This Could Be the Most Defensive Cloud Stock
Oracle (NYSE: ORCL) may not be the biggest cloud player, but its business model may be one of the most defensive. Unlike many cloud stocks, most of the company's earnings are derived from recurring software and cloud infrastructure revenue. Other cloud players have non-cloud segments that could be negatively affected by a slowing global economy. Here's how it works.
For decades, Oracle's legacy Enterprise Resource Planning (ERP) software has given its enterprise customers everything they need to run their multinational companies. ERP software handles everything from accounting, to project management, to compliance and supply chain operations. Oracle and its leading competitor, SAP, continue to dominate the space. The duopoly has treated the companies well over the years as the two companies collect recurring revenue from a growing list of contracted customers regardless of economic conditions.
Times have changed for software companies, and Oracle has embraced it. The company has built out its cloud infrastructure to allow its customers to migrate their software to the cloud and hire Oracle as their cloud service provider. Bundling the two services gives customers a cost and time advantage compared to hiring separate vendors for both.
Source Fool.com
