Amazon’s IaaS revenue is probably about 30x bigger than Oracle’s, Microsoft’s IaaS revenue is probably 15x bigger than Oracle’s, and Google’s IaaS revenue is probably 2x bigger than Oracle’s.
So with Oracle holding such miniscule cloud-infrastructure market share compared to each of the three heavyweights, why are we hearing all this commotion about Oracle becoming a big-time IaaS player? (On my Cloud Wars Top 10, Oracle is #6, Microsoft #1, Amazon #2, and Google #4.)
If its cloud-infrastructure revenue is barely a rounding error in the monthly IaaS sales figures for Amazon, Microsoft, and Google, then why did Oracle’s stock jump 10% in the week following its fiscal-Q1 earnings call whose focus was entirely on its Gen2 OCI (Oracle Cloud Infrastructure)?
And I should ask a related question of myself: in light of the vast disparity between Oracle’s IaaS market share and that of any of the three leaders, why would I write the headline above—does anybody with a functioning brain really believe Oracle can overtake 3 competitors that have:
- market-share leads over Oracle ranging from about 2x to 30x?
- market caps measuring in the trillions—Microsoft $1.52 trillion, Amazon $1.48 trillion, and Google/Alphabet $.990 trillion—versus Oracle’s $180 billion?
- thousands of loyal and happy customers?
- outstanding executive leadership who are fully aware of what Ellison and Oracle are attempting? and
- superb development teams and legions of dedicated and talented independent developers?
Those are some pretty powerful obstacles for Oracle to overcome. Plus, isn’t Oracle also guilty of committing the terrible sin of being, as so many media people and analysts have droned relentlessly over the past several years, “late to the cloud”?
So what’s my rationale for giving credence to Larry Ellison’s claim—and, more important, his belief—that Oracle can rise to the top of the IaaS market?
I’ll give 3 quick reasons of my own, and will then shift to the 10 much more interesting and important reasons that come from Ellison himself.
- Oracle has Larry Ellison, and those other companies don’t. In saying that, I am of course taking *nothing* away from the leaders of Microsoft, Amazon and Google Cloud. Just look at my last 3 picks for CEO of the Year: for 2017, Microsoft’s Satya Nadella; for 2018, AWS’s Andy Jassy; and for 2019, Google Cloud’s Thomas Kurian. But Ellison has a 40+-year history of defying huge odds, upsetting “invincible” power structures, and playing the long game with great success.
- Oracle has Autonomous Database, and those other companies don’t—but Microsoft’s Nadella sure wishes he did. As I wrote 15 months ago when Oracle and Microsoft formed a powerful partnership, “Recall that in a Bloomberg interview in September 2017, when asked what non-Microsoft product or technology he wished his company had, Nadella immediately named Oracle Database.” You can read all about that in Microsoft-Oracle Shocker: Customers Win as #1 and #6 Vendors Pair Up.
- Customers appear to be flocking to OCI. In the two earnings calls before this one, Ellison read lengthy lists of customers who’d picked OCI, and that was impressive but also rather tedious and more than a little boring. So in the Sept. 10 earnings call, Ellison, one of the world’s great storytellers, skipped the lists and instead focused on marketplace dynamics—the best ones of which I list below. Meanwhile, here’s a page on Oracle.com listing big cloud wins.
So now, from Ellison’s commentary during that Sept. 10 earnings call, here’s my list of the 10 top reasons why he fully believes Oracle can win in this enormous and hotly contested market.
- Autonomous Database. Thousands of hardcore Oracle customers will choose the new cloud-native database as the foundation for their move to the cloud, Ellison has said. And Ellison’s decision from a few years back to have the Autonomous DB run only on Oracle IaaS means that its new Gen2 OCI should experience a big, steep, and steady surge of big customers for the next few years.
- Ellison has made the former star of the show—Autonomous Database—now an appendage of OCI, which is the new center of the Oracle universe. In the Sept. 10 earnings call, both Ellison and CEO Safra Catz specifically referred to the product that Ellison has called “the most important and valuable product Oracle has ever released” as a service of OCI. So what was the big dog—Autonomous DB—is now part of the pack following the lead of OCI. This is striking because while Oracle has had businesses other than database for 20 years or so, the fact was that Oracle was the database company, and it blews past IBM, Microsoft and every one of the hundreds of competitors that have risen up against it. But as I wrote a couple of weeks ago in The Audacious Larry Ellison Flips Oracle Cloud Strategy Upside-Down, he and Oracle are now leading with cloud infrastructure.
- [email protected] I’ve checked pretty rigorously, and Ellison is 100% correct when he says that none of the big cloud vendors has anything like this, which is essentially a top-end private cloud with Autonomous Database running on OCI within a customer’s data center. Ellison offered this perspective on why customers are eagerly pursuing this unique path to the cloud: “As I mentioned in my preamble, we came out with Oracle Autonomous Database in 2018. But if you were an on-premise user, there was no way to get access to the Oracle Autonomous Database until a couple of months ago. So, the Oracle Autonomous Database was available in our public cloud and has been for three years, and it keeps getting better and better. But if you’re a big on-premise customer, you didn’t have the access to our latest and greatest database. And it was a very strange situation for Oracle that our latest technology was not available to the vast majority of our customers. All of a sudden, with Cloud @Customer, you can get at very low prices Oracle Autonomous Database and all the latest and greatest features we offer in the database and have it delivered to your data center behind your firewall. And we think the growth here is going to be explosive.” It’s already exploding, said CEO Catz in describing the surging uptake among corporate customers of Autonomous Database: “Some of them are putting it into public cloud. And many of them—actually many more than I would have expected—are doing [email protected]”
- OCI is now at the heart of *everything* Oracle does in the cloud. CEO Catz: “You have to understand that our Fusion customers are also on OCI, which means that all of the applications that they want to build themselves, all the custom things that are on the Oracle Database, they’re going to be putting them on OCI also.”
- Ellison is aggressively leveraging Oracle’s unique role in offering both SaaS apps and IaaS. Here’s the very first thing Ellison said on the call: “Oracle occupies a unique position in the cloud market. Oracle is the only cloud vendor that competes in both the enterprise applications market, SaaS, and the infrastructure-as-a-service market, IaaS. Our competitors in SaaS are people like Salesforce and Workday, and our competitors in IaaS are people like Microsoft and Amazon. They’re different markets. We’re the only one that spans these two markets. It’s a very interesting dynamic.” And Oracle believes its large and fast-growing SaaS business will drive more IaaS business as Catz outlined in #4 above.
- IDC releases a tremendous endorsement of Oracle’s new cloud capabilities. Ellison: “I believe we have the best technology in the market today at both the applications layer and the infrastructure layer of the cloud. While analysts have ranked Oracle Cloud applications No. 1 in both market share and customer satisfaction for some time—we’re #1 in customer satisfaction in HCM, we’re #1 in customer satisfaction in ERP—what’s interesting is that those same analysts are beginning to take notice of the technical quality and customer satisfaction associated with Oracle’s cloud Infrastructure-as-a-Service business. I’d like to read an approved statement from IDC about their recently published survey:
‘In the 2020 Industry CloudPath survey that IDC recently released where it surveyed 935 IaaS customers, on their satisfaction with top IaaS vendors, including Oracle, Amazon Web Services, Microsoft, IBM and Google. Oracle IaaS, OCI, received the highest satisfaction score and the biggest year over year score increase of all IaaS vendors. In addition, 86% of those surveyed said they expect their spend on Oracle IaaS and OCI to increase in the future.’ [end of Ellison reading IDC statement]
“I suspect this comes as a big surprise to many to you and many of our competitors, just as Zoom picking Oracle infrastructure surprised a lot of people in the recent past.” So first it was Gartner hotshot analyst Lydia Leong praising [email protected]–Oracle Cloud Is So Hot Even Legendarily Cynical Gartner Analyst Likes it!—and now IDC is gushing about Oracle OCI. A year ago—hell, even in January—that would have been utterly unfathomable.
- Does Oracle IaaS live up to the “faster and more secure” billing Ellison always gives it? Well, Zoom sure thinks so. Ellison: “I think Zoom is a great example because it proves that the Oracle Cloud is secure, reliable, high performant and economical. They picked it even though it has nothing to do with the Oracle Database. It has nothing to do with them being a SaaS customer. That was just purely an evaluation of our cloud versus Microsoft’s versus Google’s versus Amazon’s.”
- To support all this growth, Oracle says it will surpass Amazon in number of data centers. “OCI cloud data centers are opening all over the world at a record pace,” Ellison said. “We now have 26 OCI regions live around the world, edging out Amazon AWS, which currently has 24 regions. And we’ll be adding at least another 10 regions in the next nine months. We’re not slowing down. We’re speeding up.”
- “Half the world’s car companies” have picked OCI for a top-priority high-performance computing workload. Ellison: “Another example of that is high-performance computing as car companies simulate crashes. Now, why would anyone go to the Oracle Cloud to do high-performance computing when you can go to Google or you can go to Microsoft or you can go to AWS? Well, because we’re much, much faster and therefore they get the simulations done faster, but they’ve got to be willing to pay less. Almost every car—well, maybe that’s too strong—half the car companies around the world are now either using our high-performance computing or evaluating our high-performance computing because we benchmark so well against the competition. And this is all new business, like the video conferencing business.”
- Ellison is doing what he does best: playing the long game. “So the OCI team did a spectacular job of building a second-generation IaaS, learning from what Microsoft did, what Google did, what Amazon did and then building the next generation. And it’s so good, we’re winning business everywhere. And again, these are very early days—Gen2 OCI is relatively new, and Gen2 [email protected] is even newer. And these are both fabulous products that I think are going to do extremely well over the next few years.”
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