Blog Post

Oracle needs some cloud computing mojo

Oracle’s (s ORCL) cloud computing stance has, um, evolved, to say the least, over the past few years. As the company preps for its annual Oracle OpenWorld mega-show in San Francisco next week, a question lingers: Is Oracle software and/or hardware cloudworthy?

Expect a lot of cloud talk out of the conference and more on hardware-software bundles a la the company’s Exadata, Exalogic and new database appliance. But Oracle still has a lot to prove on the cloud front.

Oracle’s cloud problem goes back at least two years, when Oracle CEO Larry Ellison famously mocked cloud computing hype at a Churchill Club event. “What do you think Google (s goog) runs on? Water vapor?” he asked. “How about databases, and operating systems, and microprocessors and the Internet?”

As colleague Derrick Harris wrote for GigaOM Pro at the time, Ellison showed a lack of understanding of true cloud benefits:

Cloud computing is about far more than simply serving applications via the network. It is, at the least, about pay-per-use billing, process automation, on-demand provisioning of additional resources and increasing efficiency through multi-tenant architectures. Many believe cloud computing is about openness. If it does not increase flexibility and efficiency while decreasing extraneous costs, it is not cloud computing.

In order to establish some cloud cachet, Oracle needs customers — e-commerce companies, ISVs, vendors — to concentrate their cloud workloads on Oracle’s high-end Exalogic or Exadata  super-servers running Oracle’s high-margin database and middleware. But most new cloud-oriented startups steer clear of pricey anything, opting for cheaper but productive open-source databases and commodity hardware: the kind of products Ellison doesn’t care to sell.

Venture capitalist Marc Andreessen, co-founder of Andreessen-Horowitz, illustrated this point yesterday when he told Business Insider that Oracle holds no allure for these next-gen companies:

Ten years ago it was a joke: you’d raise $20 million in venture capital and write a $4 or $5 million check to Oracle, Sun, BEA, and EMC. … When it started, Salesforce (s crm) looked like a toy compared with Siebel. Look ahead five years later, it’s obviously better. Not a single one of our startups uses Oracle.

Akamai, (s akam) not exactly a newbie in this arena, illustrates Oracle’s problem. At a recent tour of Akamai’s Cambridge, Mass. network operations center, CTO Mike Afergan was asked about the racks of (mostly Dell) (s dell) blades on view and whether the company ever went with high-end hardware. The answer was no. Akamai puts its data center gear out to bid and prefers to use lots of cheap boxes versus a few pricey ones.

Another Bay Area VC agreed that he never sees Oracle software or hardware going into his companies but said that risk-averse older companies will continue to foot Oracle’s expensive software bills. “A lot of these guys think that the only way they can function is with their Oracle database and tightly linked financial applications,” he noted.

The traditional financial services firms re-up on their Oracle software licenses for compliance reasons, but these are legacy accounts. But even of those software customers, few want to give more of their IT spend to Oracle when it comes to hardware because of the company’s hardball support policies.

Oracle clearly sees its Sun hardware franchise as a way to capture more business, especially by building tightly integrated appliances like Exalogic. But, while two Exalogic machines probably could, as Ellison said last year, run all of Facebook or Twitter’s workloads, those kinds of companies don’t run this type of hardware.

There’s also a lot of talk about the challenges Hadoop  poses to Oracle in big data. Ellison prefers to think of Hadoop as a complimentary rather than competitive. On Oracle’s first quarter earnings call last week, Ellison said that Hadoop and associated utilities will feed into Oracle databases, driving more Oracle adoption. Oracle has announced Hadoop-Oracle interfaces to help achieve that.

Ironically, when it comes to hardware, the biggest potential driver for Oracle business going forward could be the mess at Hewlett-Packard (s HPQ). “People are really skittish about what’s happening at HP now,” said an executive with a Sun partner who saw many customers defect from Sun hardware since Oracle bought the franchise last year.  Most went to HP.  But now HP is in turmoil over recent management shakeups and confusion over its PC business plans. Customers don’t want to make any long-term decision under these circumstances.

This exec thinks Oracle could win over disaffected HP customers if it comes up with the right products at the right prices — and more flexible support plans. Big-bang Exadata or Exalogic, with hardware-only list price starting at $330,000 for a quarter-rack,  won’t do the trick, although Oracle has been known to discount.

15 Responses to “Oracle needs some cloud computing mojo”

  1. Faryal Khan

    Oracle towards Cloud computing is good but the company needs to work hard and strive to compete with the international standards set for Cloud Computing. according to this article i read in order to make cloud structure strong oracle needs to reach and maintain substantial position in the Cloud computing domain. read how Oracle will have to introduce flexible support plans so that their Cloud expertise can be polished

  2. Agreed with other comments, mostly. Ellison has no reason they can’t participate in the “Cloud Fest”. DB software is an integral part of cloud apss, they own Salesforce, Marc Andresen and HP do not exactly have a great record in terms of Cloud apps success.
    This said, there is another challenge and challenger to the Ellison cloud perspective which I believe is much more formidable: in-memory, realtime DBs. There Larry has also been lashing at Plattner and SAP ( I wish him good luck to scceed in the could if he continues to refuse to stir the Oracle boat in that direction.

  3. I saw Marc’s comment yesterday, and boy, I was laughing big. Well, to those who don’t know, Oracle had the so cold cloud service long a go. There is a business group in Oracle called On Demand services. This , basically, is the cloud. The difference is the name but the service is the same. Besides, MySQL where all cloud services are running plus, the relational database patent and technology is owned by Oracle. Either, you like it or not, Oracle is here to stay for a very long time. Abe

  4. Are you actually serious?

    Larry Ellison OWNS cloud computing. Check out some of his vids from like 1994. It’s cloud computing in a nutshell. And there’s a little thing called SalesForce which Oracle owns.

    You also got to remember something…

    What are all these cloud services running from? Orcale / MYSQL based systems. You’re citing that demand for Oracle’s products have fallen off the radar, which simply isn’t the case. It’s just the fact that the clients have shifted from being in-house server guys to data center managers. The demand for the products is still there – if not increasing – which is why it’s kind of neive of you to suggest that Oracle’s going down.

  5. Peter Mullen

    Let’s see, Oracle releases latest quarterly earnings, topping analyst estimates yet again. I’m sure Larry will be all over that cloud thingy. Don’t get me wrong, I can’t stand the guy but he continues to defy the prevailing wisdom and win. I would not bet against him. The landscape is continually dotted with the rotting corpses of those who tried and failed. Just sayin’.

  6. Robert Cathey

    But isn’t this the challenge that all incumbent enterprise HW and SW vendors face? The conversion of IT from a fixed cost to a variable cost is only in its early stages. The long-term picture for high-margin players is grim.

    • Agree RC. When everyone has a Porsche, it’s now about the quality of the people able to drive one, or performing the IT work. Doesn’t bode well for an Ill trained US workforce.