NEWPORT BEACH, Calif. — Generative AI (Gen AI) is rapidly transforming industries, and Oracle, a major player in the enterprise technology market, is making a bold move. It is offering its base Gen AI capabilities across its suite of business applications, including Fusion Cloud Applications Suite and NetSuite, at no additional cost.
Oracle executives presented this strategy and other Gen AI topics at its recent Data and AI Forum in Newport Beach, Calif.
Oracle’s strategy is bold and stands in contrast to competitors such as Microsoft, Salesforce, and SAP, which charge extra for Gen AI features. (For more on Microsoft’s Copilot expansion and pricing, see Microsoft Revs Up Copilot in Dynamics 365: Will It Fly with Customers?)
Oracle’s strategy prompts several questions. Will Oracle’s approach increase its share of the AI market? Is it a brilliant move – or a strategic error? Will existing Oracle customers actually end up paying for AI services through other charges, such as increased cloud services fees? Will it entice more companies to adopt Oracle?
In 2023, Oracle announced its aggressive plans to develop and embed Gen AI capabilities. Oracle Chairman and CTO Larry Ellison raved about Gen AI at the Cloud World conference in September, saying Gen AI is “changing everything about Oracle.” Steve Miranda, senior vice president of product management for Oracle Cloud Applications, emphasized the company’s commitment to democratizing AI: “We believe generative AI has the potential to fundamentally transform how businesses operate … By making it readily available within our core business applications, we’re empowering organizations of all sizes to leverage this powerful technology and unlock new levels of efficiency and productivity.”
At the customer forum in Newport Beach, Oracle senior director Jody Clayton said that Oracle’s Gen AI approach is just par for the course for the database and software giant, something customers are used to getting: “Every quarter customers get new capabilities,” Clayton said. “Every three months, you go to sleep on a Friday night, and you wake up the next morning, you have new capabilities. And you have the option to leave them off or turn them on when you’re ready. We’re keeping the power in the hands of users.”
However, some forum attendees we interviewed had a different view of the situation. One Oracle implementation partner was surprised to learn that Oracle is not charging extra for Gen AI capabilities. He first learned about this approach at the forum, he said. Another user of Oracle solutions speculated that, while base Gen AI services may be free now, Oracle may eventually charge for them later, in some form or fashion. Or it may charge for more advanced features. She likened it to a free trial of Hulu, or the lesser version of Hulu, where the viewer must endure ads in the middle of shows, rather than paying a little more for the ad-free version.
While Oracle isn’t charging for base Gen AI functionalities, we believe the company has a multi-pronged strategy for generating revenue from this technology:
Oracle positions its Gen AI offerings as secure and tightly integrated with its existing business applications and throughout its technology stack. Its Gen AI service is built on Oracle Cloud Infrastructure (OCI). This allows developers to integrate Gen AI capabilities into custom applications, potentially creating new revenue streams through developer tools and platform access fees.
At the forum, Oracle executives emphasized that the company has embedded AI capabilities throughout its stack and why this “holistic approach” has many advantages.
“If we think about how Oracle is differentiating itself in this space, really it’s all up and down the stack,” said Ryan Krebs, AI and application innovation director at Oracle. “It’s one of the things that we do really well.” Oracle’s investment in AI throughout the stack “provides maximum gains,” he said, in the realms of speed, efficiency, application integration, and security.
Oracle’s application layer is of particular note, Krebs said. “If you think about what Oracle’s been doing over the last several decades, we build industry applications. We bring a lot of that knowledge into embedding AI into the application layer for customers. Whether it’s healthcare, financial services, retail, manufacturing, or public sector, we’ve got you covered. We really have learned how to optimize these workloads and solve some of our customers most strategic challenges.”
To achieve its Gen AI goals, Oracle has established a strategic partnership with Cohere, a company specializing in building and deploying large language models (LLMs). Oracle’s collaboration with Cohere benefits its Gen AI strategy in several ways:
It’s important to note that Oracle’s embedded Gen AI applications are part of Oracle Fusion and NetSuite offerings. But what about the large number of customers that are still running older Oracle applications, such as JD Edwards, PeopleSoft, and E-Business Suite? These customers do have options through Oracle partners, such as Astute Business Solutions.
We interviewed Astute representatives at the forum. They described how they tailor support services, migration services, and Oracle Cloud expertise for customers on legacy Oracle applications. Astute offers several ways for customers to access Oracle’s cloud-based Gen AI applications. For instance, regarding accounts payable, Astute’s Gen AI solution uses Oracle AI to process invoices automatically. This involves extracting data from invoices, classifying them by vendor and expense type, and flagging potential discrepancies for manual review. The Gen AI solution also analyzes historical payment data to predict cash flow needs and optimize payment schedules. Other ways Astute’s Gen AI solutions can be tailored to leverage Oracle AI include marketing automation, lead generation and qualification, and sentiment analysis.
Although these partner offerings carry a licensing cost, they do give customers options for Gen AI other than having to immediately migrate to Fusion or NetSuite.
Oracle’s free Gen AI offering is a bold move that could disrupt the enterprise software market. By making AI capabilities readily available and tightly integrated with core business applications, Oracle will likely entice more customers to adopt its AI solutions.
Its focus on security and seamless integration throughout the stack could be a key differentiator for the database giant, attracting customers concerned about data privacy and the complexity of integrating disparate AI solutions.
The company’s monetization strategy aims to generate revenue through increased cloud adoption, upselling advanced features, and offering complementary services. However, the success of this strategy hinges on the effectiveness of the free Gen AI functionalities and the value proposition of the additional features. If successful, Oracle’s free Gen AI offering could be a game-changer.
By Tom Dunlap, Avasant Director of Research
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