It looks like it’s back to the courtroom for Oracle, which plans to sue a former employee who has alleged the software giant fudged the way it accounts for cloud computing sales.
Earlier this week, Svetlana Blackburn filed a complaint charging that Oracle (ORCL) managers pushed her to paint Oracle’s cloud services business in the best possible light, and fired her when she pushed back. She said they wanted her to “fit square data into round holes” to do so.
An Oracle spokeswoman tells Coins2Day this morning that the company stands by its cloud accounting as “proper and correct.”
In addition, she noted: “This former employee worked at Oracle for less than a year and did not work in the accounting group. She was terminated for poor performance and we intend to sue her for malicious prosecution.”
So there, I guess.
The problem for Oracle, and other large enterprise technology companies, is that no one really believes their cloud sales figures. Reported numbers typically include lots of software and even hardware that most companies would not consider cloud at all, complicating comparisons between growth businesses and legacy businesses.
For more, read:
Why Amazon’s Cloud Numbers May Be the Only Ones that Matter
A company that makes servers, network routers, and/or storage boxes might count gear that is running in its own or other people’s cloud as cloud revenue. Ditto operating system software and other tidbits. All of those products used to be counted in other categories. IBM (IBM), for example, has shifted a bunch of what it used to call “middleware” software into its cloud category.
Skeptics call this practice of mixing old products with new cloud products “cloud washing.” Because a dollar is a dollar, regardless of product category, you might ask why they bother. Good question.
The issue is that the public cloud computing market is growing fast. In this model, businesses rent servers, storage, and networking from a provider (i.e. Amazon (AMZN), Microsoft (MSFT), or Google (GOOG) etc.), which owns and manages those resources.
At the same time, sales of servers, storage, and networking to companies that run them in their own data centers is not growing so fast. This means all of those server, networking, and storage providers are scrambling to show that they’re viable contenders in this brave-but-scary new cloud world where Amazon Web Services dominates as Microsoft (MSFT) and Google are in pursuit.
AWS, because it is “just” 10 years old and doesn’t sell hardware or other gear that can be used on-premises, is viewed as a “pure cloud” play and has therefore become the benchmark for all others. AWS is on track to surpass $10 billion in sales this year.
To be fair, Oracle is not the only company facing skepticism over nebulous cloud accounting. Microsoft has also managed to obfuscate just how much of its cloud revenue is really cloud revenue. In 2013, IBM disclosed that the U.S. Securities and Exchange Commission was looking into how it came up with its cloud computing numbers. A year later, the SEC recommended no action.
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So Blackburn’s claims about shaky accounting are not exactly new to the industry. But if anything is certain, it is that Oracle is ready, able, and willing to go to defend itself in court—somewhere it’s spent a lot of time lately.
Last week, for example, it suffered a major setback when a San Francisco jury ruled against Oracle in its long-running suit against Google (GOOG). Oracle was seeking $9 billion in damages claiming that Google wrongly used patented Java-related intellectual property in its Android operating system.
In January, Oracle also sued the state of Oregon for allegedly failing to comply with a settlement that would have finally ended a series of lawsuits over Oregon’s healthcare site. Oregon sued Oracle over the failed site two years ago.
Then this week, Oracle went to court as defendant in a lawsuit lodged by Hewlett Packard Enterprise (HPE) over Oracle’s decision to stop writing software supporting the Itanium chip, which HPE co-developed with Intel.
