Why Oracle’s SaaS and PaaS Revenue Growth Is a Positive Sign



Oracle’s SaaS, PaaS and IaaS performance

Earlier in the series, we discussed Oracle’s (ORCL) cloud revenues in fiscal 2Q17. Let’s see which segment grew the most in Oracle’s cloud revenues. Cloud SaaS (software-as-a-service) and PaaS (platform-as-a-service) revenue grew 81.4% to $878 million.

In fiscal 2Q17, Oracle’s deferred revenue for SaaS and PaaS grew 51% to $1.6 billion. Billings for SaaS and PaaS grew 39%. In its earnings call, Oracle co-CEO Mark Hurd noted, “Cloud is now really two-thirds of our new customer wins.”

Oracle’s Cloud IaaS (infrastructure-as-a-service) grew 6% to $175 million. Its second-generation information-as-a-service offering, Oracle Bare Metal Cloud, is expected to accelerate its growth in this space.

Oracle’s chairman and CTO, Larry Ellison, expressed the company’s high expectations of this product, stating, “We expect our Database as a Service and IaaS businesses will grow even faster than our skyrocketing SaaS business.”

Article continues below advertisement

Cloud billing services

Among cloud billing services, SaaS is gaining popularity due to its potential to offer customized and innovative services. The global SaaS market grew 33% on a YoY (year-over-year) basis to $11 billion in revenues in calendar 2Q16.

This growth confirmed the expectations of Cisco’s (CSCO) Global Cloud Index report, which stated that SaaS is expected to grow at a CAGR[1. compound annual growth rate] of 33%. The cloud market as a whole is expected to grow at a CAGR of 24% until 2018.

Collaboration, which is the largest segment of the SaaS space, grew 37% in calendar 2Q16. Microsoft’s (MSFT) dominance in the collaboration segment enabled it to achieve a leadership position in SaaS. However, despite losing its position to Microsoft in the overall SaaS space, Salesforce (CRM) continues to rule the CRM (customer relationship management) space.

Article continues below advertisement

Oracle ERP Cloud recorded triple-digit growth

The ERP (enterprise resource planning) segment of the SaaS space saw the greatest growth, posting 49% growth in 2Q16. The Collaboration and ERP subsegments drove the company’s 33% growth in the SaaS space in 2Q16.

Oracle’s ERP Cloud grew 104% on quarter-over-quarter basis in fiscal 2Q17. Last quarter marked the eighth straight quarter in which Oracle’s ERP Cloud revenue grew more than 50% on a sequential basis.

It was the Oracle’s dominance in ERP—the segment that grew the most in the SaaS space—that led it to register the highest growth in the SaaS space in calendar 2Q16. The 49% growth in the ERP space far exceeded the 33% overall growth in the SaaS space, which helps explain why Oracle SaaS revenues did so well in fiscal 2Q17.

Please read What Helped Oracle Report the Highest Growth in the SaaS Space? for further details on this space.


More From Market Realist