There is a difference between “cloud” and Software as a Service, or SaaS. SaaS may be built on a cloud, but what is being offered is a software application, and the results delivered by that application. The salesforce.com, inc. (NYSE:CRM) ticker symbol is CRM, which stands for Customer Relationship Management. That’s an application, built on an Oracle database, that the company has been renting since its founding.
The margins on SaaS can be much wider than for plain cloud infrastructure. They’re even wider than for cloud platforms, which basically just give you the tools with which to write software. There’s also lock-in, by definition, in a SaaS system. Moving to another provider means moving all your data, and perhaps changing all the software – including software you may have written – running on top of the application.
So Benioff now has a clear path for what he calls “cloud” but which is as much cloud as “Oracle Cloud.” Salesforce.com is, and always was, a proprietary program written in a proprietary database running on proprietary hardware. Instead of fighting with Oracle Corporation (NASDAQ:ORCL), Benioff is now allied with it. And when the time comes, he can probably sell his company to Oracle at a profit, if only by threatening to someone else.
The Foolish bottom line
The most important point to remember here is that all these moves are defensive in nature. Microsoft is fighting Amazon, Oracle is fighting cloud, and salesforce.com, inc. (NYSE:CRM) was fighting Oracle Corporation (NASDAQ:ORCL).The end of those fights will be bullish for investors in the near term.
Over the long run, the problems that brought these companies to the table remain. That’s why Oracle actually fell – it had a weak sales report. It’s why Microsoft Corporation (NASDAQ:MSFT) and Salesforce.com have barely moved – the proof of this pudding will be in the eating.
Investors might consider speculating on Microsoft after this, but I would avoid Oracle Corporation (NASDAQ:ORCL) and Salesforce.com until they prove the validity of what they’ve done with sales and earnings.
The article Oracle Closes a Door and Opens a Window on Cloud originally appeared on Fool.com and is written by Dana Blankenhorn.
Dana Blankenhorn has no position in any stocks mentioned. The Motley Fool recommends salesforce.com, inc. (NYSE:CRM). The Motley Fool owns shares of Microsoft Corporation (NASDAQ:MSFT) and Oracle Corporation (NASDAQ:ORCL). Dana is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
