What Oracle does next? Fixes the global healthcare system, says Ellison

Oracle turned in solid Q3 numbers yesterday with ongoing cloud growth, but there was an elephant in the room in the shape of renewed speculation around the firm’s relationship with TikTok.

According to industry scuttlebutt, TikTok is putting in place a deal for Oracle to store US user data without its parent, China’s ByteDance, having access to it. Previously the US authorities raised security concerns around Oracle entering discussions about taking a stake in TikTok, fearing that such data would end up being passed to the Chinese Government.

But as Oracle turned in its quarterly numbers, TikTok was most definitely not on the agenda with CEO Safra Catz merely stating:

The one thing I can tell you is we have an excellent relationship with the folks at TikTok.

Numbers

Revenue for the quarter ended 28 February was $10.51 billion, up 4% year-on-year, with net income down 54% year-on-year to $2.32 billion, with the latter impacted by higher spending to support cloud services ramp-up. The firm is set to splash $4 billion on cloud data centers and infrastructure this year, Catz commented:

We've made a lot of investments. Basically our CapEx this year is double last year, and that's because we've been putting out a lot of capability around the world. Simultaneously, our revenues have been increasing.

But there’s been an important shift, she added:

Over the past few years, we've had parts of the business that were significant parts of the business that were shrinking. And now, as you see in this quarter, for example, all lines of businesses are increasing.

For his part, CTO Larry Ellison talked up what he dubbed “business as usual”, his descriptor for the firm’s ongoing cloud growth:

Overall, we have incredible progress, winning more and more in the ERP and HCM back office. Q3 was an exceptionally strong quarter for ERP cloud sales. We now have over 10,000 Fusion ERP, HCM customers…We've been in this business long enough. We're beginning to see us roll up certain industries, starting with the largest industry on Earth, healthcare.

Prognosis

With Oracle’s $28.3 billion bid for medtech provider Cerner still trundling through the necessary regulatory hoops, this focus on healthcare comes as no surprise. Ellison cited the size of Oracle’s existing footprint here:

We already have Tenet Health, Kaiser, Mayo Clinic, Cleveland Clinic, Northwell Health, Mount Sinai, Atrium Health. I can go a long list of ERP and HCM wins in the healthcare, those are all healthcare providers. We've added some additional healthcare providers, mainly hospitals and clinics. We've added the CHS Community Health Services. That's a consortium, that's 83 hospitals, and it's an ERP, HCM, SCM win there.

And to the pantheon of Oracle rivals is added Kronos, which got a specific name check as being the provider to be replaced in the health market. Ellison argued:

While [hospitals are] not recognized having some similarities to Uber, they have a lot of people that work at hospitals that are not employees at the hospitals. Hospitals have a gig economy. Doctors work in multiple hospitals, multiple clinics, have their own offices. Nurses, same thing. Scheduling and paying the workforce in hospitals is one of the most complicated things ongoing in our changing economy. And we have adapted our HCM systems so that we do help the hospitals recruit, track, schedule and pay for their health professionals.

Only Kronos - dubbed in passing as “someone not very well-known” - has been delivering this capability, said Ellison. Not even HCM champion and long-time Oracle target, Workday - also name-checked - can offer what Oracle can bring to the table, he insisted: 

It's this entire ecosystem that we're building specific features and functions for, to automate healthcare across the board. No-one has been able to roll up healthcare. It was pack a little bit - this portion of just the providers, just the ambulatory clinics, just the in-patient hospitals, just the payers, just the pharmaceutical company, just the medical device. We're going after the entire integrated ecosystem, and we're having some great results. Obviously, that influenced our decision to buy Cerner.

My take

While he did cite a number of other vertical markets and listed customer successes within them, Ellison’s emphasis on healthcare was what leapt out of the post-results analyst call. Given the scale of the planned Cerner  acquisition, it was already clear that this is to be a big roll of the dice. It is a very US-centric gambit in many ways. For example, Ellison cited one particular functional target area to address:

One thing a doctor does is before I can authorize a test, before I can authorize prescribing a drug for a patient, I have to check with the insurance company to make sure they'll pay for it. So the doctors and hospitals spend a lot of time negotiating with the payer, the insurance company. Well, OK, given these symptoms, can I get this test paid for? Yes, no? Given these symptoms, can I get this drug paid for? Yes, no? We're automating that interaction between the payers and the providers. We're adding a lot of industry-specific features to automate the interactions in the entire ecosystem. And that's why we think we're in a good position to roll up healthcare, which is a gigantic industry. No one's ever really tried this before, but we have all the pieces. We have the payment pieces. We automate a lot of the insurers.

That’s not a model that countries with primarily state-run healthcare systems might recognize so much, although given creeping privatisation of many of these national models around the world, that may not be the case for much longer. And there is clearly more to healthcare than just insurance and payments as Ellison noted:

We have HCM, which allows us to help them manage their workforce. We have ERP, which helps them keep track of inventory. And, soon, we will have Cerner, which will help them to deliver care to patients…We have the entire portfolio, and we're interconnecting all the pieces so we can make that ecosystem work efficiently for the first time.

And actually, the pandemic has showed we're in desperate need of such an integrated system…I think the benefits to every patient in the world is going to be enormous. We need to do this. The pandemic has shown a variety of weaknesses in our healthcare systems. We have the technology to address those weaknesses, and that's what we're going to do.

So all Oracle needs now is the approval to go ahead with the Cerner deal. According to Catz, that might close this coming quarter, but she’s not factored that into her outlook.

As for “business as usual”, clearly there’s room for a lot more expansion here in the coming years and a lot more competition with other SasS providers, with Ellison stating:

Even though we now have 10,000 customers in Oracle ERP Fusion, another almost 30,000 customers in total, including NetSuite, I still think we're in the very early days of doing this.

And TikTok? Time will tell.