In June of this year, Oracle CEO Larry Ellison announced the arrival of the Oracle cloud. His opening comments were,
“It’s been a long time coming … we made a decision to rebuild our applications for the cloud almost seven years ago.”
These comments both acknowledged that Oracle is late to market and that running applications in the cloud is different than running them in the enterprise. The question is, can Oracle recover and do they have anything different or better than the folks who have been offering cloud applications for over seven years, apparently before Oracle even started developing cloud applications?
One of the first things students learn in business school, is that time to market has a major impact on a business’ profitability. If a business is late to the market, they reduce the time period that their product is in the market, which reduces revenue. Introducing products late also reduces market share. This then reduces volume, which negatively effects profitability. Ellison clearly agrees with this, as in the same speech he criticized SAPs plan to have cloud applications by 2020:
“Our applications will have had eight years of maturing.”
This is an interesting comment given that Facebook and Salesforce.com applications have had over eight years of maturing in the market ahead of Oracle. Is Ellison actually implying through his criticism of SAP that Oracle cannot catch up with Facebook and Salesforce.com?
Relying on brand power might not be enough for Oracle to make existing cloud customers switch. Oracle needs to do something different to make them stand out from the competition. The question then becomes, is Oracle doing this?
Slow to Innovate
Clearly Oracle’s leadership is not lacking an understanding of the potential of the cloud. Larry Ellison has made several major personal investments in cloud services, including Salesforce.com and NetSuite. These investments have proven financially very beneficial to Ellison in his personal life, however these cloud services are now competitors to Oracle.
“Netsuite is winning over customers from Ellison enemies Microsoft and SAP. The software firm is also going up against — and beating — Oracle in deals. […] there’s been a distinct shift in the last year or so. Even big customers are receptive to the cloud message.” Read more…
Large corporations like Oracle find it difficult to foster and embrace innovation. The layers of management mean that innovative ideas never bubble to the top of an organization. Instead, they are burst by risk adverse management or management that is focused on achieving the goals laid down by their superiors. Large organizations are littered with stories of employees whose prototypes were years ahead of the competition but never made it out of the labs.
“According to Eichenwald, Microsoft had a prototype e-reader ready to go in 1998, but when the technology group presented it to Bill Gates he promptly gave it a thumbs-down, saying it wasn’t right for Microsoft. ‘He didn’t like the user interface, because it didn’t look like Windows,’ a programmer involved in the project recalls.” Read more…
The other key reason why large enterprise organizations fail to innovate is that they simply have more to lose. Their earnings are under continual scrutiny from shareholders and market analysts. It is hard to be innovative and take risks, while growing and maximizing opportunities in the company’s current markets. Oracle’s conservative IT customer base would have also found it to be extremely unsettling if Oracle’s vision and direction five years ago was to radically change the way IT works and propose everyone move to a utility-based cloud model.
A Cloudless Vision
Oracle’s vision to their customers is a one-stop cloud provider, where Oracle provides both the platform to develop and run applications as well as the applications themselves. All of us in IT have experienced the finger pointing that occurs between vendors when problems occur. Oracle’s vision has tremendous appeal to IT shops that want to deal with one vendor when problems occur. It is also highly appealing that enterprises can develop an application that will work both in the cloud and on premise. To quote Larry Ellison:
“You can move things gracefully backwards and forwards… You can run it on your computers or in our cloud.”
While I can see the appeal of Ellison’s message, there are a few missing elements with Oracle’s vision.
First, it does not embrace the concepts of cloud computing in terms of creating a utility-based model where resources are shared, and where applications and services can be quickly turned on. It therefore begs the question, will the IT show actually attain any of the benefits that cloud computing offers?
Second, the Oracle vision does not embrace and encourage third party application innovation on the Oracle cloud platform. Their vision seems almost exclusionary by design. Oracle needs to take heed from the painful lessons that Microsoft has experienced over the past few years. Oracle has years of experience working with developers. It would be great to see them take this knowledge and expand these efforts on their cloud platform.
Third, Oracle needs to deliver their cloud solutions with a strong service level agreement (SLA). This will be a new business model for Oracle. They need to provide the same or higher service levels that the Amazon Elastic cloud does. Otherwise, enterprise organizations will not take the risk of placing their core business applications on the Oracle cloud.
Fourth, the Oracle’s vision has failed to embrace the cloud as an extension of their enterprise solutions. For example, one area where Oracle could have taken leadership is in providing meaningful solutions for IT shops implementing and managing hybrid cloud networks. A hybrid model is where an IT shop leverages both internal IT assets along with resources available on public clouds. A hybrid solution acknowledges the fact that not all a company’s IT resources should be in the cloud.
Managing IT resources across internal and external networks is highly complex. Oracle could position their enterprise architecture and single management solution across internal IT and public clouds. This kind of high impact leadership would position Oracle in a position of strength, versus simply taking jabs at the other successful public cloud service providers, like SalesForce.com, Facebook, and Workday:
“Oracle chief Larry Ellison roasted Salesforce.com’s chief executive Marc Benioff and slammed his service-as-a-service poster child, saying that the company runs ‘old’ technology and that it polices customers’ data using a ‘horrible’ security model… Ellison [then] called the Salesorce.com multi-tenancy model 15 years out of date [… stating] it has a security model that’s ‘horrible’ because it merges customers data in a single database […]” Read more…
ISV Hosted Clouds
The cloud market is continuing to grow and evolve. There is a definite shift by IT enterprise organizations away from hosting expensive software, such as Oracle RDBMS, on infrastructure service providers like Amazon Elastic Cloud. Today we are seeing a shift towards major software vendors hosting their own clouds.
Oracle is a major software supplier. They are ranked number one in the application server market, and their Fusion middleware products are selling well. Couple this with their strong global brand recognition, Oracle has become a dominant force in the market.
There are many examples of major companies that were late to the market, but successfully leveraged their brand to attain a sizeable marketshare. Oracle is pursuing such a strategy, creating uncertainty in the quality, effectiveness, and reliability of competitors that are already successful in the cloud application marketplace.
“Salesforce has a weak security model – everyone’s data co-mingles on the same platform and if that goes down, everyone goes down. It is not fault tolerant, it’s not virtual and it’s not elastic.” Read more…
Making the right steps now, Oracle can secure a healthy position in hosting applications for IT enterprise customers, especially those that currently run on their platforms. The challenge will be attracting new customers away from the existing cloud service providers. Creating more fear and uncertainty in the market with comments such as, “We think the modern cloud does not mix data with your competitor’s data,” could actually hurt Oracle in the long run. Oracle needs to step forward with products, platforms, and service level agreements (SLAs) that assure reliability, serviceability, availability, and security of their cloud applications, services, and platforms.
Delivering the Goods
It can be quite difficult to see past the schoolboy bickering and back stabbing going on between Oracle, Facebook, SAP, Workday, and SalesForce.com, and to actually get a fair assessment of their product and service offerings. So come on Larry, let’s stop the competitive slanders and jabs, and let’s see a focus on enterprise solutions.
If not, the Oracle cloud initiative may give way to innovate vertical cloud solutions that focus on solving real solutions for real businesses. Of course this will give Larry more time to sail around his six hundred million dollar island in his yacht.
Larry compared Oracle’s vision with that of his competition:
“[…] Amazon’s EC2 and salesforce.com, describing them as two ends of the cloud definition – either a platform for building and deploying applications (EC2) or an application delivered over the Internet (salesforce.com). ‘Needless to say,’ said Ellison, ‘we agree with Amazon. It’s a platform for standards-based applications.”
It’s interesting how Larry takes a shot at a company that not only runs on Oracle’s database but that he himself is financially invested in.