Porter’s Five Forces Analysis of Oracle
|Industry||IT, Internet, Software & Services|
Safra A. Catz
|Revenues||US$ 42.4billion,2022,Annual Report, FY 2022|
|Profit||US$ 6.7 Billion, 2022 ,Annual Report,FY2022|
|Competitors||Accenture,Hewlett Packard Enterprise (HPE), Google, IBM, Microsoft, SAP, Amazon Web Services (AWS)|
Oracle Corporation is Software and Hardware solution provider Companywith 2nd highest market share of 2.6% as of 2019.The Company was founded by Larry Ellison, Bob Miner and Ed Oates in 1977.It made $42.4 billion in revenue and $6.7 billion in profit in 2022. It has assets of $109.2 billion worth. Oracle employees are 170,000.Oracle ranked 91st by Fortune 500 as of Nov 2022 while ranked 115th by Forbes “The Global 2000” Year 2022.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis of Oracle is used to determine the company’s competitive position reference to it’s Industry for better strategizing the companies’ operations for higher profits and less competition.
Oracle Rivalry among Existing Competitor
- Oracle Global Operations Year 2021: Oracle Corporation (ORCL) acquisition of Cerner, FarApp, Federos, and GloriaFood in 2021 are just a few indicators of the company’s technical outreach. These business acquisitions have supported Oracle’s development in a variety of areas, including industry solutions, application development, server, middleware, expansion, storage capacity, and network development. In 2021 Oracle earned the revenue of $40.47 billion and profits of $6.71 billion. In order to diversify its portfolio, Oracle has invested a sizable amount on buying businesses.
The most valuable acquisition for Oracle, which is valued $28.3 billion, might be the one it announced in late 2021: the acquisition of Cerner in case it gets completed.
The company PeopleSoft, which was purchased by Oracle for $10.3 billion in 2005, is the company that it has invested the most in acquiring. Cerner’s purchase will place Oracle in the IT healthcare market that would be a new opportunity for Oracle.
- Oracle Business Segments: Oracle’s four key business segments are :
Cloud Services and license support: Cloud and License is in charge of marketing and providing solutions for apps, platforms, and infrastructure. This segment generated a revenue of US$ 30.17 billion in FY 2022 which is 71.09% of total revenue.The same segment generated a revenue of US$ 28.7 billion in FY 2021.Overall the segment experienced almost 5% of revenue growth from FY 2021 to FY 2022.
Cloud license and on-premise license: This segment generated an income US$ 5.87 billion which is 13.8% of total revenue in FY 2022 while the revenues are US$ 5.39 in FY 2021.
Hardware:The Hardware sector includes Oracle Engineered Systems, industry-specific hardware, servers, virtualization, storage, operating systems, management, and other hardware-related applications, as well as accompanying hardware support. This segment generated a revenue of US$ 3.18 with 7.5% of total revenue contribution in FY 2022, while the revenues from the same segment is US$ 3.3 billion in FY 2021.
Services:The Services branch provides advanced support, consulting, and education services. This segment contributed US$ 3.2 billion with a 7% of total revenue contribution in FY 2022.While the same category generated a revenue of US$ 3.02 billion of revenues in FY 2021.
- Investment in Research & Development-Marketing Cost and Brand Image: Oracle is a global leader in corporate software and IT solutions, and it is the world’s second-largest software corporation by revenue. The database and cloud computing products offered by Oracle are widely recognized in the industry, however the company concentrates on bold acquisition strategy to strengthen its business offerings. Acme Packet, BEA Systems, Siebel Systems, Hyperion and Sun Microsystems are just a few of the companies that operate under the Oracle banner.
- Competitive Rivalry with Existing Players in the Market: The global IT Software Industry by leading by Microsoft with a largest market share of 4.7% while Oracle captures 2.6% of the market transactions. The third largest company by market share is IBM by attaining 2.5% of the market share. Microsoftmade $184.9 billion in revenue and $71.2 billion in earnings in 2022. It has $340.4 billion in assets. IBM made $67.3 billion in revenue and $5.5 billion in profit in year 2022.
Oracle Threat of New Entrants
- Global IT Industry:The global IT industry is estimated spent around 5.3 trillion US dollars as of FY 2022 with a project growth rate of 5% annual growth rate in 2024.As in the presence of IT giants and small startups there is high trending of entering IT industry in all areas from software to hardware products and services.
- High Capital Investment- Trained Human Resources: Oracle strives to create an environment that fosters employee success and a culture in which everyone has a participation in driving innovation. Oracle employed about 143,000 full-time employees, with around 48,000 working in the United States and around 95,000 employed overseas.
- High Research & Development Cost By Oracle:Oracle offers a spectrum of services and capabilities, including AI-powered cloud apps, to assist organizations in driving artificial intelligence. Oracle’s AI platform offers data scientists and developers a comprehensive collection of cloud services for designing, implementing, and administering AI-powered applications. In the annual report 2022 Oracle announced that it aims to continue committing significant resources to R&D projects in order to preserve and improve current product and service offerings.The company expensed out US$ 7.2 billion in R&D in FY 2022 while US$ 6.5 billion in FY 2021.
- Technological Advancement by Oracle: The new Oracle B2B Commerce simplifies business systems, and data integration challenges that affect B2B transactions by directly connecting over 40,000 sellers, buyers, and service providers through the software called Oracle Cloud Enterprise Resource Planning (ERP).
Oracle Bargaining Power of Suppliers
- Supplies Industry Influencer: Oracle also manufactures hardware. Its hardware solutions include servers, designed systems, storage, and with the purpose of improving database performance while minimizing cost.
- Oracle Supplier Terms: Oracle has closed ties with its supplier as it launched Oracle Internet Supplier Portal (iSP) for better supplier experience. Oracle also devised Oracle Environment, Health and Safety –Contractor Safety Program for better evaluation of supplier and keep checking on them.
- Suppliers Collaboration: Deloitte offers solutions to reorganize business processes in an innovative manner by integrating deep Oracle Cloud and digital enabling technologies. As a result of digital technologies finance firms become faster and more productive. PwC’s Digital Operations helps the connected supply chain through key digital solutions built on Oracle Fusion Cloud.
Oracle Bargaining Power of Buyers
- High Product Differentiation: The Oracle Cloud delivers all of the services companies need to construct, and administer their IT, from outdated corporate workflows to new cloud-native apps and data platforms. The premier convergent, multi-model database management system in the world is Oracle Database, also in-memory. MySQL and NoSQL databases, are all offered to clients through Oracle database solutions in affordable, fast versions.
- Customer Base and Satisfaction: The Oracle NetSuite only has 29% customers from Professional Services worldwide while Communication Industry with 16.5% and Consumer Package Goods with 14.7% in Year 2022.For customer satisfaction evaluation Oracle used different methods like Customer Satisfaction (CSAT), Net Promoter Score (NPS) and First Contact Resolution (FCR).
- Brand Loyalty: Only Oracle offers a comprehensive range of integrated cloud apps in combination with a cloud infrastructure platform. NASA researchers are using Oracle PCA to make it easier for people to access everything they’ve learned from all of the space exploration. Oracle also works with Netflix for data processes and JP Morgan for customers bank transactions.
Oracle Threat of Substitute Products or Services
- Software and Hardware products:On a global scale, telecom services, equipment, and infrastructure, as well as IT and business services, account for significant portions of IT expenses.
This is due to technology enterprises benefiting from the ongoing digital transformation, while many organizations are spending on internal procedures to overcome the challenges encountered by 2020, COVID-19.
- Post-COVID 19 Market: Oracle stated in their annual report 2022 that the markets in which they compete are distinguished by rapid technological advances in cloud, software, and hardware development, changing customer needs, evolving standards in computer hardware and software technology and frequent new product introductions, and enhancements.
- Fortune 500, Profile, Oracle
- Forbes Global 2000 Year 2022, Ranking. Available at Forbes Global 2000
- Forbes, Profile, Oracle
- Forbes, Profile, Microsoft
- Forbes, Profile, IBM
- Statista (October 2021) Distribution of the information technology (IT) industry worldwide from 2019 to 2022, by region | Statista. Availableat.Statista
- Statista (October 2021) Distribution of the information technology (IT) industry worldwide from 2019 to 2022, by region | Statista. Availableat.Statista.
- Investopedia – 8 Companies Owned by Oracle.AvailableatInvestopedia
- Oracle Press Release – Oracle Revolutionizes B2B Commerce to Reduce the Cost of Doing Business. AvailableatOracle
- Oracle Company Annual Report 2022. Available at Oracle
- Statista (March 17, 2022) Software industry market share in year to end June 2019,by major supplier .Available at Statista
- Oracle Buys PeopleSoft (December 13,2004)
- Oracle Buys Cerner (December 20,2021)
- Statista (June 24, 2022) Oracle NetSuite CRM customer share worldwide in 2022, by vertical. Available at Statista