Only four years after Oracle Corporation relocated its corporate headquarters from Oracle’s place of birth in Northern California to Austin, Texas, the software giant announced last week that it was pulling up stakes again and re-relocating its head office to Nashville, Tennessee. While publicizing the move to Music City, Oracle co-founder Larry Ellison gushed about the opportunities for Oracle in a similar fashion to when he shared the news that the company was leaving California for Texas.
Ellison spun the latest move of Oracle’s world headquarters to Nashville as a signal of the company’s ambitions to expand its reach into the healthcare industry and focus on its burgeoning healthcare software products. Recall that “Oracle made a big bet on healthcare when it bought health IT and electronic health records software company Cerner in a $28 billion deal in June 2022.” According to Tech Central:
In the nearly two years since the Cerner acquisition, Oracle says it has invested "tens of thousands of engineering hours and millions of dollars" to enhance its core clinical applications.
Nashville is an appealing site for Oracle because of its central role in the healthcare industry and high quality of life, Ellison said last week.
Also appealing, presumably, were the $175 million in incentives from the city of Nashville and $65 million from the state of Tennessee that Oracle received to help construct a campus in the city where Oracle is pledging to create 8,500 jobs.
Regarding the much-hyped new Oracle headquarters, Ellison stated:
“It's not going to look anything like a corporate campus. What we're building is a park. It's a park first that has buildings in it. And, those buildings include not only office buildings, but a community clinic.”
Ellison even suggested that the operation of the clinic will take the role of an incubator “for us to deploy the latest versions of our software."
Despite the reported $1.2 billion price tag for developing a Nashville campus, it remains to be seen whether Oracle’s latest move for its headquarters is all hat and no cattle. To wit, more Oracle employees still reside in California than any other U.S. state, including Texas. In fact, more employees reside in Missouri than in Texas due to the Cerner acquisition. Against this backdrop, Tech Central suggested that “if its last headquarters move is an example, it may be much less than the fanfare suggests.” Curiously, it didn’t take long for Ellison himself to backpedal from the import of this disclosure, saying “I shouldn’t have said that.”
But there’s no doubt about Ellison’s penchant for stirring the pot and generating news coverage – even distracting from Oracle middling performance in the market (including an 8% drop over the past month). Bluster and distraction aside, we see at least three things that the Oracle licensee can glean from this recent news.
First, we believe it is unlikely that this move will signal a meaningful change in Oracle’s typical licensing agreements. When Oracle first moved its headquarters to Austin, we speculated there might be an upcoming shift from choice of law and/or venue selection provisions that favor California to the potentially more corporation-friendly state of Texas. This change never materialized. (See Section 13, General Terms, Transactional Online Master Agreement.) With this in mind, we consider it unlikely that Oracle is contemplating invoking Tennessee law anytime soon.
Second, licensees should take note that Oracle is doubling down on increasing revenue from its newly christened Oracle Health initiative. If the past is an indicator, this is likely to mean targeting current customers in the healthcare industry with revenue-generating audits and other aggressive license inquiries. After all, not only is this Oracle’s tried-and-true method of generating short term revenue, it is also how Oracle entrenches its captive licensees, often resolving licensing disputes by extending the life of current agreements and/or expanding Oracle’s footprint with additional products. Accordingly, all current Oracle Health licensees should consider themselves targets and are advised to review and clean up their deployments and entitlements.
Third, it seems manifest that cloud performance remains Oracle’s real focal point. When touting Oracle's Cerner acquisition, Ellison stressed that “Oracle has helped more than 1,000 Oracle Health EHR customers migrate to Oracle Cloud Infrastructure (OCI).” Notably, after years of trailing in the cloud wars, Oracle has recently hit certain important milestones and defied expectations in cloud performance. It is a safe bet that Oracle considers moving into healthcare as coextensive with strengthening its cloud standing. And, as more cloud customers bolster a more robust cloud infrastructure, all Oracle licensees – healthcare or otherwise – should expect increased pressure from Oracle to move deployments away from the relative security and stability of on-prem to the uncertain world of the Cloud.
In sum, a leopard can’t change its spots – no matter where its corporate headquarters may be found. (Pro Tip: Don’t succumb unless and until you are ready.)
Published on May 7, 2024
Software licensors are known for vague contracts—they’ve made a business of it.
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