How Oracle Engineered Its Sales Staff for the Cloud

By Jay Greene Features Dow Jones Newswires

Oracle Corp. is starting to see the benefits of revamping its sales force, addressing longstanding questions from Wall Street about the software company's commitment to cloud computing.

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Co-Chief Executive Mark Hurd nearly doubled Oracle's sales staff over the past six years to around 35,000 workers. Many hires were put through a revamped training program, then charged with winning over startups and small businesses that Oracle largely had bypassed.

Annual recurring revenue, a measure of Oracle's ability to attract new customers to its cloud-subscription business, topped $2 billion in fiscal 2017 that ended May 31, up from $1.4 billion the prior year. A 15% gain in fourth-quarter profit sent shares up 10% to a record $50.95, where they have hovered since.

Oracle still faces challenges in the cloud, particularly from market pioneer Amazon.com Inc. But the sales changes have helped the 40-year-old company emerge as one of the few pre-internet tech giants to succeed in the era of cloud computing.

Just a few years ago, Oracle was ill-equipped to do so. Its highly compensated sales staff targeted chief information officers at corporate giants, looking for big-budget deals that came with fat commissions. The company not only bypassed smaller businesses -- who were among the early adopters of the cloud's web-based, on-demand computing services -- but also the division leaders at big companies who were starting to buy cloud services piecemeal.

While Oracle knew chief information officers, Mr. Hurd said in an interview, "We didn't know the head of HR. We didn't know the chief marketing officer."

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So he created a program in 2013 to indoctrinate hires fresh out of college in Oracle's sales methods, rather than solely hiring veteran sales executives from other companies. Called "Class Of" -- playing off the term for a group of graduating students -- the program aims to develop a low-cost sales force that prospects for new markets. Oracle taps its own seasoned salespeople to become mentors to the newbies.

"We can now go from fundamentally startup to enterprise in terms of our ability to sell our capabilities," Mr. Hurd said.

Oracle's rethought sales approach has turned some doubters around.

As Thierry Zerbib prepared to move Telesoft Corp, a Phoenix maker of expense-management software, to the cloud earlier this year, the chief technology officer got a cold call from an Oracle salesperson. Mr. Zerbib couldn't imagine becoming an Oracle customer, recalling a frustrating experience years earlier when the company was a reseller of Oracle technology.

But the young sales rep persisted, winning over Mr. Zerbib and securing a three-year contract for around $500,000 to deploy the full suite of Oracle's cloud services. "I never felt pressure," he said of the negotiation. "There's a change that's happening at Oracle."

The transformation is aimed at helping Oracle, often criticized by analysts for being late to the cloud, better compete against the likes of Amazon and Salesforce.com Inc. Gartner Inc. estimates the overall cloud market, including on-demand computing resources, apps and cloud advertising, hit $209.1 billion last year. This year it is projected to reach $245.45 billion.

Winning over smaller accounts for cloud applications may not be enough, analysts warn. Customers often run Oracle databases on the computing processing and storage services operated by rivals such as Amazon, effectively giving the rivals a chance to market their competing applications and services. The risk is those cloud-infrastructure competitors swipe Oracle's customers as they shift from running legacy Oracle applications in their own data centers to cloud services.

It is "the longer term existential threat," said Stifel Nicolaus Co. analyst Brad Reback.

That puts pressure on Oracle's sales team to sell the full cloud portfolio, the databases and other applications as well as the underlying processing and storage.

In four years, more than 4,500 representatives have gone through the five-week Class Of program. Mr. Hurd figures that in a decade or so all of Oracle's sales leaders will be graduates of Class Of

The program didn't initially sit well with some Oracle veterans, who worried mentoring duties would pull them away from managing their own accounts.

"Everybody thought, 'What the hell is this?'" said Mike Mansouri, a manager in the company's El Segundo, Calif., office, who has worked two decades in sales, the last three years at Oracle. "I thought it would do more harm than good."

Two years later, Mr. Mansouri said he was wrong. Recruits he managed were scooping up smaller customers, and he received commissions from deals they closed. He estimated his commission compensation has jumped 25% since the program began.

"They are cracking accounts I wasn't aware of," Mr. Mansouri said.

Write to Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

August 16, 2017 05:44 ET (09:44 GMT)