What to know about Oracle’s potential cost-cutting moves

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What to know about Oracle’s potential cost-cutting moves
Larry Ellison (Oracle)

News broke on Friday that tech giant Oracle recently considered cost-cutting measures to the tune of US$1 billion. The measures, according to a report from The Information, could result in thousands of job cuts by August.

The cuts come of the heels of Oracle’s massive $28.4 billion acquisition of healthcare IT giant Cerner, which closed on June 8. The potential cost cuts also come at a time where Oracle is trying to up its game and go head-to-head with the stiff cloud competition, namely, Amazon Web Services and Google Cloud. Oracle has some big-name cloud customers, including AT&T, TikTok, and Zoom, and the company is actively pursuing government contracts, too. To that end, the company has touted its infrastructure investments in recent years and is trying to undercut its competition on price. Oracle CEO Safra Catz said in June that the company’s revenue growth in the cloud unit was poised to “accelerate substantially” in the coming year.

That’s why the timing of the potential cuts is interesting. Still, it’s important to note that the Austin, Texas-based company hasn’t confirmed the details in the report or commented on any potential job cuts this summer. At the same time, however, the report also said that two senior Oracle executives are leaving the company: CMO Ariel Kelman and Juergen Lindner, senior vice president of marketing for SaaS — moves that a source confirmed to CRN US.

Here‘s the details of the report, including the potential job cuts and cost-cutting measures, and what to know so far about Oracle’s plans to compete in the crowded cloud space.

Potential layoffs ahead

Oracle’s recent cost-reducing considerations to save the company as much as $1 billion could possibly result in putting thousands of jobs on the chopping block as early as August, according to a report published Friday by The Information.

An Oracle spokesperson with knowledge of the situation said that the layoffs could “disproportionately impact” workers in the U.S. and Europe and would include marketing for software applications in customer service and e-commerce employees, the report said.

Oracle has not responded to CRN US’s request for comment on the possible layoffs.

The company last made substatial cuts in 2019 as part of a restructuring. Oracle, at the time, revealed it was cutting hundreds of jobs across the U.S. as it was looking to improve its financials in what appeared to be part of a much larger restructuring of its 143,000-employee workforce.

Cerner megadeal

Oracle in June closed its $28 billion acquisition of Cerner, a company that specialised in electronic health records, in the company’s largest-ever deal after receiving regulatory approval. The purchase will give Oracle a deeper presence in the healthcare technology space, but speculation remains around how many former Cerner employees will be staying on.

“Working together, Cerner and Oracle have the capability to transform healthcare delivery by providing medical professionals with a new generation of healthcare information systems,” said Larry Ellison, Oracle’s chairman and CTO said of the deal in June.

Cerner said it would be joining Oracle as a dedicated industry business unit. The acquisition brought in about 28,000 Cerner employees to Oracle, according to the company’s website.

Executive departures

Alongside the potential cost-cutting measures, two senior Oracle executives are leaving the company: CMO Ariel Kelman and Juergen Lindner, senior vice president of marketing for SaaS. A source at Oracle confirmed the two high-level departures.

Kelman joined Oracle from AWS two years ago and has been leading the infrastructure team that is working with TikTok, one of Oracle’s highest-profile customers since the viral video platform selected Oracle as its cloud in 2020. Lindner, also leaving the company, leads a team that is facing a potential reorganization and job cuts, according to the report that cited people familiar with the matter.

Going after AWS

After Oracle founder Larry Ellison once downplayed the business potential of AWS, the company has spent the past six years trying to compete with the cloud giant and come in at a lower price point.

Oracle in June reported the highest organic growth in over a decade and a significant fiscal 2022 fourth quarter compared to expectations, with total revenue up 10 percent over the previous year. During its fiscal 2022 fourth quarter, which ended May 31, Oracle reported total revenue of $11.84 billion, up 5 percent from the $11.23 billion the company reported for its fiscal 2021 fourth quarter. The figure represented cloud services and license support revenue of $7.62 billion, up 3 percent; cloud license and on-premises license revenue of $2.54 billion, which climbed up 18 percent.

While Oracle has put up strong revenues and growth in cloud infrastructure and as a service, the company is still struggling to gain a larger share of the global cloud market. Oracle still falls behind the big three: AWS, Microsoft Azure, and Google Cloud.

TikTok: a key customer

Despite talk of cuts, Oracle has publicly said it is investing in its cloud service to serve TikTok, which it gained as a customer in 2020. The viral video provider in June published a blog confirming that it had adopted Oracle infrastructure in the United States to dispel fears about U.S. customer data being accessed by the Chinese government.

According to a report published last month, Oracle is hosting TiKTok information in a data centre in Texas but is providing more of a Bare Metal offering to the company as opposed to the traditional Oracle Cloud infrastructure service.

TikTok said it stores its US data in both the US and Singapore. “For more than a year, we’ve been working with Oracle on several measures as part of our commercial relationship to better safeguard our app, systems, and the security of US user data. We’ve now reached a significant milestone in that work: we’ve changed the default storage location of US user data,” TikTok’s blog said. “Today, 100 percent of US user traffic is being routed to Oracle Cloud Infrastructure. We still use our U.S. and Singapore data centres for backup, but as we continue our work we expect to delete US users’ private data from our own data centres and fully pivot to Oracle cloud servers located in the U.S.”

In a letter to Congress last month, TikTok also said Oracle Cloud will help it train machine learning models to improve TikTok’s personalized video recommendations.

 

 

This article originally appeared at crn.com

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