It's horrible how large companies always try to frame whistle-blowers as 'disgruntled employees' and use the media to publicly shame them and make them unemployable.
An employee who was fired (for whatever reason) is always going to be much more likely to blow the whistle than a happy employee who is still receiving pay cheques from their employer.
Just because someone was fired doesn't mean that there is no substance behind their claims. Also, 'poor performance' is highly subjective... Maybe Oracle was looking a very specific kind of 'performance' which was outside of the legal/ethical boundaries of that employee.
Regarding the Oracle cloud sales not doing well, this isn't surprising. I am more surprised by the fact that Oracle shares are still performing well on the stock market. I can't think of a single Oracle product that the software engineers of today are actually excited about. The terms that come to mind when I think about Oracle are 'legacy', 'lock-in', 'expensive' and 'inflexible'.
Many years ago, I saw a notice on a company bulletin board stating that a couple of executives had been indicted based on testimony by a disgruntled former employee. It turned out presently that he was disgruntled because he had been caught by the feds and had done a plea deal. Within a few months the executives were off to Allenwood.
I don't understand Oracle hate. Yep, they're all about making money, but at the end of the day, that's what most businesses are doing, and the ones who say otherwise are bullshitting you with crap their marketing department made up. Only in start-up bizarro world can a company give away free products and have negative or zero profit margin and be considered "succeeding".
It makes no sense to me to hear people working at for-profit companies complaining that other companies only exist to make money. It's inconsistent, at the very least.
Open source is great, volunteering is great, sharing and giving stuff away is great, etc., but businesses and corporations only exist to make money for the people who own them and work for them.
The problem here isn't asserting that businesses and corporations exist to make money.
It's asserting that they only exist to make money. Or that that is in any way natural.
For a company to focus entirely on making money when they don't have enough money to operate is, let's say, understandable. But since companies are run by humans, and humans are quite adept at balancing different goals at the same time, it's not at all beyond reason to expect a company that is making money hand over fist to also focus on more than just that. It's not at all bad to judge them if they choose not to do that, nor to consider them worse than other companies that both make money hand over fist and choose to focus on more than just making more money.
It is in no way inconsistent to work at a for-profit company and complain that another company only exists to make money. Even if you are the chief executive of a for-profit company that both makes money and has additional goals beyond that, you aren't being inconsistent. But if you aren't the chief executive? If you are an employee whose day-to-day job actually isn't directly to make money, even if it is, somewhere above you, being guided by that goal? That doesn't even come close to inconsistent, IMO.
Most businesses are making money. That's not the same as being all about making money. Confusing the two is a really good way to discount the companies who manage perfectly well to make money without losing their souls to that goal[1].
[1] - I'm not really saying Oracle is one of these companies; I've never worked for them or interacted with them (though I've heard plenty of tales). I'm taking issue with the broader statement, because I think it's a fundamentally problematic lens to view the world through.
Both of you may be right. The company exists to make money for the shareholders. But to make money for shareholders it has to treat its customers well, it has to treat its employees well, it has to treat its partners well and it has to obey all the laws. Management who value these things are often referred to as having 'high levels of integrity'.
Good shareholders should look for management exhibiting high levels of integrity. Like Warren Buffet said :
"In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. If you hire somebody without [integrity], you really want them to be dumb and lazy."
At least in the public's eye, Oracle has lost the perception of having any integrity.
>But to make money for shareholders it has to treat its customers well, it has to treat its employees well, it has to treat its partners well and it has to obey all the laws.
Sadly not. One of the tragedies of capitalism is that it's much easier to run a profitable business by sharking everyone than by being a good citizen.
The optimal ethical position for profit is not the same as the optimal abstract ethical position.
This is why markets are a bad thing. If profit is your only measure of morality, you don't have a working mechanism to protect you - and everyone - from choices that produce short-term gains but long-term disasters.
... well, that's extreme. The ownership of the company should be working to avoid long term disaster. In most industries this happens all the time.
Actually, some of the main instances they don't (financial industry) is because of government support. If you're allowed to fail and get bailed out, then there's no reason to avoid disaster.
The company exists to make money for the shareholders
Actually, that should be circumstantial. The primary reason for a business to exist is because it provides value to its customers. If the value provided (and monetized) is more than the business' operating costs, it gets to continue to exist.
Shareholders are an artifact of unnatural growth, not a fundamental property of business.
those are some strong assumptions. people don't start companies to serve others, and if by any chance they won't lose money but actually earn something that would be nice.
maybe that's the world you would like to see, and maybe one day we will have it, but it's not the world we currently live in.
why is it so hard for some to accept that money is, overall, by far the strongest motivation force out there? Remove it, and >95% of population will not show up for their crappy work next day. it might not be the best motivator overall and has some drawbacks, but it works so far surprisingly well and we came to this situation by long evolution.
ok, then do that test of removing salary, indefinitely. since it's not the strongest motivator, maybe secondary one, most would still come, right?
now how many would show up next day?
> It's asserting that they only exist to make money. Or that that is in any way natural.
There are plenty of companies that exist to make money and have additional goals.
But, gigantic, publicly traded corporations don't fall into that category, and they exist exclusively to make money. If they tell you otherwise, their PR people are trying to fool you.
I'm also tempted to say a business whose number one goal isn't making money for its owner and employees should probably be registered as a non-profit or a charity or something else, and not a corporation, but I guess there's no reason they couldn't be a corporation.
> I'm also tempted to say a business whose number one goal isn't making money for its owner and employees should probably be registered as a non-profit or a charity or something else, and not a corporation, but I guess there's no reason they couldn't be a corporation.
Um, what does "corporation" mean to you? Can you identify anything that you would call a "non-profit" that is not also a corporation?
At least in the UK, there's the concept of an unincorporated association. The one I chair is definitely non-profit, and (not being incorporated) we're not a corporation.
You're right. I think many people in tech today are not used to Oracle's old-school style. They've become accustomed to companies like Google and Facebook that want to make money and collect as much private information about as many people as possible; they want money and unlimited power. Or companies like Google and Apple that want your money and your mind, that, like Big Brother, are not content just having power over you; they want power over you and your love. That a company would just want your money but not your love and allegiance, or that it wants your money without also trying to brainwash you or spy after you indeed seems strange these days.
BTW, I agree with the idea that companies shouldn't only be about making money, but also care about other things, like the welfare of their employees. But companies like that are virtually nonexistent among America's tech giants.
I don't read GP post as a defense of Oracle. And I say that as someone who fully expects Oracle to build a slot into their servers that you can feed POs to in order to fill it back up when the cash sunk into it is running low.
Oracle is no angel; I'm not aware of any altruistic -- or even non-solely-egotistic American tech megacorp. But I do prefer their brand of old-school evil (unbridled greed; we'll sue you into compliance) over Google's (we're going to spy on you and collect data on you and you're going to love us) or Apple's (we'll turn our customers into religious fanatics, who don't just pay us but also worship us).
Actually, companies exist to allow investors to put money up to finance a certain venture without liability for the actions of the employees and representatives of the company. So if you, for example, decided to invest in a company but do no work for that company, and then the company's employees use your money to buy a boat and attack other boats and steal their cargo and sell it for a profit then you could sell your shares in the company for a huge profit or get paid dividends once the company sells the pirated goods. And you couldnt be sued for their actions. Historically, corporations were invented specifically for businessmen to be able to invest in state-sanctioned piracy in the middle of the second millenium in Europe. Today, their purpose is pretty much the same, except instead of robbing sea-faring merchants, they're robbing their customers. In any case, making money is a side-effect of corporations. They could be losing money but growing tremendously and if they continue to attract investors then they are still technically a successful company.
Companies are not only about making money. They are also about being good citizens in the markets and environments they are involved in. They have duties and resposibilities to customers, workers, shareholders, competitors, suppliers, regulatory authorities, the community and the environment - amongst others.
To me, Oracle discounts and in some cases shows disdain for, being a good corporate citizen.
Are you aware of any company in Oracle's position that did not sue? Are you aware of any company that has ever done what Google did, at that scale, and was not sued?
Obviously not. They didn't have the resources or the time to sue; they were on the brink of collapse and already involved in talks of acquisition. Google fully expected them to sue[1], but got a reprieve due to Sun's troubles.
Android was released in September 2008, with the first phone in November. At that time Sun was in acquisition talks with IBM (and maybe HP), which fell through in 3/09. In 4/09 -- about six months after Android was released -- they announced their agreement with Oracle[1]. That's hardly enough time to even prepare such a lawsuit, let alone carry it through, and obviously Sun had much greater concerns at the time.
[1]: Because no such action had ever gone un-sued.
Oracle made many arguments -- patent and copyright infringement. The patent claims were rejected, but after an appeal, the appeals court ruled that language-level APIs (i.e, not REST APIs or other protocols) are copyrightable, at which point (another) court debated the question of fair use by Google, and ruled in Google's favor (i.e, that their use of Java's API does not constitute an infringement of the API's copyright). Oracle have announced their decision to appeal the ruling.
In the meantime, though, it seems like Android is about to adopt Oracle's OpenJDK, under the open-source license granted by Oracle.
And I understand, the cases are not the same at all, but it highlights that Oracle is hardly the only tech company who will take to the courts to help themselves make money.
I would wager in some way it is more honest to state you are doing professional business and here for the money, than creating mottos about disruption and doing good (or not doing evil) etc.
The surprising part is when customers of BigCo could be borderline labeled as fans - for me, at least.
Oracle may be "evil" in many people's eyes but at the end of the day they just want to sell some products and services. Same with Microsoft, same with Apple. Compare and contrast that with Google and Facebook who make their money off your private data.
Both Oracle and Microsoft use some pretty creative means to inflate their income. See also 'free audits' by the BSA, which are nothing less than the setup for a shakedown. I've seen quite a few companies that waved the need for such an audit only to be presented with a bailiff and some guys in suits claiming to have received 'information' about illegal software being used on the premises.
This can get ugly - and expensive - real fast because in a large enough corporation it is stupidly easy to miss a detail and this will then be used to put in a claim of a few 100K worth of extra licenses that you need to buy to make the problem go away. It's the mafia, only now with bits and bytes and weird licensing terms that only they know how to interpret.
This is one of the main reasons why everything I do uses open source. The only time these companies still get some money through me is when I buy new hardware and MS levies their tax.
If all Oracle and Microsoft wanted to do was to 'sell some products and services' that would be one thing. But really what they want is to extract as much money from companies that use their products as they can get away with and if they have to use strong-arm tactics on sufficiently locked in customers to get that they'll be more than happy to do so.
The obvious defense - you don't have to do business with them at all - is one that is becoming a more and more viable choice. Twice now I have encountered a company that had transformed their internal applications to be web based using Apple products rather than Microsoft and licensing terms and costs were the main reasons given. I suspect this is going to be a trend of sorts and maybe this will be one backdoor that will allow 'linux on the desktop' to enter companies too (it would allow them to re-use the hardware they already have).
Of course MS has a whole 'TCO' dog-and-pony-show to prove that you'll lose money that way, based on all kinds of funky reasoning which sounds believable to pointy haired bosses.
It would be nice if 'the new Microsoft', Oracle etc. stopped waging war on their customers.
You have a good point. It's a spectrum. There are software companies that thrive by using different models. Some are based on open source, some are based on closed source and some even mix the two. Some other companies as listed elsewhere are ad-companies and give away software to bolster their eco-systems.
Can anyone with a finance/CFO background give a primer in how a) to detect such aggressive accounting in a cloud company's earnings statements and/or b) what aggressive means in this context?
It would be nice to have a field guide to how to spot those without bathing suits when the tide goes out.
a) All IFRS (International Financial Reporting Standards) compliant financial statements will have a accounting policies statement preceding the 'Notes to the accounts'. This accounting policy section will outline how revenue is recognised and how this is recorded in the financial statements. There is a trend for financial market regulatories to require auditors to provide a summary of 'key audit matters' in their opinion to the accounts - which details the key risk areas in the financial statements for an entity.
b) Aggressive in this context likely means that revenue (and earnings) were being improperly accounted for in the current period. My guess in this context relates to revenue recognition. For instance if I sell SAAS product for $1000 setup and $100 per month and I expect the customer to stay on average 10 years - how do I recognise this revenue?
The aggressive accounting would recognise revenue of $1000 (setup) and $1200 (subscription) in the first year.
But it may be fairer (and potentially more appropriate) to recognise $100 (10% of the setup costs as customer expected to stay 10 years - apportion over this period) and $1200 (subscription) in the first year.
On this simple alteration in treatment revenue could differ from $2200 to $1300. NB: This is an oversimplification and the actual recognition criteria depends on scenario, nature and company policies.
Cloud accounting (read: SAAS) is still relatively new and very different to traditional licensing and the accounting/finance community is still grappling with the recognition and treatment.
I'm seeing, in the field, Oracle reps offering bundles of Oracle software licenses + cloud for less than Oracle software license on it's own. Is that something that could be tricky to account for properly?
Generally speaking, when I see hard-to-explain sales behaviours from enterprise vendors my experience is that:
1/ The sales incentives are leading to sales teams optimising their incentives in ways that seem bad for the organisation over all, and/or
2/ The contract has nasty fishhooks that will make all that money back, and more, in year two or three (classic example from my experience with a different vendor: selling servers at $50k, discounted from $250k, but then assessing maintenance on the original price, leading to a $50k/year opex).
As I understands it, some companies may also recognize the contract signing as the revenue and capitalize $13,000 for the year the contract was signed ($1000 setup and $1200 subscription pr year * 10 years).
If the customers cancel the contract they may then book the lost revenue as a loss, so an annual statement with high losses may be an indicator that they booked revenue before the revenue was truly secured.
It's actually wrong to book revenues until one has satisfied the performance obligations to the customers, i.e., until the services have been provided. It means that I can't book revenues for 10 years ahead under no circumstances.
It is possible though to have something called "deferred revenues" in case the customer has pre-paid for those years (i.e., transferred the cash for the 10 years), but those are not revenues (not on the P&L), but a liability to the customer to satisfy the performance obligations (on the balance sheet), and this will be gradually released (apportioned) to actual revenues over the course of the remaining years.
Good points. The new IFRS 15 tries to deal with those issues, and defines principles of performance obligations, un-bundling etc., which should be helpful in this case.
I'm sure the Big 4s have issued Q&As and position papers to their audit clients already on the adoption of IFRS 15, but this is going to be a nightmare to implement...
The gray area is how one counts revenue as cloud or non-cloud. Some software can be used in both modes, and the question is how one categorizes them. For example, Microsoft Office 365 can be used in cloud (in style of Google docs) but it can be installed locally. The gray area affects many firms, and is not isolated to Oracle.
b. Just from the article I think the aggressiveness in this case was probably doing something like assuming that current subscriptions continue for longer than they've received payment, and then counting that entire time as revenue.
From what's listed in the news story, we don't know that, but the point of the article is not to single out Oracle, but to realize that financial accounting for cloud software products is a grey area that affects many firms -- including those that sell it, and even the buyers, and having clearer standards will benefit everyone.
Ahh, another example of "Creative Accounting" as I like to call it. Sort of like "Creative Writing," but instead of writing up a fictional story, it's about moving numbers and creating plotlines that aren't true but look pretty good on paper. My how I loathe it.
On the flip side, I would like to think one of the most talented gentlemen in such a dog-shit-ethics-gutter, Mr. Andy Fastow[1][2], would be an excellent comentator on this subject.
An employee who was fired (for whatever reason) is always going to be much more likely to blow the whistle than a happy employee who is still receiving pay cheques from their employer.
Just because someone was fired doesn't mean that there is no substance behind their claims. Also, 'poor performance' is highly subjective... Maybe Oracle was looking a very specific kind of 'performance' which was outside of the legal/ethical boundaries of that employee.
Regarding the Oracle cloud sales not doing well, this isn't surprising. I am more surprised by the fact that Oracle shares are still performing well on the stock market. I can't think of a single Oracle product that the software engineers of today are actually excited about. The terms that come to mind when I think about Oracle are 'legacy', 'lock-in', 'expensive' and 'inflexible'.