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Oracle’s cloudy cash dash could fall flat, insiders warn

Staff say they’re in the (Big) Red after sales teams push customers into the fluffy stuff

By Rebecca Hill, 25 Aug 2017

Boardroom high-fives at Oracle over bumper cloud sales haven’t spread across the entire business, with staff lower down the food chain telling The Register that their bonuses have tanked.

Customer success managers (CSMs) have claimed aggressive commercial tactics used to drag customers onto the cloud have resulted in fewer contract renewals.

These managers advise clients on how to get the best out of Oracle’s products - they don’t get involved in the sales side, but do earn a large chunk of their overall annual income from bonuses based on whether their customers refresh or extend agreements.

Normally, these bonuses - typically weighted 70:30 in favour of renewals - make up as much as 40 per cent of their overall annual income. They might not expect to pocket it all but rely on taking home a fair chunk.

However in Oracle's last full fiscal year ended 31 May, when it reported a 60 per cent year-on-year rise in cloud sales to $4.6bn, UK-based CSMs said their compensation had fallen significantly.

One insider, who spoke to The Register on condition of anonymity, calculated that in fiscal ’17, CSMs’ bonuses were between £20,000 and £35,000 less than in previous years.

CSMs believe the unexpected, and large, drop is because of an increase in the number of so-called one-time deals sold to customers, deals where prices were heavily discounted and cloud versions included as part of the total package, even though the SaaS element might not be used.

Similar practices have been reported at various vendors, with IBM being called out some years back. Resellers previously told us IBM was booking software sales as cloud revenue, even though customers did not explicitly sign up to use the cloud version of its wares.

The source acknowledged that this isn't unusual in software firms, but said that Oracle's recent push for the cloud - with sales teams under pressure to sign up customers and Big Red competeting with smaller, more nimble rivals like Workday - may have led to instances of sellers overpromising and under-delivering.

“The sales teams can win great deals and they do a good job of it - but when they struggle they start to pull on resources they don’t have,” the insider said.

“I think the sales guys tried to mimic competitors’ capabilities, but we can’t because there are too many moving parts - loads of acronyms and lots of people. They try to dress it up in a way a customer will understand, but when it gets closer to procurement, it gets more and more complicated… Then the sales guys just try and get anything in.”

Oracle CSMs’ main complaint is that they were unable to influence the deals and so should have had any non-renewals as a result of one-time deals removed from their bonus calculations.

The advocates have expressed frustration at the way the situation has been handled by Big Red. CSMs argued that the terms of CSM compensation plans don’t specify that one-time deals were included in renewals calculations, and that repeated requests for clarification have been ignored.

Emails seen by The Reg, which date back some months, show staff repeatedly questioned Oracle about the terms and calculations for their bonuses, how many non-renewals were as a result of one-time deals and asked for their bonuses to be “retargeted” excluding the one-time deals.

The emails confirmed Oracle has escalated the matter to the corporate level and its Global Incentive Compensation team, but as yet the CSMs have not received a response to any of their questions.

Disgruntled staff have now begun to raise grievances against Oracle - our source said that around 10 have done so, with another 15 to 20 expected to add their names to the list. There are 45 UK-based customer services managers, and a total of 270 across EMEA.

Revenues floating away?

The unrest comes as Oracle continues its years-long drive to reshape itself as a cloud business. Back in 2015, The Reg revealed sales teams were bagging bonus packages up to seven times larger than their salaries in return for flogging products under a services contract.

A number of sources have claimed the one-time, or sweetener deals, include discounts of on-prem renewals and offers to write-off non-compliance payments after audits - assuming the customer also takes the cloud.

But, our contacts said, unless Oracle can get its customers using and renewing the cloud services, the move might not pay off in the long-run. Microsoft channel sellers are now targeted on customers’ consumption of their cloud deployments in a bid to justify a customer's investment and boost the chances of renewal.

“Most customers we’re dealing with are not renewing their cloud purchases with Oracle,” said Nathan Biggs, CEO of consultancy House of Brick Technologies.

“This is largely because public cloud for Oracle software doesn’t yet fit in with their enterprise strategy. Many customers purchase Oracle cloud credits simply in order to avoid negative audit findings, with no intent to actually move their systems to the cloud. If they’re not using it, they’re not going to renew.”

Biggs added that Oracle's revenue growth "seems to be outpacing actual cloud usage", and that this would be a "huge issue" unless customers start consuming its software-as-a-service.

“There’s no doubt that cloud adoption - including Oracle’s - will continue to grow. Because many customers seem to be making Oracle cloud purchases with no intention of actually implementing those solutions, it appears that the cloud growth that Oracle is reporting may be on a shaky foundation".

Oracle, which is also hiring 1,000 fresh-faced cloud sellers in EMEA who are due to start in January 2018, declined to comment on either the drop in customer success managers’ annual bonuses or concerns about sustainability of cloud revenues. ®

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