Exclusive Oracle salesmen are being awarded bonus packages up to seven times larger than their salaries in return for getting customers to buy its as-a-service (aaS) offerings, a source has told The Register.
The company reported a total rise in Oracle cloud revenue of 33 per cent - $527m - for the three months to February 28.
How Oracle achieved this is no surprise to The Register, which has learned of one tactic Oracle used: mega bonuses for sales people flogging its Infrastructure, Platform and Software as a Service.
Oracle salesmen are being given bonuses of up to seven times their salaries on certain sales of Oracle’s infrastructure, platform and software as a service. The company is handing out bonuses of five times peoples' salaries on other cloud programs.
The big numbers are being awarded to Oracle’s real star performers: those hitting above 120 per cent of their sales targets.
Typically, sales compensation packages look like 2.5 times annual salary.
The bonus structure was introduced in November last year. That was too late to affect Oracle’s second quarter, announced on December 17, but the impact seems to be shown in the third-quarter numbers rolled out by Oracle on Wednesday.
Richard Spithoven, a partner of Oracle licensing expert b.lay, explained Oracle's sales largesse to The Reg. He is a former Oracle licensing consultant and regional director who is now helping customers who've been oversold on Oracle cloud.
"You see, all those sales people are running into customers saying: 'You need to go to the cloud'," Spithoven told us.
The compensation awards are used by Oracle to help push whatever product or service is a designated priority. Currently that priority is cloud. Oracle is late to cloud, and is now in a war of prestige to catch up and overtake its rivals: SaaS pioneer Salesforce is the target du jour.
Spithoven reckoned the huge bonuses demonstrated how seriously Oracle is taking cloud. In his view it needs to show the industry that its cloud sales can deliver.
“The fact it’s 5:1 says Oracle has a lot at stake,” Spithoven said. "Big companies like Oracle want to show stake holders they are capable of going with that product, so to stimulate the sales force more incentive is given."
Oracle certainly needs cloud to deliver not just for the prestige but for the on-going revenue: execs claimed $200m revenue from PaaS and SaaS subscriptions in the third quarter that would increase by half to $300m in the current, fourth, quarter.
Larry Ellison, Oracle co-founder and its now chief technology officer, said on Tuesday that Oracle would make $1bn in SaaS and PaaS in calendar year 2015.
Spluttering old biz stalwarts
Oracle's software license sales fell seven per cent during the last three months while license updates and maintenance increased two per cent.
Yet while cloud is the future, it’s still a tiny proportion of Oracle’s overall income: software sales are worth $1.9bn – 21 per cent of the business – with license updates and maintenance accounting for half of what Oracle makes, at $4.6bn.
Whether the sales bonuses are having an effect is difficult to tell. Oracle crowed about that 33 per cent growth in its Tuesday announcement, but growth rates haven’t changed much since before the new bonus structure.
Revenue for PaaS and SaaS was up four per cent to $372m, the same rate of growth for the quarter when the bonus was introduced and the period before.
The only noticeable difference has been in IaaS: rate of growth was two per cent, up from one per cent in the quarter when the bonuses debuted and the period before. IaaS earned Oracle $155m for the three months to February 28.
An Oracle spokesperson refused to comment on the company’s cloud compensation package. ®