Ascending to the cloud: The rise of cloud computing is forcing old adversaries Oracle and Salesforce to work together

Ascending to the cloud: The rise of cloud computing is forcing old adversaries to work together

Jun 29th 2013 | SAN FRANCISCO |From the print edition

FOR years they loathed one another, rarely missing an opportunity to pick a fight. Their rows, full of sarcasm and sniping, occasionally hit the headlines. Then they started meeting discreetly every now and again—and ultimately realised just how badly they needed each other. Now, to the surprise of many, they have told the world about how they were really made to be together after all.

This is the backdrop to events that have caused a stir this week in the world of corporate computing. On June 24th Oracle and Microsoft announced plans to work closely together in the “cloud”—the business of delivering software and services over the internet. The following day Oracle unveiled another partnership, this time with Salesforce.com, a pioneer of cloud-based services such as hosting businesses’ marketing and customer-relations systems. The day after that, Oracle announced yet another alliance, with NetSuite, another provider of cloud-based business software. Oracle also unveiled a new, cloud-compatible version of its database software.The partnership between Oracle and Microsoft is especially striking because the two firms—and their high-profile co-founders, Oracle’s Larry Ellison and Microsoft’s Bill Gates—have a long history of feuding. Tension between them escalated in the 1990s when Oracle tried to promote an alternative to personal computers to limit the influence of Microsoft’s Windows operating system and Microsoft began competing with Oracle’s core database business. Relations have thawed somewhat since then, but the companies still compete ferociously in many areas.

The two old foes have come together because they have both been wrong-footed by the speed at which business customers have shunned their costly packaged software and maintenance contracts in favour of cloud-delivered services. Microsoft and Oracle both have their own web-based offerings, but they face stiff competition from the likes of IBM, which recently bought SoftLayer Technologies, a cloud firm, and Amazon, which has built a dominant position in cloud infrastructure. “Amazon could ultimately steamroller everybody,” predicts David Linthicum of Cloud Technology Partners, a consultancy.

To avoid being left behind in the drift to the cloud, Oracle and Microsoft want to show that their services work well together to win customers who fear being locked into a single firm’s products. The two firms have co-operated quietly for some years to ensure Oracle’s database software runs smoothly on servers using Microsoft operating software. But this week’s announcement signals a deeper commitment. In particular, Oracle will ensure that various bits of its software run well on Azure, Microsoft’s cloud platform. In return Microsoft will promote Oracle’s database software and other products to Azure customers.

The partnership comes at a critical time for both firms. Oracle’s revenue was flat year on year in its most recent quarter. Some analysts blame its slow reaction to the rise of cloud computing, which Mr Ellison initially scorned before undergoing a Damascene conversion a few years ago. As for Microsoft, it is said to be preparing a massive internal shake-up to sharpen its focus on things such as cloud services and smart devices.

The alliance between Oracle and Salesforce also caused jaws to drop. Mr Ellison and Marc Benioff, the founder of Salesforce, have revelled in firing potshots at each other’s businesses. Mr Ellison once called a Salesforce product “itty-bitty” and Mr Benioff sniffed at purveyors of “false clouds”, in a swipe at an Oracle product.

Now the two tech titans want to convince the world that their firms are a perfect match. In future Oracle will provide the technology on which Salesforce’s platform and applications will run, and Oracle will integrate Salesforce’s cloud-based applications with its own ones for finance and human-resources management. Salesforce will return the favour by promoting Oracle’s products in these areas. This arrangement guarantees Oracle a big customer (ie, Salesforce), while Salesforce gets to tap Oracle customers for business. All this will only accelerate businesses’ move to the cloud.

Oracle and Salesforce: Tech’s unholy alliance

By Michal Lev-Ram, writer June 28, 2013: 9:28 AM ET

Long-time opponents are teaming up.

FORTUNE — It’s the end of an era. Or the beginning of one, as Oracle and Salesforce.com would describe it. The formerly sparring enterprise tech companies hosted a conference call for press and analysts Thursday afternoon, in which they outlined a new, nine-year partnership through which their respective cloud-based applications will work hand-in-hand.

“The value we can provide to customers is just awesome,” said Marc Benioff, CEO of Salesforce (CRM), the largest provider of customer relationship management tools and a pioneer in cloud-based software. “This is a new world, this is a new time. Companies like Salesforce and Oracle working together are evidence that that’s how it has to be.”

Salesforce and Oracle (ORCL) have competed in the past — and the companies’ CEOs have long maintained a vocal, often entertaining war of words. (Their rivalry landed at No. 31 on Fortune‘sGreatest Business Rivalries of All Time list.) Now the two companies say they plan to allow customers to easily deploy and integrate their various applications in the cloud. As part of the agreement, Salesforce has committed to using Oracle’s database and other infrastructure technologies and to implement Oracle’s Fusion human capital management software, used by HR departments. Oracle, for its part, has agreed to run Salesforce’s flagship customer relationship management software, though it didn’t specify how widespread its implementation would be.

“Almost every time we buy a company, they are running Salesforce CRM,” said Larry Ellison, CEO of Oracle, adding that he plans to “leave some of those companies on those applications.”

Those same “out-of-the-box” integration capabilities will be made available to customers of both companies, though there won’t be cross-selling involved. Oracle will continue to sell Oracle applications, and Salesforce will continue to sell Salesforce applications.

The alliance, while surprising, could make sense, especially for Oracle, which has been trying to push its way into the cloud. The company inked other partnerships earlier this week, with Microsoft (MSFT) and NetSuite (N), a cloud-based provider of enterprise resource planning software for small- and medium-sized businesses. And while customers may want to move to the cloud, they don’t necessarily want all of their applications from one vendor.

But Thursday’s call was a far cry from the tit-for-tat Ellison and Benioff have engaged in previous interactions. (Ellison once referred to Benioff’s Salesforce as the “roach motel” of cloud services.) Instead, the two alpha males showered each other with compliments and kept telling each other they should “go first” when answering questions.

“I couldn’t be more thrilled to make this announcement with you today,” Benioff said to Ellison at one point. (An aside: Benioff started his career at Oracle, where he stayed under Ellison for over a decade). Later in the call, he invited Ellison to attend Salesforce’s annual “Dreamforce” conference. Ellison gladly accepted the invitation.

When asked whether the new partnership will mean the end to the “fun, entertaining potshots” of the past, Benioff said he hopes not. “That’s one of the things I’ve enjoyed in our industry,” he added. “We’ve always enjoyed working together and having fun with each other. Hopefully it will be the end to us getting a little too revved up at times.”

Naturally, Ellison agreed with Benioff, saying “I’m sure both Marc and I are going to try to continue to be entertaining, while making sure that the entertainment never distracts from our commitment to work together.” In other words, the era of entertaining potshots is over.