LMT Episode 02 - Is Oracle Waking Up to Cloud?

Thank you for downloading.

Please find us online at Madora.co.uk.

Would love to hear from you. Drop me a line via email [email protected]

Is Oracle starting to wake up to the demand of its users for more cloud capabilities and flexible licence models?

With recent announcements in Oracle OpenWorld 2014, is Oracle starting to wake up to the demand of its users for more cloud capabilities and flexible licence models?

Oracle’s core business has, like many of the larger enterprise software companies been focused on selling software designed to run on premise and charging a flat fee for the licenses and typically an annual support and maintenance fee. Over the last fifteen years we have seen a number of application providers providing access to their application via subscription models that do not require the purchase of any infrastructure – database, application servers, operating systems, networking or and hardware servers. Although Larry Ellison has in the past been quick to poo poo cloud computing he has clearly woken up to the industry shift.

“We have a new, much-upgraded cloud platform,” Ellison said to his key note speech on the 28th September. “We are just getting started. We launched our real platform this month.”

Previously the only options for customers to run Oracle in the cloud on a true subscription basis was via Amazon or Azure.

Oracle will “have the same pricing as Amazon or any other infrastructure provider,” Chairman Larry Ellison said at the Oracle OpenWorld conference in San Francisco.

Oracle has seemed to be behind in many ways with regards to providing utility or SaaS type pricing. Sure Oracle would argue that Fusion Apps have been available for a while and the cloud application portfolio is increasing all the time. However most customers still run ‘on the premise applications’ which are fundamentally different than the Fusion Apps which were written from scratch for the cloud.

It is these traditional ERP/CRM/SCM legacy applications that present a number of problems for customers:

Licensing metrics are often not clear.
It does not allow for the growth or decline of the business.
It does not allow for spikes or seasonal peaks.
It does not lend itself for innovation, testing of new concepts.
It does not allow a trial to review business benefits or ROI.
So what about customers that have written their own apps running on Oracle or use vendor apps based on Oracle? Many want to pay for Oracle technology licences as a subscriptions whether on premise on their own kit or on the cloud.Clearly Oracle is moving this way with enhancements to its PaaS services. See https://cloud.oracle.com/database

The fully ‘Oracle managed’ Oracle database is yet to make an appearance but pricing is available for a number of options. For example the client managed option for High Performance Enterprise Edition is $4,000 / Month per OCPU. This sounds high but it does include a large number of management, testing and security database options. The pricing is also available by the hour so it is absolutely possible to use this for testing, development or backup. It’s per OCPU – not sure what that really means. When I get a better idea I will let you know. Where I see the real opportunity is for the duel running of new systems.

Previously the only real option for customers to run new systems in parallel for a period before switch over was to buy 1 year term licenses in order to remain compliant.

Cloud Alternatives

The current alternatives to Oracle’s cloud services are Amazon http://aws.amazon.com/oracle/ or Microsoft’s Azure.

Amazon Web Services and Oracle Amazon RDS for Oracle allows you to bring your own licences or use Oracle included licences. Costs start from 0.04 USD per hour for the on-demand licence included option which means that running an oracle application really is more affordable than ever. Bring you own licence starts at 0.025 USD. There does appear to be one downside of the licence included option and that is the database is Standard Edition 1. This could mean that applications that use Enterprise option will not be able to take advantage of this.

While this may not provide the licence subscription desirable for most enterprise applications, for developers this could be a more effective way to run proof of concepts.

What about cannibalisation of revenues?

One of the main criticisms of Oracle not being so quick to adopt subscription based licence models for Database and Middleware was the concerns about cannibalisation of its existing revenue streams.

Last month in the Oracle earnings call Oracle reported fiscal first-quarter profit and sales that were below analysts’ projections. Oracle also forecast Q2 revenues and profits below estimates. Oracle is investing in its cloud division and there is a big drive within Oracle to push managed cloud services with big incentives for its sales teams.

On the same call Safra Catz, Oracle co-CEO said,”As the movement to the cloud grows, we expect this transition will affect our revenue to the positive”.

See full earnings transcript on Seeking Alpha.So in summary , I welcome the announcements in OpenWorld 2014. It is a good start and it should provide some alternative flexible options for customers who want a subscription based pricing. This will present some organisational challenges especially around its sales division. Sure customers are going to continue to run software on premise but do Oracle really need all those sales people?

So what do you think? Does Oracle or even Amazon present a viable alternative now? Will you use it?