Oracle announced their IaaS offering late last year and they briefed analysts of their offerings and roadmap. Rishidot Research makes a quick analysis of the briefing to highlight our clients and readers on the status of Oracle IaaS offering from our vantage point.
Market Overview
Ever since Amazon announced public cloud infrastructure services, the IaaS market has been growing steadily with increased enterprise adoption in the past 3 years. Amazon Web Services is leading the pack with annual revenue of close to $13 Billion as per the latest financial results. After some initial missteps, Microsoft is investing heavily on Azure making them a credible competitor to Amazon. Google Cloud and IBM Cloud are the distant 3rd and 4th place vendors in the public cloud infrastructure landscape. In spite of the threat for lock-in and open source efforts to enable a federated market place for cloud infrastructure providers, public cloud infrastructure market is tending towards oligarchy with Amazon, Microsoft, Azure and IBM as key players. After a delay, Oracle is finally taking steps to enter public cloud infrastructure market (IaaS).
Oracle IaaS
Oracle is betting their IaaS on three factors that may be attractive for enterprise customers, performance, security/governance and lower cost than AWS. When it is compared with Oracle’s SaaS and other products, they can easily become the one throat to choke for enterprise customers. The performance and security claim comes from the fact that their IaaS is built with bare metal servers as building blocks and they are hoping that the physical isolation provided by bare metal servers will be attractive to enterprises worried about cloud multi-tenancy. With their marketing on better performance provided by bare metal servers, Oracle is betting on enterprises wanting to forklift legacy applications to cloud. The bare metal performance advantage becomes less important for cloud native applications unless it is in the niche area of HPC workloads but when you forklift legacy applications to cloud (an approach Rishidot Research strongly discourages but many enterprises are faced with situations where they cannot move some of their mission critical applications to cloud native architectures), compute and network performance matters. Oracle IaaS is pushing ahead with their marketing on better performance than other public clouds (an independent verification on this claims is needed at this point) and hoping that their enterprise customers will prefer Oracle IaaS over AWS or Azure. The cost advantage and governance are not big differentiators as it is easy for competitors to close the cost loop and many higher order services (including 3rd party services) can provide the necessary tools for governance.
SWOT Analysis
Strength
- Oracle has the enterprise market power and they can leverage that position to push Oracle IaaS to their enterprise customers. This will clearly stem the bleeding that is happening as enterprises wanting to move to cloud look towards AWS or Azure for their cloud needs. With Oracle IaaS, offering a cheaper price (at least in the short term), can be a good carrot to dangle in front of their existing customers. If Oracle can get to $1 Billion in IaaS revenue by the end of 2017, I can confidently say that their enterprise cloud strategy is on a strong footing
- With bare metal IaaS, they can easily target diverse workloads including high performance, virtualized and containerized
- There have the necessary financial muscle to do whatever it takes to compete with AWS and Azure
- Having a strong SaaS portfolio helps gain traction for custom apps on their cloud
Weakness
- Lack of higher order services on top of Oracle IaaS is definitely a problem. Without these services, it is difficult to get developers to use Oracle IaaS for their needs. They definitely have a database service that will be useful in the enterprise app dev segment but not enough to make a play in the public cloud market. AWS, Azure and Google Cloud all have a good set of services developers can tap and it is critical for any IaaS platform to not just succeed but also to lock in their users
- The delay in entering the public cloud infrastructure market will definitely be a drag. How they ramp up adoption in the first year is going to decide the longevity of their IaaS ambitions
- The success of AWS is solely due to the success they had with developers. Even though Oracle has the attention of Java developers, it is going to be a tough climb for Oracle to gain developer karma. It is going to depend on their community outreach in the first year to see how far they can go on this front
Opportunities
- Their leadership in database market will help them gain enterprise interest in their IaaS.
- By leveraging their Java platform to Oracle IaaS and making Java apps first class citizens on Oracle IaaS, Oracle can gain widespread enterprise developer trust
- Oracle IaaS (and their strategy in the coming years for Oracle IaaS) is going to help them go head to head with Microsoft targeting enterprise customers. This puts them in a position where they can target Microsoft for the second place in public cloud market. It is not going to be an easy path but they are better positioned than Google to compete with Microsoft for enterprise customers
Threats
- Lack of a rich cloud services ecosystem like AWS but this can be easily overcome once Oracle gives the trust that they are serious about their IaaS offering
- With AI getting widespread adoption since 2016 and Google, Microsoft and Amazon investing heavily on AI services on their cloud, Oracle is at a disadvantage. Google is using AI as a way to compete hard against AWS and Oracle will need an enterprise AI strategy to make their IaaS stay competitive in the coming year(s)
Conclusion
Even though they are late by close to a decade, Oracle has moved into the public cloud space. They are clearly disadvantaged at this point in terms of richness of developer and other higher order services on top of their IaaS. But we expect them to fill the gap through acquisitions and compete hard with AWS. If they can take their IaaS revenue to $1B in 2017, I can confidently say that they will be a major force in enterprise public cloud market. It will be interesting to watch where they go from here.
Competitors
Amazon AWS, Microsoft Azure, Google Cloud, IBM Bluemix
Document Source
Briefing Note: https://github.com/rishidot/Briefing-Notes/blob/master/2017/Oracle-IaaS-Jan.md
SWOT: https://github.com/rishidot/SWOT/blob/master/Oracle/Public-IaaS.md