What Oracle’s Cloud Strategy Means for Customers

ByPrimary Researcher

Executive Summary

  • Oracle has a strategy for the cloud that will lead to long-term issues for Oracle customers.
  • We cover the problems and how customers should interpret what Oracle is doing.

Introduction

Listen to Oracle’s cloud pitch in the OpenWorld 2018 sessions. The narratives invariably lead to one destination: Database. When Oracle talks about infrastructure technology, they really mean database. That’s Oracle’s cloud strategy. That’s Oracle’s compelling reason for the Oracle Cloud.

Our References for This Article

If you want to see our references for this article and other related Brightwork articles, see this link.

Lack of Financial Bias Notice: The vast majority of content available on the Internet about Oracle is marketing fiddle-faddle published by Oracle, Oracle partners, or media entities paid by Oracle to run their marketing on the media website. Each one of these entities tries to hide its financial bias from readers. The article below is very different.

  • This is published by a research entity, not some dishonest entity that is part of the Oracle ecosystem. 
  • Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. As you are reading this article, consider how rare this is. The vast majority of information on the Internet on Oracle is provided by Oracle, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, Oracle pays off all IT analysts -- who have the same concern for accuracy as Oracle. Not one of these entities will disclose their pro-Oracle financial bias to their readers. 
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If you want the Oracle database, you must use the Oracle cloud. When Oracle uses the term cloud, there are issues with its accuracy as Oracle’s cloud is about lock-in, which is not the cloud. 

Why Oracle Follows this Strategy

Cloud customers have options. Why Oracle and not AWS, Azure, or GCP?

Oracle needs a compelling reason for customers to choose their cloud. However, the following reasons forced Oracle into a corner:

Oracle’s Tiny CAPEX Spend on their Cloud Infrastructure

Building cloud infrastructure is expensive. If Oracle matches the CAPEX spend of AWS, Microsoft, or Google, their operating margins and EPS will plummet. Oracle’s executive compensation is built around high operating margins, NOT growth.

The Inability of Oracle to Compete Monopolistically by Acquiring Competitors

Oracle’s competitive playbook’s simple: acquire competitors you can’t beat. Today, Oracle can’t acquire any of its cloud competitors. Amazon, Microsoft, and Google are too big for Oracle to swallow. As of January 04, 2019, Oracle’s market cap is $193B. Amazon hit the Trillion dollar valuation in September 2018.

Oracle’s Hard Core On-Premises DNA

To be commercially competitive in the public cloud, companies need massive scale. Operating at scale means that cloud vendors get massive discounts from hardware manufacturers. At these discount rates, vendors can offer hardware at low price points and still make significant margins.

However, operating at scale requires very advanced operational competencies because vendors must host customer software and data for billions of users worldwide. Moreover, vendors need to develop advanced automation capabilities to manage millions of server farms and globally distributed data centers and ensure high service availability levels. In other words, the game isn’t so much about software features and functions. The bigger challenge is site reliability and operational efficiency.

Oracle’s DNA for the past two decades has been to acquire, rebrand, and sell on-premises software. The customer, not Oracle, always had to install, operate, tune, upgrade, and integrate it. Thomas Kurian realized that Oracle didn’t have the DevOps DNA and tried to push using third-party cloud infrastructure to host software. Oracle executives and investors shut down that strategy, and Thomas left Oracle to lead Google cloud operations.

How Does Oracle Enforce its Strategy?

Licencing

Oracle uses database licensing to drive customers toward the Oracle cloud. In January 2017, Oracle removed its core licensing factor (CLF), effectively doubling its DB license cost on AWS, Azure, and GCP.

Certification

Oracle does NOT certify new product releases on competing clouds. Database 18c autonomous is only available on the Oracle cloud.

Cloud Only

Oracle does NOT offer new database releases for on-premises deployment. Oracle 18c autonomous database analytics DW and transaction processing are only available as cloud services.

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Conclusion

Most of Oracle’s cloud strategy is a bit misleading, as the Oracle Cloud is not the cloud. However, whatever it is called, there are many factors to “it” that are a long-term customer problem. After years of cloud talk, Oracle still behaves as a dyed-in-the-wool on-premises vendor. Oracle consulting partners will never explain these issues to their clients. Through the partnership agreement, Oracle’s control means that few sources will provide the real story on this topic.