportunities, cost-saving synergies and higher accretion from Sun are achieved during the next few quarters. . . . Multiple checks indicate a strong finish for Sun. Our checks, along with positive commentary from QLogic's earnings call last week, indicate Sun performed better in its December quarter than the Street currently anticipates. Although revenue recorded prior to the close of the acquisition may not materially flow into Oracle's Q3 (Feb.), we believe positive momentum from Sun runs counter to the Street's expectations and may mark a trend change relative to Sun's recent string of very weak quarters.

As Ellison himself said just last week in guaranteeing that the Sun portion of Oracle's business would become profitable starting in this month of February:

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