Ever since I started this blog over two years ago, I have been commenting on three laws that impact all product companies:
- There is an Inverse relationship between Moore’s Law and product margins.
- As technology markets mature, revenues and margins become services-centric.
- Product-centric companies contract in mature markets.
Oracle, for the past five years, has been one of my go to proof points for the second of these three laws. Oracle’s revenue mix has become very services-centric over the past five years. Before the Sun acquisition, 70% of Oracle’s revenues were related to maintenance, consulting, and education services.
Oracle consulting, specifically, used to represent over 20% of Oracle’s total company revenues. In 2009, Forrester rated Oracle consulting as one of the top tier providers of consulting services related to Oracle technologies. The report listed the standard reasons product companies are uniquely positioned to provide services related to their products:
Oracle Consulting is in a unique position as the consulting arm of the technology provider, which means it is closely tied into product and support teams at the provider level.
Although strongest in the technical phases of implementation, Oracle has been ramping up its strategy consulting capabilities in an effort to round out its ability to provide end-to-end implementation services.
But this past week, I happened to look at the trend for Oracle Consulting revenues over the past three years. Check this out:
So, Oracle consulting revenues now represent less than 10% of total company revenues. This change is not simply a result of the Sun Microsystems revenues being added to total company revenues. The absolute revenue dollars for Oracle Consulting has been declining as well. From a peak of $1B a quarter in Q12008 to $660 million dollars in Q1 of this year.
What is going on here? While HP, IBM, and a host of other product companies aggressively pursue consulting opportunities, Oracle backs away from them? Or is this decline simply the result of less implementation and integration requirements as technology matures?
The trend is fascinating. I guess I need to update my proof points.
Tags: Oracle consulting