On March 20, 2012, Oracle released its financial results for the quarter ending February 28, 2012, and Accenture did the same on March 22, 2012. Both had generally positive results, but with different implications for the software, hardware, and services markets of which they are a part. In short, we think the software and computer equipment market will do better in Q1 2012 than Oracle’s results suggest, while the IT services market will not do as well as Accenture did.

• Oracle is underperforming the software and computer equipment market in terms of revenue growth. Oracle reported total revenue growth of just 3% in this fiscal quarter, with 8% growth in software, an 11% decline in hardware systems revenues, and no growth in services. Software was the most positive, with 7% growth in new license revenues. However, that growth was all in the database and middleware unit; application license revenues rose by just 3%, and total applications revenues by just 4%. And note that Oracle’s application revenue in the quarter included about $60 million in RightNow revenues that were not in the numbers from a year ago. Without that — and it’s not clear whether Oracle is counting those subscription revenues in new software license or in software license updates and product support — Oracle’s application revenues would have shown almost no growth. This would be worrisome for the tech market in Q1 2012 if Oracle were a bellwether for business and government purchases of technology. But for now, it’s not. In hardware, Oracle’s results are a product of its transition from commodity gear to integrated hardware and software devices, not the state of demand for servers and storage in general, where growth has been positive. In software, Oracle had a 7% increase in software revenues and a 2% decline in application license revenues, while the total revenues of the two dozen software vendors we track rose by 9% and application vendors did the same or better. This quarter, we think that these same vendors will have revenue growth of about 8%, but application vendors will certainly do much better than Oracle’s anemic application results.
• Accenture is outperforming the IT services market in terms of revenue growth. Accenture’s results were quite a bit better than Oracle’s, with revenue growth of 12%. Consulting services were not quite as robust, with 8% revenue growth, while IT outsourcing revenues surged by 23%. This suggests a strong quarter for IT services vendors. But last quarter, the 20 IT services vendors we track had total revenue growth of just 5%, compared with Accenture’s 17% growth. We think a similar pattern will hold this quarter, with this group of IT services vendors having total revenue growth of 3% to 4%.

So, in sum, software vendors should expect a good first quarter with revenue growth that matches or exceeds Oracle’s results — especially in applications. On the other hand, most IT services vendors (with the exception of the Indian vendors) will not do as well as Accenture, and should expect revenue growth in the mid-single digits.