
Oracle whistleblower suit raises questions over cloud accounting - danielconde
http://www.reuters.com/article/us-oracle-lawsuit-accounting-idUSKCN0YS0X1
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jondubois
It's horrible how large companies always try to frame whistle-blowers as
'disgruntled employees' and use the media to publicly shame them and make them
unemployable.

An employee who was fired (for whatever reason) is always going to be much
more likely to blow the whistle than a happy employee who is still receiving
pay cheques from their employer.

Just because someone was fired doesn't mean that there is no substance behind
their claims. Also, 'poor performance' is highly subjective... Maybe Oracle
was looking a very specific kind of 'performance' which was outside of the
legal/ethical boundaries of that employee.

Regarding the Oracle cloud sales not doing well, this isn't surprising. I am
more surprised by the fact that Oracle shares are still performing well on the
stock market. I can't think of a single Oracle product that the software
engineers of today are actually excited about. The terms that come to mind
when I think about Oracle are 'legacy', 'lock-in', 'expensive' and
'inflexible'.

~~~
needusername
> I can't think of a single Oracle product that the software engineers of
> today are actually excited about.

Java Mission Control. Yeah 'lock-in', 'expensive' and 'inflexible' all apply
but it's quite amazing.

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toyg
Do you mean _JRockit_ Mission Control? ;) a product Oracle bought, not
developed...

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needusername
Well BEA bought it was well.

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suprgeek
Slightly relevant - about Oracle and its single-minded pursuit of money over
all else:
[https://www.youtube.com/watch?v=-zRN7XLCRhc&t=33m](https://www.youtube.com/watch?v=-zRN7XLCRhc&t=33m)

~~~
jlarocco
I don't understand Oracle hate. Yep, they're all about making money, but at
the end of the day, that's what most businesses are doing, and the ones who
say otherwise are bullshitting you with crap their marketing department made
up. Only in start-up bizarro world can a company give away free products and
have negative or zero profit margin and be considered "succeeding".

It makes no sense to me to hear people working at for-profit companies
complaining that other companies only exist to make money. It's inconsistent,
at the very least.

Open source is great, volunteering is great, sharing and giving stuff away is
great, etc., but businesses and corporations only exist to make money for the
people who own them and work for them.

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shadowfiend
The problem here isn't asserting that businesses and corporations exist to
make money.

It's asserting that they _only_ exist to make money. Or that that is in any
way natural.

For a company to focus entirely on making money when they don't have enough
money to operate is, let's say, understandable. But since companies are run by
humans, and humans are quite adept at balancing different goals at the same
time, it's not at all beyond reason to expect a company that is making money
hand over fist to also focus on more than just that. It's not at all bad to
judge them if they choose not to do that, nor to consider them worse than
other companies that both make money hand over fist and choose to focus on
more than just making more money.

It is in no way inconsistent to work at a for-profit company and complain that
another company only exists to make money. Even if you are the chief executive
of a for-profit company that _both_ makes money _and_ has additional goals
beyond that, you aren't being inconsistent. But if you _aren 't_ the chief
executive? If you are an employee whose day-to-day job actually _isn 't_
directly to make money, even if it is, somewhere above you, being guided by
that goal? That doesn't even come close to inconsistent, IMO.

Most businesses _are making_ money. That's not the same as being _all about
making money_. Confusing the two is a really good way to discount the
companies who manage perfectly well to make money without losing their souls
to that goal[1].

[1] - I'm not really saying Oracle is one of these companies; I've never
worked for them or interacted with them (though I've heard plenty of tales).
I'm taking issue with the broader statement, because I think it's a
fundamentally problematic lens to view the world through.

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simula67
Both of you may be right. The company exists to make money for the
shareholders. But to make money for shareholders it has to treat its customers
well, it has to treat its employees well, it has to treat its partners well
and it has to obey all the laws. Management who value these things are often
referred to as having 'high levels of integrity'.

Good shareholders should look for management exhibiting high levels of
integrity. Like Warren Buffet said :

"In looking for people to hire, you look for three qualities: integrity,
intelligence, and energy. And if you don’t have the first, the other two will
kill you. If you hire somebody without [integrity], you really want them to be
dumb and lazy."

At least in the public's eye, Oracle has lost the perception of having any
integrity.

~~~
TheOtherHobbes
>But to make money for shareholders it has to treat its customers well, it has
to treat its employees well, it has to treat its partners well and it has to
obey all the laws.

Sadly not. One of the tragedies of capitalism is that it's much easier to run
a profitable business by sharking everyone than by being a good citizen.

The optimal ethical position for profit is not the same as the optimal
abstract ethical position.

This is why markets are a bad thing. If profit is your only measure of
morality, you don't have a working mechanism to protect you - and everyone -
from choices that produce short-term gains but long-term disasters.

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arcticfox
> This is why markets are a bad thing.

... well, that's extreme. The ownership of the company should be working to
avoid long term disaster. In most industries this happens all the time.

Actually, some of the main instances they don't (financial industry) is
because of government support. If you're allowed to fail and get bailed out,
_then_ there's no reason to avoid disaster.

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firebones
Can anyone with a finance/CFO background give a primer in how a) to detect
such aggressive accounting in a cloud company's earnings statements and/or b)
what aggressive means in this context?

It would be nice to have a field guide to how to spot those without bathing
suits when the tide goes out.

~~~
vectran
a) All IFRS (International Financial Reporting Standards) compliant financial
statements will have a accounting policies statement preceding the 'Notes to
the accounts'. This accounting policy section will outline how revenue is
recognised and how this is recorded in the financial statements. There is a
trend for financial market regulatories to require auditors to provide a
summary of 'key audit matters' in their opinion to the accounts - which
details the key risk areas in the financial statements for an entity.

b) Aggressive in this context likely means that revenue (and earnings) were
being improperly accounted for in the current period. My guess in this context
relates to revenue recognition. For instance if I sell SAAS product for $1000
setup and $100 per month and I expect the customer to stay on average 10 years
- how do I recognise this revenue?

The aggressive accounting would recognise revenue of $1000 (setup) and $1200
(subscription) in the first year. But it may be fairer (and potentially more
appropriate) to recognise $100 (10% of the setup costs as customer expected to
stay 10 years - apportion over this period) and $1200 (subscription) in the
first year.

On this simple alteration in treatment revenue could differ from $2200 to
$1300. NB: This is an oversimplification and the actual recognition criteria
depends on scenario, nature and company policies.

Cloud accounting (read: SAAS) is still relatively new and very different to
traditional licensing and the accounting/finance community is still grappling
with the recognition and treatment.

~~~
rodgerd
I'm seeing, in the field, Oracle reps offering bundles of Oracle software
licenses + cloud for less than Oracle software license on it's own. Is that
something that could be tricky to account for properly?

~~~
danielconde
That's very curious. So by adding cloud capabilities, you are effectively
getting a discount.

~~~
rodgerd
Generally speaking, when I see hard-to-explain sales behaviours from
enterprise vendors my experience is that:

1/ The sales incentives are leading to sales teams optimising their incentives
in ways that seem bad for the organisation over all, and/or

2/ The contract has nasty fishhooks that will make all that money back, and
more, in year two or three (classic example from my experience with a
different vendor: selling servers at $50k, discounted from $250k, but then
assessing maintenance on the original price, leading to a $50k/year opex).

~~~
danielconde
Reduced transparency (if one does not realize what comes in year two or three)
makes it really hard to make a fair comparison in year one.

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tyler_larson
Oracle whistleblower suit raises questions over _Oracle_ accounting.

FTFY.

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6stringmerc
Ahh, another example of "Creative Accounting" as I like to call it. Sort of
like "Creative Writing," but instead of writing up a fictional story, it's
about moving numbers and creating plotlines that aren't true but look pretty
good on paper. My how I loathe it.

On the flip side, I would like to think one of the most talented gentlemen in
such a dog-shit-ethics-gutter, Mr. Andy Fastow[1][2], would be an excellent
comentator on this subject.

[1]
[https://en.wikipedia.org/wiki/Andrew_Fastow](https://en.wikipedia.org/wiki/Andrew_Fastow)

[2] [http://www.bloomberg.com/news/articles/2012-03-22/enrons-
and...](http://www.bloomberg.com/news/articles/2012-03-22/enrons-andrew-
fastow-the-mistakes-i-made)

