Oracle customers caught in the cross-hairs of Larry’s 'interesting dynamic'

The first rule of presenting club is, know your audience. Larry Ellison certainly knows his.

Speaking to investors this week, Oracle's founder and CTO presented his perspective on the cloud infrastructure market, in which Statista determined Big Red had a 2 per cent stake globally in Q2 compared with AWS’s 33 per cent.

Unperturbed by the stats, Big Red's boss went into salesmanship overdrive on the conference call:

“Oracle occupies a unique position in the cloud markets. Oracle is the only cloud vendor that competes in both the enterprise applications market, SaaS, and the infrastructure-as-a-service market, IS," he said.

"Our competitors in SaaS are people like Salesforce and Workday. Our competitors in IaaS are people like Microsoft and Amazon. They're different markets. We're the only one that spans these two markets. It's a very interesting dynamic.

In terms of SaaS, IDC estimated Oracle had a 3.1 per cent slice of total worldwide sales in 2019, compared with Salesforce's 7.8 per cent.

But what is “interesting” for investors could be concerning for another audience: Oracle’s customers.

Elsewhere in Ellison’s discussion he, ever so slightly, lets the mask slip.

Claiming Oracle’s vast superiority to the cloud infrastructure market in terms of price performance, he said: “Customers are picking Oracle Cloud Infrastructure and the Oracle Autonomous Database for a few very basic and very obvious reason; much better security, much better reliability, much better performance, and dramatically lower cost: much, much lower cost than AWS.”

Stepping back through the looking-glass, the reason for the lower costs is not entirely down to AWS. Oracle structures its licensing on AWS to make it more expensive than Oracle Cloud. In 2017, Oracle modified its Cloud Policy document, to remove the use of the Processor Core Factor Table in calculating licenses required in AWS and Azure deployments, a change that effectively doubled the number of licenses required in the cloud.

Also on the long-running conference call to discuss Q1 results for the company's fiscal 2021, Ellison pointed out how Oracle tries to take advantage of this “interesting dynamic”.

“We have an Exadata Cloud Service… but the Oracle Cloud Exadata database service isn't available anyplace," he said. "We're much better – you'd expect us to be much better at running Oracle Applications than anybody else,” he said.

Organisation already committed to Exadata in terms of their data warehousing strategy, but wanting the scale and flexibility of cloud economics, really have no place else to go, he opined.

With Oracle winning such a tiny market presence in cloud infrastructure, Big Red could be accused of unfairly exploiting its strength in business applications and databases, but sometimes that’s just the way the world is.

On the other hand, Oracle recently won praise from Gartner for its “thoughtfully architected, hyperscale cloud architecture,” while its partnership with Microsoft means customers can overcome shortfalls in Oracle’s cloud products via Azure services – though Gartner warned that most customers for this partnership favour Azure as the strategic choice.

Nor is AWS by any means a saint in this scene. It has failed to lower prices in line with expectation, according to Gartner.

AWS, which is helping to fund his Jeff Bezos' space adventures, will also play the same game as Oracle. Its data warehouse product is called Redshift for a reason: it wants to extract customers from Oracle by exploiting its dominance in the cloud market.

Oracle customers should not be left thinking there is nothing they can do with the Oracle-cloud dilemma. As licensing advisory House of Bricks points out, simply lifting and shifting Oracle workloads to AWS can be expensive, but a good review of license policy and nifty use of alternative services can mitigate the pain.

In a cloud infrastructure market where Oracle is desperate for a greater share, customers should recognise there is room for manoeuvre. Oracle policy documents are not the same as contracts. While it might be better the devil you know, it is better still to trade one devil off against the other. ®