There is no doubt about Oracle’s cloud ambitions. In the past four months alone, we’ve posted just under ten articles about it here on Techzine. Not just about new products or services like Roving Edge Infrastructure or Cloud Lift, but also about partnerships with Red Bull Racing, SailGP and the Premier League. It should be obvious that Oracle means business. It has meant business for several years, but this year we see an acceleration. We had the chance to discuss Oracle’s cloud journey with Richard Smith, SVP Technology & Cloud EMEA at Oracle.
Before we get into the current developments, a recap about Oracle and OCI is in order. Anyone who follows public cloud developments a bit knows that Oracle is not among the top three names when it comes to market share. An important reason for this is that the company was relatively late with its Oracle Cloud Infrastructure (OCI). The likes of Amazon (AWS), Microsoft (Azure) and Google (GCP) were simply earlier. This meant they had already claimed a portion of the market before Oracle got there.
Furthermore, Oracle has also had to make quite a turnaround in terms of its business model. After all, the world of on-prem databases is essentially different from that of the cloud. Finally, the cloud also requires a different image, something Oracle has been working on a lot in recent years. In addition to the partnerships mentioned above and the adjustment of the licensing model, this has also led to a new logo and new branding.
What is the size of the Oracle cloud?
It’s not entirely clear how much of Oracle’s revenue comes from the various cloud units. Oracle is never quite clear about that in its quarterly earnings reports. SaaS revenue and IaaS revenue end up in the same column, for example. So a clear figure on how OCI is doing relative to AWS, Azure and GCP cannot be given. Smith himself cannot give growth figures and the like either. Oracle is currently in its quiet period, the weeks before the close of the fiscal year. That’s when they don’t make statements like that.
So what do we know about Oracle’s cloud position at the moment? The various analyst firms seem to agree that Oracle has a market share of about 2 percent on IaaS/PaaS. Looking only at SaaS, Oracle comes in at 6-8 percent, depending on the source. These are the enterprise applications for things like ERP, HCM and CRM. Also known as the Fusion Cloud Applications. Especially in the field of ERP, Oracle is a big player in the SaaS segment. Furthermore, don’t forget that NetSuite is also part of the Oracle portfolio. That’s one of the oldest SaaS providers in the market, older even than Salesforce.
The fact that Oracle’s market share in IaaS/PaaS is relatively low does not in itself say much about OCI’s ultimate success. As Smith also points out during our conversation, this total cloud market will grow enormously in the coming years. Only a small portion of what can be run in the cloud is actually running there already. At the moment, he assumes that 70 percent of everything running at organizations worldwide has yet to be migrated to the cloud. So there is still plenty of growth possible for Oracle.
Unique cloud approach
Oracle wants to grow OCI as part of its entire cloud portfolio. The depth of that portfolio is unique in the market, Smith points out. Whereas other cloud players have to make do with a specific subsection of what the cloud has to offer, Oracle offers all levels. For example, it competes not only with AWS, Azure and GCP in the field of IaaS and PaaS, but also with parties such as SAP, Salesforce and Workday when it comes to SaaS. So customers can get to know Oracle’s cloud from multiple angles.
In addition to a deeper portfolio, Oracle also wants to differentiate itself on its breadth. Consider announcements such as Roving Edge Infrastructure and the cloud@customer products and services. With Roving Edge Infrastructure, Oracle wants to make its cloud offering fully hybrid and also available in locations where it was not previously possible. Think of very remote and demanding environments. Here too, the goal is to have a (hybrid) cloud-like experience.
With cloud@customer, Oracle also has another unique offering. It allows you to have a fully-fledged OCI environment run by Oracle within your own organization. Oracle calls this a Dedicated Region. You can also go for only the Autonomous Database on Exadata offering. This seems like a very limited niche to us. That is, if strong growth in the cloud is the goal for Oracle. Yet Smith does see a lot of opportunity here. Again, unfortunately, he cannot share specific data on the adoption of this offering, announced last summer. He will say, however, that every heavily regulated market is interested in this.
In addition to these kinds of unique products and services, Smith of course also places the necessary emphasis here on the autonomous nature of OCI. That is, as few people as possible are involved in setting up and running the cloud environment. This approach ensures fewer errors in, for example, configuration. This in turn has the effect of making the environment more secure. This Gen2 cloud is therefore significantly more secure than those of competitors, according to Smith.
About the statement that OCI Gen2 is more secure than the offerings of AWS, Azure and GCP, we could probably write a whole book. The fact is, it’s not that easy to demonstrate. That OCI Gen2 is more secure than the offerings of those parties when they started doing it relatively long before Oracle seems a certainty. But of course those other parties have not been idle either, so it is very difficult to prove.
What does make sense conceptually as far as we are concerned is that an environment that does things like patching itself is fundamentally more secure. So on this point we can go along with Smith’s claim. Mind you, this still doesn’t mean that your environment as a whole is more secure. If we take the example of patching, as an attacker you can also shift your attention to the patching servers, for example, and still get into the cloud environment. So in part it’s also shifting the security issue. But a good development nonetheless.
OCI for HPC (and health care)
Not too long ago, the public cloud was actually not suitable for High Performance Computing (HPC) purposes. HPC is often about running workloads as close to the metal as possible. This in order to maximize performance, and keep latency at a minimum. A public cloud environment is almost by definition heavily virtualized. So that was not a good marriage. So organisations often went for (rather complex) OpenStack or Hadoop environments.
According to Smith, however, those days are over. In particular, latency has been greatly improved (i.e., reduced), making HPC on OCI possible now. As an example, he cites a major automaker that does all crash testing in OCI today. Previously, this customer had an on-prem environment to do this.
Another example Smith mentions has to do with the situation around corona that we are in. According to him, founder Larry Ellison has personally made it a point that Oracle should play a major role in fighting the virus. The fact that Oracle is already pretty deep in the health care business anyway, helps this along too, of course. So it also makes sense to invest in this. Oracle is doing this, among other things, by working with Oxford University on genomic sequencing of the virus, in order to gain better insight into new variants more quickly. After corona, the platform developed by the parties involved can also be used for other infectious diseases. The university doesn’t have to pay anything for this platform, by the way. Oracle is paying for all of this out of its own pocket.
Cost, by the way, is a good reason to do HPC in OCI, according to Smith. He points out that HPC is possible in Oracle’s environment at only a tenth of the cost, compared to an on-prem environment.
New course, extra people: Oracle Generation O
As indicated several times above, the result of Oracle’s cloud strategy cannot be captured in numbers here. That is, other than sports partnerships and the occasional big name like Zoom, we have a hard time quantifying how many customers the new direction has brought Oracle. Smith only indicates that this is just the tip of the iceberg. It’s unfortunate that we can’t quantify this better. A person more cynical than us might see this as evidence that things are not going so well. However, Smith has indicated that he will come up with some numbers after the quiet period. So we’re going to explore this in more detail later if all goes well.
The new course, however, is also partly responsible for an effect that Smith can and does want to address. It also calls for new, or extra people. That’s why Oracle has set up Generation O. With this, Oracle wants to engage talent at the beginning of their careers. For nine to twelve months, they are given the opportunity to get to know the entire portfolio of Oracle. Based on this, they can choose what they want to do and in which region.
Generation O is more than just a large-scale internship program, Smith points out. In fact, people get a fully-fledged contract at the beginning of the program. Furthermore, Oracle is also clearly looking outside the standard target group in this program. That is, you don’t necessarily have to have studied computer science or a related field. Oracle believes that more breadth fits in with what the company is currently looking for. Smith, by the way, immediately adds that this doesn’t mean that the people they have now won’t suffice. It’s really about expanding the knowledge and skills of the people who work at Oracle.
Ready for what’s next
The past year has been a very important one for Oracle, when it comes to OCI. The company has announced many new and often unique features, services and products. With the move towards sports partnerships, the cloud platform has also become a lot more visible. In addition, OCI has also contributed and is contributing to the fight against the coronavirus. Both the foundation and the image of OCI have thus become more robust. Finally, Generation O should also attract more employees who fit in with the present and the future direction.
So the big question now is really whether the future is ready for OCI. In other words, are we going to see significant growth from Oracle in the public cloud market? Not just in an absolute sense. Given the workloads that are still going to go to the cloud, that’s going to happen anyway. But especially relative to the other players. That will not be an easy job. For the time being, all providers will continue to grow, so it is difficult to catch up. Then again, 2-3 percent of an ever-growing pie is not bad either, although this will undoubtedly not be Oracle’s ambition. As you’ve come to expect from us, we’ll continue to follow it closely and keep you updated. It’s definitely going to remain an interesting story to follow.