Simplify IT, Drive Innovation
BY Bob Evans – Oracle
Eager to help Oracle customers around the globe innovate and grow, founder Larry Ellison says his company’s surging efforts in Oracle ERP Cloud applications and cloud infrastructure have reshaped the competitive dynamics of the industry such that Oracle’s top two competitors are now Workday and Amazon Web Services.
Oracle can provide its customers the maximum possible benefit in the ERP cloud space—including financials, procurement, performance management, project management, and much more—Ellison says, because this application affects so many business processes. Workday has become Oracle’s only viable competitor in this space, given SAP’s obsession with building HANA, a new database platform. Oracle contends its ERP Cloud business is already much larger than Workday’s and is growing significantly more rapidly.
Oracle Executive Chairman and CTO Larry Ellison
At Oracle OpenWorld 2016, Oracle Executive Chairman and CTO Larry Ellison explained Oracle’s strategy for surpassing Amazon in the cloud.
In the first quarter, which ended August 31, Oracle added 344 new ERP and EPM (enterprise performance management) cloud customers, CEO Mark Hurd said on Oracle’s September 15 earnings call. “That’s more ERP customers than Workday has sold to in the history of their company,” Hurd added.
However, over in the cloud infrastructure sector, the competitive dynamics are reversed as Amazon Web Services claimed first-mover status in infrastructure as a service (IaaS) and has a significant lead over Oracle in IaaS revenue.
But it’s abundantly clear that Ellison is relishing—yet again—the role of underdog, a role he and Oracle have played successfully over the company’s history in database, middleware, applications, high-end business systems, and, more recently, in the two other major portions of the cloud business: SaaS (applications) and PaaS (platform as a service, including database, middleware, and programming languages).
During the annual Oracle OpenWorld mega-event in San Francisco late last month, Ellison laid out Oracle’s strategy for surpassing Amazon in the cloud, detailing an extensive set of capabilities, assets, and experiences that Oracle possesses and Amazon lacks for meeting the end-to-end needs of enterprise computing in the cloud. At the same time, Ellison went out of his way to freely acknowledge Amazon’s success and achievements here in the still-early days of the enterprise cloud. Ellison—always the master of the long game—constructed his core arguments around a few major themes:
For 40 years, Oracle’s one and only business has been enterprise computing, and that focus is only accelerating as Oracle completes its pivot to being a cloud-first company.
Companies that have run their businesses on on-premises systems and software for the past 30 to 40 years are not going to shift everything to the cloud in one year or five years or perhaps even 10 years—so, enterprise cloud vendors need to have expertise in both types of computing.
Oracle has not only the desire but the proven and hard-earned ability to compete at global enterprise scale in all three established layers of the cloud—SaaS, PaaS, and IaaS—plus the emerging fourth layer, data as a service.
So, pulled from Ellison’s remarks during Oracle OpenWorld, as well as during a Q&A with financial analysts, here is Ellison’s 10-point plan for beating Amazon in the cloud.
1. Customer Choice for a Decade of Coexistence. As noted above, almost all businesses and large organizations today are operating significant on-premises estates of hardware, software, middleware, networks, and more. So while they’ll look to move to the cloud as quickly and securely as possible, the inescapable fact is that it’s going to take awhile to get to their desired state, and until then they’ll create and refine a blended “coexistence” model of on-premises, public cloud, and private cloud. So in the meantime, which enterprise-cloud vendors can meet those needs? While Amazon surely cannot, Ellison says Oracle’s unmatched technology and experience will help lead customers through this challenging period by making it possible for them to have “your data center and your cloud services used interchangeably at the touch of a button.”
2. Lower Acquisition Price and TCO and Better Performance. Ellison says Oracle will be able to offer cloud infrastructure that not only outperforms Amazon’s, but comes with a lower acquisition price and lower cost of ownership over time. This is possible, Ellison explains, for a few reasons unique to Oracle:
a) Oracle plays at all three layers of the cloud, and Amazon doesn’t—so Oracle’s end-to-end cloud services and technologies give customers the choice of avoiding the costly, time-consuming, and highly complex integrations that cannot be avoided with Amazon.
b) Oracle’s huge R&D investments are generating world-class data-center technologies and expertise that Amazon can’t hope to match, says Ellison. The new “Generation 2” data centers that Ellison and President Thomas Kurian announced at Oracle OpenWorld will have big competitive advantages over what Amazon IaaS can offer: 2X as many cores as AWS, 10X I/O capacity, *plus* 20% less cost to businesses. “Gen 2 means you build a fundamentally simpler, cheaper, more reliable, more secure, and more-powerful data center where we have significant advantages. In some cases, our costs are multiple times lower than Amazon’s…and we deliver better performance,” Ellison said.
c) Oracle’s massive installed base of enterprise-scale workloads: “Our big customers haven’t really started moving much [of these big workloads] to the cloud yet. That’s a huge opportunity for us.”
3. Software Chops that Amazon Lacks. For all of Amazon’s early successes in offering compute and storage services, Ellison said, it simply doesn’t have the breadth and depth of enterprise-class R&D to compete at all levels of enterprise cloud computing—not just IaaS but also PaaS and SaaS. That multilayer expertise, Ellison said, is essential in the enterprise cloud for optimal performance, security, reliability, and price. (For a detailed discussion of Oracle’s Gen 2 data centers and overall IaaS and PaaS strategy, see this extensive interview with Oracle President of Product Development Thomas Kurian.)
Ellison went on to make the argument that four—and only four—tech companies have the deep software expertise and data-center expertise to compete at all layers of the cloud: Oracle, Microsoft, Google, and Facebook (with the caveat of “if they want to” for Google and Facebook). “One of Facebook’s core competencies is data centers,” Ellison told the analysts. “A Facebook data center is better than a Google data center and it’s better than an Amazon data center, and let me tell you why: they’re newer, and they use newer technology.”
On top of data center competency, he said, success across the enterprise cloud will be wholly dependent on breadth and depth of enterprise-software expertise: “We are still the largest enterprise software company in the world. Microsoft is the largest software company in the world.…You look at a Salesforce.com and you look at an Amazon and they’re both called ‘big cloud companies’ and yet they have nothing to do with one another. They don’t do the same thing at all. So my belief is that in order to compete broadly in the cloud at the SaaS layer and the infrastructure layer and the PaaS layer, you have to be a pretty big software company. And I would argue, Amazon’s not a real big software company. Don’t get me wrong—I have a lot of respect for Amazon—I really do. I think they’ve done an incredible job. But I don’t think of them as a really big software company in the way I think of Microsoft as a big software company, or in the way I think of Oracle as a big software company.”
4. Unique, Unparalleled Security. At his opening-night keynote address at Oracle OpenWorld last month, Ellison proclaimed, “If you don’t think data security is a big thing and getting bigger every day, you are mistaken!” And he used much of not only that presentation but also his second keynote address to hammer home the huge investments Oracle is making in security from the chip level through databases to applications and networks and virtualization. And security is core to the design of Oracle’s next-gen data centers, which Ellison described in some detail during his Q&A with financial analysts: “And I think you’ll see a lot of emphasis on the network because in these cloud data centers, your limitations in performance are largely the network. Your risks and security are largely the network. So we spent a lot of time re-architecting this and building this virtualized network in our Gen 2 data centers. It allows us to give you much better security as messages move around the network. Not only is everything encrypted in motion, it’s encrypted at rest—in storage. It’s encrypted in motion on a network, but because it’s virtualized, each message is encapsulated with virtual addresses. It’s almost impossible for people to interpret these messages as they’re flying around.”
Likewise, Oracle does its software-defined networking in network processors off-box with no access to the public internet. “So you can’t break in—there is no door! So, we did it very, very differently than everyone else did it,” Ellison said. “…The big difference in our infrastructure as a service is our network and how we do virtualization.”
5. Unleash Tremendous Business Value. Oracle’s massive end-to-end R&D investments in all three layers of the cloud let customers move more low-value manual IT work over to Oracle, which in turn enables those customers to redeploy huge chunks of their IT budgets to customer-facing initiatives focused on innovation and growth. In his meeting with financial analysts, Ellison focused on the huge competitive advantages those investments are delivering in the mission-critical areas of database and analytics/AI:
Database: Ellison expects more and more customers will discover the new features and functions of Oracle Database 12c Release 2 via the cloud, not by loading it on on-premises boxes. Oracle’s new Exadata Express Cloud Service starts at $175 a month. “I think it’s extremely attractive for everything from an MIT graduate student who’s starting her own company to a large corporation like General Electric with thousands and thousands of developers who can develop on our cloud rather than develop in their data center,” he said. “So, I think the opportunity for 12.2 is gigantic.”
Database and analytics/AI: “Do you know who the last big purchaser of our analytics software was? It’s a really big retail company: Amazon,” Ellison said with a smile. “So, how good is the opportunity for analytics? Well, Amazon is buying our analytics. Amazon runs most of their retail stuff on the Oracle Database, and they’re buying our analytics. We think the opportunity for analytics is enormous, and we’re selling analytics to our big database customers.”
6. Lift and Shift Enterprise Workloads. Oracle’s newest data centers give customers a powerful new option: To lift and shift entire workloads—even an entire data center’s worth of workloads—into Oracle Cloud, complete with IP addresses and virtualization software. Oracle offers IaaS using Oracle Linux and Xen-based virtualization software (based on open source projects that Oracle contributes to), which it has optimized for cloud infrastructure. But Oracle’s Bare Metal IaaS gives customers the choice of using their existing architecture without rewriting apps, so that a company running a workload on Red Hat Linux and VMware virtualization can move that as is to Oracle’s Bare Metal infrastructure.
“That is a very big deal,” Ellison said. “Right now, people are moving kind of an application at a time, and they have to partially rewrite, at least reconfigure the application, retest it on the new OS, change the I/O. They have to do a lot of things to move an existing application to a data center. You have to retrain your people over—there’s a bunch of things you have to do, not so with our new Bare Metal experience. It’s just, take your existing network, your existing network definitions with your existing range of IP addresses, your existing operating system, your existing hypervisor, your existing database, your existing apps, your existing everything, move it over, and it just runs. No one else can do that. We think that’s very, very important.”
7. Fast, Easy Purchasing via Oracle’s Accelerated Buying Experience. Ellison recalled when the Oracle leadership team decided it needed to become the easiest enterprise-cloud company to do business with. “I give credit to Amazon,” Ellison said. “The company we were looking at and studying was Amazon.” If Oracle hadn’t changed how it sells cloud, that would’ve been a huge impediment to growth, Ellison said. But it did change. Today, Oracle has neutralized that AWS advantage by totally rewiring how it sells cloud services, creating what it calls the Accelerated Buying Experience to automate much of the process of configuring and quoting a cloud service and to offer a click-to-accept option to purchase.
“We decided to redo our contracts to make them human-readable, to make them easy,” Ellison said. “…It eliminated a lot of the friction and heat inside of companies who wanted to consume our services.” Almost 70% of Oracle Cloud deals used the Accelerated Buying Experience in the past quarter, and Ellison said he expects that percentage to keep growing. “I think it’s the way customers want to buy.”
8. No Hotel California, which “You Can Never Leave.” Unlike Oracle’s unconditional commitment to industry standards, AWS has two cloud databases and *both* are closed—“more closed than an IBM mainframe,” Ellison said, noting that, even in the mainframe’s heyday, companies could move their IBM workloads to other mainframe makers’ hardware. Ellison added that, while Amazon’s Aurora and Redshift databases are based on open source projects (MySQL and Postgres), they aren’t open source code that companies could choose to run on their own infrastructure; they run only on Amazon’s IaaS. By comparison, companies can run Oracle Database on premises, in AWS, in Oracle Cloud, or anywhere they want. And, Oracle’s benchmark tests show Oracle Database runs faster on Oracle Cloud than on AWS, and that Oracle Database on Oracle Cloud ran 105 times faster than Aurora and 35 times faster than Redshift on AWS.
9. Public Cloud and Private Cloud and Cloud at Customer. While Amazon offers only public cloud, Oracle offers public *and* private clouds, in all combinations customers might need or want during their decade of coexistence between on premises and the cloud. For example, a company can run its development and testing on Oracle Database Exadata Cloud Service, and then move that workload for production to its own on-premises data center, using an identical cloud environment based on Oracle Exadata. And in another perfect alignment of on-premises data center operations with the cloud, Oracle’s Cloud at Customer offering lets customers deploy within their data centers the same systems—hardware and software—that run Oracle Cloud. And, they can pay for these systems on the same subscription, usage basis as the same service in Oracle Cloud.
10. Win over ISVs. Ellison acknowledged Amazon has done a good job getting startup independent software vendors (ISVs) and software-dependent businesses like Netflix to run workloads on AWS, on alternative databases such as Mongo DB. That said, Netflix isn’t an enterprise workload that would’ve ever been a candidate for Oracle Database, Ellison said. But now, a new wave of true enterprise ISV apps are ready to move to the cloud, many of which are built on Oracle Database. “It doesn’t make sense to me for very many SaaS companies to run their own infrastructure or, for that matter, run their own database,” Ellison said. “…We should be able to save them money, get better performance, better security, better reliability, all of those things.” Helping ISVs run in the cloud, and run more efficiently, is a “gigantic” opportunity for Oracle, Ellison said. “I think that’s one thing that no one is expecting.”
At the end of the day, Oracle’s market opportunities in IaaS, PaaS, and SaaS are symbiotic with Oracle’s customers’ needs. In today’s tumultuous business world, where disruption is everywhere and customers are calling the shots, companies that cannot aggressively fund customer-centric business innovation will die. Those innovations can only come from the efficient use of cloud services, and Oracle is becoming the only tried-and-true business technology provider that can offer those efficiencies.
Turning around traditional vendor-customer relationships where vendors won at the customer’s expense, Oracle Cloud is becoming that true unicorn where Oracle and its customers can both win.
Bob Evans is senior vice president and chief communications officer for Oracle.
Safe Harbor Disclaimer The preceding is intended to outline Oracle’s general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle Corporation.