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How Does Oracle Make Money? The Oracle Business Model In A Nutshell

Oracle is a behemoth software company founded in 1977 by Larry Ellison, Bob Miner, and Ed Oates. The company primarily followed the on-premise software model, but it mostly successfully transitioned to the cloud model. In fact, by 2020, cloud services represented most of its revenues. Indeed its lineup of software products comprises MySQL, Java, Middleware, Oracle Linux, and many others.

Origin Story

Oracle is a multinational computer technology corporation, founded in 1977 by Larry Ellison, Bob Miner, and Ed Oates.

Originally known as Software Development Laboratories (SDL), Ellison in particular became inspired by a 1970 paper written by Edgar F. Codd on database management systems.

Thirteen years later, SDL became Oracle Systems Corporation – a name aligned with the flagship Oracle Database product.

Oracle had early success using the C programming language to implement its products.

Its products and services were expanded following the successful acquisitions of PeopleSoft, NetSuite, and BEA Systems.

The company now sells database software and technology, cloud-engineered systems, and enterprise software products.

It currently occupies position 82 on the Fortune 500 list and employs over 136,000 people.

Glance At The Oracle Business Model

As the company highlights in its financials:

Oracle provides products and services that address enterprise information technology (IT) environments. Our products and services include applications and infrastructure offerings that are delivered worldwide through a variety of flexible and interoperable IT deployment models. These models include on‑premise deployments, cloud‑based deployments, and hybrid deployments (an approach that combines both on-premise and cloud‑based deployment) such as our Oracle Cloud at Customer offering (an instance of Oracle Cloud in a customer’s own data center). Accordingly, we offer choice and flexibility to our customers and facilitate the product, service and deployment combinations that best suit our customers’ needs. Through our worldwide sales force and Oracle Partner Network, we sell to customers all over the world including businesses of many sizes, government agencies, educational institutions and resellers.

Oracle, therefore, is a behemoth whose software business ranges across the old and the new way (from on-premise to cloud and a hybrid between the two).

Oracle’s three primary lines of business comprise:

  • Cloud and license: representing 83% of the company’s total revenues for 2020. This operating segment sells and delivers a broad spectrum of applications and infrastructure technologies through our cloud and license offerings.
  • Hardware: it represented 9% of the company’s revenue in 2020 and it provides a broad selection of hardware products including Oracle Engineered System.
  • And services: which represented 8% of the company’s revenue in 2020, primarily focused on helping customers and partners to use at the best the suite of Oracle products.

Oracle revenue generation

Oracle Revenue Model moves around three primary lines of business. Cloud services are either based on license and support or on-premise model. And the remaining lines of business (Hardware and Services), which represent a smaller part of the company’s revenues.

Oracle makes money by designing, manufacturing, and selling hardware and software products.

More specifically, revenue comes from software subscriptions, license, hardware, and service fees.

Through its numerous acquisitions, it also offers extensive complimentary services in consulting, hosting, financing, and training.

Ultimately, Oracle sells enterprise-level technology to large enterprises.

Let’s take a look at some of the major products and services.

Oracle Cloud Infrastructure

Oracle Cloud Infrastructure (OCI) delivers high-performance, on-premise computing power for cloud-native and enterprise IT workloads. Some of the more notable organizations utilizing OCI are Zoom, 7 Eleven, and FedEx.

Given that this is an enterprise solution, prices are available on request. Alternatively, a business can estimate its potential costs using a simple unit cost model.

Software

Central to the Oracle software offering is their flagship product Oracle Database 19c.

This gives organizations cost-efficient access to the industry’s most reliable, scalable, and secure database technology.

Other on-premise products include:

  • MySQL.
  • Java.
  • Middleware – a cloud platform for digital businesses.
  • Oracle Linux – guiding leveraging Linux OS to deploy enterprise applications more rapidly.
  • Engineered Systems – designed to integrate, test, and optimize software and hardware products.
  • GraalVM – enabling interoperability between programming languages in a shared runtime.
  • Analytics Server – for detailed customer analytics.
  • Oracle Autonomous Database – a product allowing enterprises to reduce operating costs by 90% through an automated, machine learning database for full lifecycle management.

Prices are available by contacting an Oracle expert.

Hardware

Oracle Hardware is a suite of scalable and engineered systems, storage, and servers. This hardware delivers many benefits to enterprises, including lower costs, better cloud integration, optimized performance, and more robust data.

Again, prices are available upon request. Current Oracle Hardware customers include Toyo, Halliburton, and Exelon.

Key takeaways

  • Oracle is a multinational computer technology company for large enterprises. Co-founder Larry Ellison was inspired to create Oracle after reading a paper on database management systems.
  • Oracle makes money by selling an extensive range of products and services to large enterprises. Acquisitions of related organizations also enable it to sell complementary services in hosting, training, and consulting.
  • Oracle is best known for selling its database management system. It also sells cloud infrastructure and scalable systems, storage, and server hardware.

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Related Business Model Types

Platform Business Model

platform-business-models
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.

Marketplace Business Model

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Network Effects

network-effects
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

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