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Beyond the database: Digging deeper into Oracle’s cloud strategy and its bid to conquer AWS

Oracle has plenty of ground to catch up on in the cloud infrastructure space if it is serious about going toe-to-toe with Amazon, so how does it plan to close the gap?

Oracle’s cloud strategy has changed course quite dramatically over the years. It started out with co-founder and CTO Larry Ellison’s infamous declaration in 2008 that cloud was a fad to regular despatches about how superior the Oracle Cloud Infrastructure proposition is.

But, even after all this time, it is hard to know what Oracle actually wants to be seen as. Does it still want to be the best cloud computing company on the planet? Does it still believe it can outdo Amazon Web Services (AWS), Microsoft and Google from a cloud infrastructure perspective, and is that even a space it wants to play in any more?

The truth lies somewhere in between.

“There are four dominant public cloud platform players, which offer both platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) – AWS, Google, Microsoft and Alibaba,” says Forrester principal analyst Dave Bartoletti.

The first three all came from very different backgrounds and strengths to dominate the cloud market. As Oracle took its eye off the ball, these companies invested heavily in building up their cloud portfolios, says Bartoletti.

“This left Oracle and IBM having to figure out what they wanted to be, and they’ve had shifting strategies over the years, primarily because neither company has the capital budget to invest ahead of time in major datacentre build-ups around the world, which is necessary [to be a major player] in the cloud computing numbers game,” he adds.

Even as recently as 2017, Ellison claimed Oracle had a huge technology lead over AWS and Microsoft Azure. He even suggested AWS could only handle “relatively small databases” while Oracle’s cloud could run 10 times faster than Amazon’s off-premise infrastructure.

These are not sentiments that the end-user community has necessarily agreed with, however.

End-user and analyst feedback

River Island CIO Doug Gardner told Computer Weekly in 2018 that his team was an Oracle on-premise customer that had tried to use Oracle’s cloud infrastructure, but that “it was a joke, it was unbelievable”, prompting the company to switch allegiance to AWS.

Sporting Group’s CTO Peter Wallis says that despite the company’s original trading platform and data warehouse running off Oracle technologies, the tech giant’s cloud platform was not considered for inclusion in its own digital transformation plans.

The issue for some CIOs may not even be the technology, but just the way Oracle has worked over the years, with Wallis making reference to the firm’s licensing costs and the way it handles sales negotiations as being two reasons why Sporting Group decided against going deeper into its product portfolio.

This sentiment has been reflected by Oracle’s market share in the cloud infrastructure space: AWS reported revenue of nearly $9bn on IaaS alone in its most recent financial results, with many analysts suggesting it has about one-third of the market.

Meanwhile, Microsoft has about 16% of the IaaS market, followed by Google with about 8%. Oracle is not even considered by Gartner as having any notable IaaS market share – only being categorised with “others” in sixth, with IBM fifth.

So has Oracle surrendered its ambitious aims to take over the IaaS market?

“Over the last two years, Oracle has realised how expensive it is and how long it takes to build out datacentre infrastructure around the world and build really competitive general purpose [cloud] services,” says Bartoletti. “It would take a long time to catch up with AWS and Azure.”

With the resignation of Thomas Kurian, Oracle has taken the opportunity to restructure its team and refocus under a new leader – Don Johnson, executive vice-president of Oracle Cloud Infrastructure product development.

“It is refocusing on what it does well, which is database workloads and software-as-a-service (SaaS) applications,” says Bartoletti. “And the first thing it needs to do is make the case to customers that its databases will run better on Oracle cloud than another public cloud. Secondly, Oracle needs to make the case that Oracle applications will run best on Oracle’s own infrastructure.”

Building out the Oracle stack

Indeed, this idea of having all three layers – platform, infrastructure and applications – is what Oracle believes differentiates itself from the rest.

Steve Daheb, senior vice-president of cloud at Oracle, tells Computer Weekly: “When you look at it in aggregate, it is greater than the sum of its parts. We have an open platform and we are flexible on where you want to run Oracle database, but providing that fully integrated cloud is something that is very different, and within each of the layers, we are focusing on being best of breed.”

Oracle is essentially trying to position itself as the Apple of cloud computing, and to get there, it still needs to invest in infrastructure, which is what it is doing. For instance, it has grown from four datacentre regions in 2018 to 16 in 2019, and it plans to have 36 by the end of 2020. The tech giant also announced recently that it would hire 2,000 more staff as part of this infrastructure expansion.

“We are opening up new regions every 23 days, and we believe that by the end of next year, we’ll have more regions than Amazon,” says Daheb, who adds that the 2,000 staff are very much focused on the infrastructure side of the business.

Despite this, Bartoletti believes general-purpose cloud infrastructure is Oracle’s third strategic focus. “It’s still there, but it’s not their primary focus,” he says.

The opening up of Oracle

As well as investing heavily in Oracle Cloud Infrastructure, another area where the company has made big changes is its approach to partnerships, with its recent agreements with VMware and Microsoft suggesting that its stance on working with other players in the same market is softening.

“The partnership they inked with Microsoft, where they’re going to have high-speed connections between Oracle Cloud running the Oracle database and the Azure public cloud… you can look at that as an admission that Oracle is not going to be able to compete with and beat Azure on all those general-purpose services it provides,” says Bartoletti.

Nor when it comes to serving up customer access to container technologies, internet of things-related services, as well as artificial intelligence tools and anything else an enterprise requires to make modern apps, he adds.

And Bartoletti believes another major deal will be tied up in 2020. “I predict they’ll do the same sort of partnership with either Google or AWS this year – their customers are going to demand it,” he says.

Many large Oracle customers have already made commitments to start building services on the public cloud, says Bartoletti.

“So Oracle have a choice,” he says. “They can try and stop that movement to larger public clouds for general-purpose workloads and try to beat three hyper-scale public cloud leaders at a game that is already so many years under way before they got into it. That would distract their focus on what’s important to their business, which is maintaining the primacy of their database and being ready with a roadmap for how Oracle wants their customers to modernise their databases.”

Oracle therefore has to position itself as more of a partner. It has to be able to give reasons for customers to move to Oracle cloud and autonomous databases, but it also needs to embrace more partnerships.

But Daheb is keen to emphasise that although the company does not have many partnerships in place at the moment, it is still committed to the concept of openness.

“People don’t think about the fact that Oracle database can be run on-premise on anyone’s hardware – HP, Dell, you name it – and you can run it on Azure Cloud and on AWS or on Oracle,” says Daheb.  

“Whereas there’s only one place I can run an AWS database and that’s on AWS. People are now realising that AWS is a very proprietary system, whereas ours is open.”

Despite this, Daheb acknowledges that a partnership would lead to better integration – as is the case with Microsoft and VMware. “We get asked by customers, and never say never, I think people were surprised that we did something with VMware and Microsoft,” he says.

Approach to customers

As Daheb is at pains to emphasise, there are not many enterprises that are not already Oracle customers in some way, which is why the firm is focusing on getting its existing customers to adopt its cloud offerings first – but this will take time.

Nicholas McQuire, vice-president of  enterprise research at market watcher CCS Insight, says: “There are a lot of mission-critical uses of [Oracle’s] technology and its customers need to be comfortable in moving to the cloud, and Oracle needs to convince its customers not to move to other providers.”

According to Daheb, convincing both existing and new customers to move to its cloud products has not been a problem for the firm to date.

“When you look at applications, we have reported 40% of businesses that are buying our cloud-based apps are new to the company – they did not have on-premise Oracle applications,” he says.

“While with our autonomous database, 30-40% of database workloads were brand new workloads. So while we want to protect our install base, we have shown that we can capture new workloads with the same customers and get entirely new greenfield customers.”

Those include the small and medium-sized enterprise (SME) space, which is an area Daheb says the company has turned its attention to in recent years.

“They might not have historically been Oracle customers, as before, Fortune 100 companies were the only ones that could afford Oracle technologies,” he says. “But cloud is enabling small companies like DropChain to have access to Exadata cloud-based technology – the same technology as CERN uses, so we’ve made great investment in our salesforce to engage those types of customers.”

Also, Daheb says Oracle is engaging with its existing customers to not only lift and shift their data, but to answer their questions about what it will do with that information, how it can tie this to the system to get insights more quickly and how it can use application development to do things it could not do before.

CCS’s McQuire believes that, in time, once Oracle builds out its cloud capabilities and gains more momentum from cloud-native developers, it could still attract customers to its compute platform.

But in the near future, he cannot see any new customers switching to Oracle Cloud Infrastructure. 

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This is clearly a long-term game, however, and Oracle does not intend to go away without a fight. Key to its resolve will be fighting off Amazon – and Daheb believes Oracle has an edge because it provides the application layer that Amazon has shied away from supplying until now.

“They don’t have applications to speak of… and they have a pretty weak platform-as-a-service layer,” he says. “They try to promote databases, but we understand there are multiple databases for multiple tasks that are not integrated.”

In its recent earnings calls, Amazon has dodged questions about whether it would really step up its SaaS game and, considering the importance of applications in the enterprise, perhaps Daheb has a point.

But on the database front, Amazon recently shut down the last database powering a big chunk of its business and moved it over to its own technology.

It has also publicly committed to moving completely off Oracle’s database technology by 2020 – an idea that was previously thought impossible by Ellison.

This huge shift could signal to other companies that it is possible to move from Oracle’s database to AWS. If customers are convinced, AWS could make an impact in the enterprise database market – where Oracle is dominant – and weaken its hold.

And that is without mentioning Microsoft, which can argue that it has the best current package of all three layers, with its proposition enhanced further by the recent deal with Oracle.

With a potential technology tie-up between Google and Oracle on the horizon too, it’s an intriguing war. And although Oracle is still ploughing money into infrastructure, there could come a time when it gives up the chase.

Bartoletti says: “Absolutely that could happen and I’m sure there are plenty of large Oracle customers that will continue to push them in that direction if those companies have made a commitment to another public cloud. But I think Oracle sees the opportunity to still pave that path to Oracle cloud and prove their differentiation there.”

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