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Oracle's Hurd: Cloud Pulls CFOs Into Business Model Revolution

Oracle

NEW YORK—Oracle CEO Mark Hurd said Tuesday that the benefits of cloud computing go well beyond cost savings, allowing companies to pay for innovation they can ill afford to ignore given slow-to-no global economic growth. “This is becoming a CFO-CEO discussion as much as an IT discussion,” he said during the opening keynote of Oracle CloudWorld 2017 here.

Oracle CEO Mark Hurd told Oracle CloudWorld attendees that data is key to unlocking better business outcomes.

As Hurd explained, 80% of most IT budgets is consumed by routine maintenance of systems that companies run out of their own data centers. Money to address new security and compliance requirements is being pilfered from the remaining 20% that was intended to go toward improving customer service or developing more-innovative products and services. “More stress tests and compliance tests for regulated companies are putting significant pressure on innovation budgets,” he said.

Moving all those systems to the cloud would cut those nonproductive costs by 30% right off the bat, Hurd said, leaving much more room for innovation. CEOs and CFOs would jump at the cloud opportunity for that reason alone, but cloud applications also add new features more rapidly as part of the subscription “on the supplier’s dollar, not yours,” he said.

“The move to cloud is about a new business model,” Hurd said.

Companies that run off a single suite of cloud-based business, HR, and financial applications will be using the most modern applications on the market, giving them better access to the most up-to-the-minute data as well. This has huge implications for everything from sensing market shifts to calculating raw goods and inventory needs on a real-time basis. “Data is key to unlocking better business outcomes,” Hurd said.

Hurd noted that the cloud model represents a "huge change" for the IT industry as well. While the business IT market as a whole is growing at close to 0%, he said, cloud revenues for the four largest cloud vendors, including Oracle, are growing at an average clip of about 44%.

Meanwhile, erstwhile industry blue-chip companies such as EMC are becoming acquired or disappearing altogether.

Hurd said that the pace of change across all industries is accelerating. Whereas once companies that comprised the Fortune 500 could be expected to remain on the list for 75 years, today that longevity is closer to 15 years.

The same rate of change is plaguing CEOs, 40% of whom don’t make it past 18 months, he said. And even if 2% global economic growth doesn’t seem so bad, the picture grows bleaker when you consider that most of that growth comes from China. (China represents $11 trillion of the $75 trillion global economy and is growing by at least 7%—or $800 billion—per year, with the remainder of growth—roughly another $800 billion—coming from the rest of the world.)

If half of all growth is coming from China, “if you’re not exposed to China, you’re going after the other $800 billion,” Hurd said.

It’s a well-worn truism that you can’t cut yourself to growth, which means the only way for businesses to grow in this economy is by taking market share—in other words, being more innovative and providing better customer service than their competitors.

The money for doing that simply isn’t there if companies don’t find ways of shifting dollars into their innovation budgets instead of away from them. The cloud is that opportunity to “simplify while you transform,” Hurd said. “It’s just a different business model.”