rate than our total expenses.

Services Business

Our services business consists of consulting, managed cloud services and education services. Consulting revenues are earned by providing services to customers in business and IT strategy alignment, enterprise architecture planning and design, initial product implementation and integration and ongoing product enhancements and upgrades. Managed cloud services revenues are earned by providing services for comprehensive software and hardware management and maintenance services for customers hosted at our Oracle data center facilities, select partner data centers or physically on-premise at customer facilities. Additionally, we provide support services, both on-premise and remote, to customers to enable increased performance and higher availability of their products and services. Education revenues are earned by providing instructor-led, media-based and internet-based training in the use of our software and hardware products. The cost of providing our services consists primarily of personnel related expenses, technology infrastructure expenditures, facilities expenses and external contractor expenses.

Fiscal 2012 Compared to Fiscal 2011:     Excluding the effect of currency rate fluctuations, our services revenues increased modestly in fiscal 2012 due to increased consulting and managed cloud services revenues including incremental contributions from our recently acquired companies, which were partially offset by decreases in our education revenues.

On a constant currency basis, our services expenses decreased during fiscal 2012 due to lower third-party contractor expenses associated with our managed cloud services offerings, lower intangible asset amortization and certain other net expense reductions.

Excluding the effect of currency rate fluctuations, total services margin and total margin as a percentage of revenues increased during fiscal 2012 as our total services revenues increased while our total services expenses decreased.

Fiscal 2011 Compared to Fiscal 2010:     Excluding the effect of currency rate fluctuations, the increase in our services revenues in fiscal 2011 was due to increases in our managed cloud services revenues resulting from the full fiscal year impact of revenue contributions from our acquisition of Sun.

On a constant currency basis, our services expenses increased during fiscal 2011 primarily due to additional employee related expenses associated with a full fiscal year of expense contributions from Sun and higher third-party contractor expenses that supported our increase in revenues.

Excluding the effect of currency rate fluctuations, total services margin and total margin as a percentage of revenues increased during fiscal 2011 as our total services revenues increased at a faster rate than our total services expenses.

Research and Development Expenses:     Research and development expenses consist primarily of personnel related expenditures. We intend to continue to invest significantly in our research and development efforts because, in our judgment, they are essential to maintaining our competitive position.

Fiscal 2012 Compared to Fiscal 2011:     On a