Last week I attended Oracle’s Industry Connect conference. It’s been a while since I’ve had an opportunity to see Oracle’s retail strategy and messaging in person, and I have to say I was impressed. Here are my take-aways from the event.

Cloud Is About More Than ROI

The biggest message that I heard at the conference’s general session was about cloud delivery models. Actually, I have to say that Mark Hurd and Bob Weiler presented probably the most rational explanation for why companies will not just end up adopting cloud delivery of solutions, but ultimately need to embrace it as a strategy.

The rationale goes like this: consumers are changing. Whether because they are Millennials who grew up as the most digital native population that is currently in the workforce and with spending power, or because no matter what their age they are embracing technology as part of the shopping process, the reality is that how consumers engage with retailers has changed (for the record, Oracle presented the message in industry-neutral terms, but I’m making it retail specific here).

And more change is coming. We’re only seeing the beginning with Millennials entering the workforce, and there’s another generation behind them that is even more digital native. The change is going to happen fast. My favorite stat of the day: by 2020, Millennials will be the largest generational segment in the workforce.

Therefore, retailers need to change – fast. And with companies on average spending 82% of their technology budget on maintenance, there is just no way they can change fast enough to keep up with changing consumers (82% is an average across industries – I don’t know what it is in retail today, but I suspect it’s even higher).

Enter The Cloud. Cloud delivery models enable retailers to change fast. And to stay flexible so that they can change again, because this isn’t a one-time transformation that consumers are going through, it’s an on-going thing. Cloud is the only way that retailers can change fast enough and afford it if they want to survive. That was the message delivered at Oracle’s conference.

Now, for me, I have heard a lot of the same things said by other people when it comes to making the case for cloud. But the order has been different. For the most part, we at RSR hear questions from vendors more like, “What business case will convince retailers to invest in cloud solutions? ” The answer is, there is no business case. Because it’s not about the ROI, it’s about the corporate willingness to give up “customization ” in favor of “flexibility “.

And there are a lot of retailers – I’m guessing way more than 50% of them out there – who are not yet ready to embrace that philosophy. For those retailers, it doesn’t matter how much money you offer to save them, they are not going to be interested in the cloud. And frankly, they’d be a risky bet in taking on cloud because they would not have the commitment to keep from trying to customize things – which adds expense and reduces flexibility.

Do I believe that cloud is inevitable? I don’t honestly know. I do believe that speed and flexibility are more important than custom. And will continue to be so. If cloud is the best model for delivering that, then I’m on board. But that kind of commitment can’t be won with a business case. It can’t be won by selling the CIO. This is a commitment that must be made by the executive team, all holding hands, all agreeing that customization, rather than creating differentiation, only creates cost and reduces flexibility. That’s a big ask.

Retail Is Central To Oracle Industries

The other big message I took away from the conference is that there has been some restructuring going on, around how Oracle supports industries. I have the sense that this is more of a long-running theme than something new, but for retail is has come more into focus due to the recent Micros acquisition. Retail is a big group – out of the conference, somewhere around 300 attendees were retail out of around 1300 overall, which covered 8 total industry groups.

But it helped for me to hear the way Oracle views the differences between industry groups and corporate. Hurd and Weiler explained it this way: the majority of investment that companies have made in IT has been focused on operations, with efficiency as the primary business case. There is no differentiation to made there. In retail, the differentiation is made in the relationship with the customer. But keeping up with the customer requires a lot more speed and flexibility – and a lot more emphasis on the application layer. The user experience layer. The industry groups thus focus on that layer, while Oracle corporate focuses on the enabling technologies that support creating great user experiences.

Every decision about how to design organizational structure comes with trade-offs. The trade-off for Oracle is that having an independent retail business unit both provides a way for the company to innovate specifically on what’s important to retail. But it also makes it more complicated to leverage across business units, as well as keep in sync with what’s going on in corporate. This is true of any company. The challenge for Oracle will be in making Oracle Retail a cohesive, single unit of solutions. One that, as Jill Puleri, Oracle’s new SVP of Retail, stated, means that Oracle should own the integration costs between its solutions, and not the retailer.

If Oracle stays true to its own cloud transformation, then Jill should easily be able to keep that promise. I’m more worried about whether retailers will ever really be able to give up customization in return for more flexibility. These days, that looks like the bigger hill to climb.