Oracle announced a rather poor quarter yesterday, blaming poor sales tactics for a really bad third-quarter software sales. And things are only going to get worse, with Oracle saying it will lose more ground this quarter.  Investors were left wondering, while its stock has dropped since the trade floor opened this morning.

According to a report by Reuters, the world’s No. 3 software maker projected a 1 to 11 percent rise in new software licenses and Internet-based subscriptions in the May quarter – an indicator of future performance. But investors focused on the 2 percent slip in the February quarter, notable because it missed Wall Street’s targets by a long shot.

Oracle’s February quarter revenue miss, which executives attribute to poor sales-force performance, was its worst since the November quarter of 2011.

“What we really saw was the lack of urgency we sometimes see in the sales force, as Q3 deals fall into Q4,“ Chief Financial Officer Safra Catz told analysts on a conference call.

Oracle’s business model under assault from Open Source

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According to our data and our reports at SiliconANGLE, Oracle’s business model of scale-up commercial (expensive) software is under attack from scale-out open source (free) software.

Companies like Fusion-io and Violin Memory, which make flash memory, are powering a new generation of mission critical enterprise, hyperscale solutions.  Bottom line: the software is free and the hardware is inexpensive.

The combination of open source scale out hardware and software is working.  I spoke with one CIO, who requested not to be named, who said that he saved 8x by not going with Oracle.  This math is so compelling that it’s causing companies in droves to pour big money into not renewing Oracle licenses and Oracle hardware.   Facebook is leading the charge with its work with the Open Compute initiative.  Other commercial open multivendor solutions such as HP’s Moonshot and 3Par solutions are putting pressure on Oracle.   Just today in the news QLogic is doing well with a hybrid scale-up and scale-out approach.

The world is changing and Oracle is feeling the “heat.”

Big Data pressure

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Platforms such as Hadoop are capable of performing certain Big Data workloads for a fraction of the cost of an Oracle database or appliance such as Exadata. With CIOs under pressure to do more with less, the significantly less expensive open source Big Data approach is quickly gaining momentum in the enterprise.

The open source Big Data movement, characterized by scale-out platforms that use commodity hardware and open source software (supported by some level of proprietary components), is the antithesis of Oracle’s scale-up, proprietary hardware and software, appliance-led model.

According to Wikibon analyst Jeff Kelly, open source big data is the real threat.  See his post on the subject here.   “From what I’ve seen to date, the company has no real plan, other than to sow FUD in the market, to address this challenge. Simply realigning sales incentives won’t help either” says Kelly.