Since introducing cloud-based CRM all the way back in 1999, Salesforce has long dominated the space – they boast over 150,000 worldwide customers, and enjoy a 20-25% CRM market share. With Salesforce founder and CEO Marc Benioff at the helm, the company has evolved tremendously since its inception, and is now quickly expanding with artificial intelligence (AI), backed by a robust ecosystem of strategic partnerships and acquisitions.
However, recent news suggests that a new competitor – led by an old ally of Benioff’s – could be entering the cloud space with force, ultimately challenging Salesforce’s long-standing dominance.
Enterprise software company Oracle recently conducted its Q3 earnings call, sharing some eye-opening predictions for the future that turned some heads on Wall Street, as well as the wider tech ecosystem. The company forecasted over 70% year-over-year (YoY) growth for its cloud offering, Oracle Cloud Infrastructure (OCI), across the next four years, with financial growth that would position them as one of the leading cloud providers in the market.
By hedging their bets on AI and pursuing large-scale investments, Oracle’s new AI infrastructure, combined with their SaaS product, could prove an attractive option in the greenfield market – and ultimately a viable alternative to Salesforce’s offerings.
How Oracle vs. Salesforce Began
Larry Ellison, captivated by the potential of relational databases, left college in the early 70s and eventually teamed up with Bob Miner and Ed Oates to found Software Development Laboratories in 1977.
IBM researchers first developed the relational database model a few years before, but had yet to commercialize the product so companies could buy and use it. This left the door open for this new company to flourish.
Their first product, Oracle V2, was positioned as the world’s first commercial relational database, and an early contract with the CIA – codenamed “Oracle” – gave the company its lasting name.
By moving faster than IBM, Oracle established itself as an appropriate option for enterprises eager to adopt this new technology. Known for their aggressive sales tactics, often selling features before they were built, Oracle rapidly expanded and went public in 1986, raising the capital that fueled its transformation into the leading database provider of the 1980s and 1990s.
However, issues arose for Oracle as the world entered the cloud computing era in the 2000s. Ellison famously called cloud computing “marketing hype”, claiming it was just old computing models with new names. This ultimately led to the failure to adapt to this new wave of technology.
This was the era when Salesforce emerged with offerings built entirely on cloud computing. Ellison was an early investor in Salesforce, and Benioff was often described as his protégé. But it didn’t take long for Salesforce to outpace Oracle, and the long-standing database giant was soon labeled a ‘legacy player.’
Salesforce’s agility and customer-focused approach helped it win market share rapidly, while Oracle’s reluctance to embrace the cloud left it struggling to keep up.
The Resurgence of Oracle
After years out of the limelight, Oracle has changed the company narrative these last few quarters, investing heavily in AI and cloud infrastructure to position itself as a modern, cloud-native powerhouse capable of competing with the likes of Salesforce and other SaaS leaders.
At the heart of this transformation is Oracle Cloud Infrastructure (OCI), which underpins the company’s current ambitions with AI. Oracle has poured billions of dollars into expanding its global data centers, developing high-performance computing environments, and integrating AI across its product suite.
Recent large-scale acquisitions also highlight this newfound focus. In 2022, Oracle acquired Cerner for $28.3B, as well as DataFox in 2021, and Aconex for $1.2B in 2017. All of these purchases were made to accelerate their AI efforts across different industries, including healthcare, sales, marketing, and engineering product management.
The synergy between AI and cloud infrastructure is central to Oracle’s strategy. By embedding AI into its cloud offerings, Oracle can deliver smarter, more automated services – from predictive analytics to advanced customer engagement tools – directly on its platform.
This has all played a huge factor in the news shared in Oracle’s very positive Q3 earnings call. Some of the key facts disclosed were:
- Their stocks have soared over 30%.
- They have booked over $500B in future cloud contracts.
- OCI is forecasted to grow by 77%, hitting $18B in cloud revenue.
- Growth will continue exponentially over the next four years, from $32B, to $73B, $114B, and ultimately, $144B.
- Their remaining performance obligations (RPO) have reached $455B – up by 350% from the year previous.
Oracle may have initially been reluctant and somewhat forced into this new strategy, but they’re clearly reaping the benefits and effectively ushering in a new era for themselves as a successful AI cloud provider.
Salesforce’s Position in the AI Era
Salesforce has always been at the forefront of cloud innovation, and its entry into the AI era is no different. However, while Oracle is charging ahead with bold AI-driven initiatives, Salesforce’s AI strategy seems to be raising more questions than providing answers.
The company’s recent Q2 earnings report revealed mixed sentiment around its AI efforts. While Salesforce has experienced consistent growth, it’s clear that investors are applying more pressure for tangible results from their AI investments.
Agentforce, Salesforce’s flagship AI product, was highly touted upon its release, but a year later, adoption rates have been disappointing, with only a small percentage of Salesforce’s actual user base actively using the platform. This slow adoption has put a spotlight on Salesforce’s ability to execute the product after some fairly aggressive marketing for it.
The fact that Agentforce, a cornerstone of their AI vision, isn’t seeing widespread usage suggests that Salesforce’s AI tools may not be as easily integrated into businesses as anticipated. With Oracle’s bold investments in AI infrastructure and growing customer base, the pressure on Salesforce to show real, measurable results from its AI initiatives is mounting.
As competitors like Oracle ramp up their AI capabilities, Salesforce needs to quickly prove that it can deliver on the promises made to its customers and investors. The expectation is high on both sides, but so far, the results have yet to fully materialize.
Is Salesforce at Risk?
When a company like Oracle steps up to challenge Salesforce’s long-term dominance, it’s my job to ask whether the CRM giant we all know and love is really at risk of being knocked off its perch. In this case, though, the answer isn’t a simple yes or no.
Salesforce enjoys a formidable moat and strong customer lock-in. With the vast amounts of data stored in both its core multi-tenant platform and Data Cloud, combined with the significant time and investment required to implement and customize the platform, long-term customers are unlikely to switch just because of Oracle’s latest offerings.
This makes it difficult for Oracle to win over Salesforce’s existing customer base, giving Salesforce a persistent advantage.
The real risk for Salesforce lies in the greenfield market, where startups and new entrants are choosing their first SaaS platform. Oracle now has a fresh angle, which could attract young companies that want their CRM to be AI-enabled from day one. Oracle can bundle its SaaS applications with its expanding AI infrastructure, which could prove financially attractive compared to Salesforce.
This allows Oracle the opportunity to win deals that might once have defaulted to Salesforce. In the next few years, this dynamic could put more pressure on Salesforce in new customer deals.
Oracle has also re-strengthened its position as a full-stack provider, able to deliver both the infrastructure and the applications. That makes its pitch to greenfield customers more compelling than in the past. The question for Oracle is whether it can also retain customers rolling off legacy on-premise systems – a shrinking but still relevant part of its base.
For Salesforce, the bigger risk is not losing entrenched customers – where switching costs remain high – but rather facing a re-emerging competitive threat in the greenfield market, where Oracle’s “two-sided” product story could resonate with ambitious startups.
Final Thoughts
Oracle’s resurgence as an AI and cloud powerhouse certainly poses fresh challenges for Salesforce, particularly in the greenfield market where startups are choosing their first platform. By bundling SaaS with infrastructure, Oracle has a sharper value proposition than in previous years, and that could chip away at Salesforce’s once-automatic dominance in new deals.
That said, Salesforce’s entrenched position in CRM, its vast customer ecosystem, and the high switching costs tied to its platform mean its long-term dominance is far from over.
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