Will Oracle’s Australian cloud crusade prove to be a misadventure?

Industry hopeful but remains wary of vendor’s chequered history

Oracle has recently launched its platform and infrastructure cloud offerings in Australia. But the question remains, can the global software giant make the transition and challenge the established cloud players?

Gartner research director, Michael Warrilow, told ARN that Oracle had strength in its cloud offerings and the company has made significant investments in staff and infrastructure.

“They are spending big money and they are poaching people from Amazon, and they have a lab up in Seattle where much of the engineering is happening," Warrilow said.

“There is a lot of potential and there is a lot of money being spent. It is a question of how successful will they be and are they too late?

“They have many years to catch up just to get into this race and billions of dollars that have to be spent. They are spending the money, how long they can afford to do that before the accountants start questioning the return [remains to be seen],” he said.

Michael Warrilow - Gartner research director
Michael Warrilow - Gartner research director

Microsoft and Google have good reason to have a multi-billion dollar investments in data centres that is underutilised, according to Warrilow, but Oracle doesn't have that, as much of its revenue still comes from on-premise.

“They have a claim in the PaaS [Platform-as-a-service] space; they may have some accounting differences in what they call PaaS as opposed to the rest of the world but database and middleware has been their bread and butter,” Warrilow said.

Coupled with this is the vendor’s chequered history in its approach to customer engagement. The company has a reputation for auditing its clients when licenses come up for renewal.

“That classic traditional Oracle sales strategy - you have to question whether that will be successful in the cloud where there is more competition and more freedom,” Warrilow added.

He said that, in many ways, Oracle needs to overcome itself before it can be successful in the cloud.

“[Oracle will] definitely have to reinvent their own go-to-market. Microsoft have done all the hard yards in that respect and it has taken many years to do that transformation. Oracle is going to have to do that to get the new opportunities," Warrilow said.

“They are not going to go out of business anytime soon because they have such an entrenched business, but as the move continues toward cloud, they need become more cloud friendly,” he said.

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Ellison loves a target

Oracle chairman, Larry Ellison, made big claims relating to the company’s chances in the cloud market at Oracle’s Openworld conference in San Francisco in 2016, leaving many questioning if the company understood the tough road it has ahead to catch its rivals.

Larry Ellison - Chairman and CEO, Oracle
Larry Ellison - Chairman and CEO, Oracle

“It is very clear Larry [Ellison] has painted a target on Amazon and I don’t know if that is the right target for Oracle,” Warrilow said. “I think their opportunity, and where customers want them to be is more in that PaaS space and in the SaaS layer."

According to the analyst, the race to catch Amazon is not one that Oracle can win in the Infrastructure-as-a-service (IaaS) space.

True to form, Oracle has also recently changed the terms of its licensing agreements to effectively double the cost of Oracle workloads running on AWS or Microsoft Azure.

“Is that going to engender people to trust them in the cloud when that was their first foray and now that they are getting more interested in targeting it directly, and they suddenly double the price for customers who are running Oracle in the cloud?" Warrilow said.

“What do those customers do? Do they pay that tax? Or, does it make then consider non-Oracle technology?"

Warrilow warned that if the company continued its old practices in the cloud, it runs a risk of customers jumping ship, a process which is much easier in the cloud than in a traditional sales model.

“If they are true in that the cloud is their future, they are going to have to realise that, and this is not a good indication in that respect,” he said.

Deep customer base

Oracle is not in danger of going out of business in the short term, as the company still has a broad install base in database management services, which will sustain it.

UXC Red Rock is Oracle’s largest Systems Integrator (SI) partner in the local region and is a pure Oracle shop.

For the company's managing director, Phil Milne, the timing of the local cloud launch was right for the region both for current Oracle users and potential customers.

Phil Milne - UXC Red Rock managing director
Phil Milne - UXC Red Rock managing director

“The data tells us that about 50 per cent of CIOs are looking at cloud solutions, whether that be hybrid [or in other forms], but the certainly have a cloud first strategy, and they are looking at those kind of solutions,” he said. “I think the market is mature enough now to be embracing what Oracle now has to offer.

“Many of our customers have invested heavily in Oracle all the way up and down the stack. I think this just rounds out the offering that Oracle has here locally," he said.

Milne said Red Rock’s customers are a mixture of companies which have some workloads running with other cloud providers and those which have stayed loyal to the vendor.

“For many, Oracle is a part of their cloud strategy and for them it is just easier [to move to the Oracle cloud],” he said. “Many of our clients have Oracle apps, some of which are on premises, and the new offering makes it much easier for them to migrate those on to the Oracle platform.”

As a subsidiary of CSC, the company also has a number of clients with non-Oracle workloads and Milne said that this presented the company with an opportunity to migrate those workloads to the Oracle platform or infrastructure services.

“We will be driving the Oracle workloads onto the Oracle cloud, but once we have done that, many of our customers will then look at other non-Oracle workloads and seek for us to offer a solution there within Oracle, and as part of the larger CSC, we can offer all of those solutions," Milne said.

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For Warrilow, there will always be those customers who want Oracle for different workloads.

"And having the option of cloud or on-premise in Australia is a good thing and that will help them with the PaaS and SaaS layer,” he said. “But unless they play nice, they just accelerate the consideration of non-Oracle technologies, that’s their big risk.

“There certainly continues to be negative sentiment around how they treat their customers, but there are some big workloads that Oracle continues to have and, worst case, if you don’t want to invest in the skills yourself, putting [workloads] in an Oracle cloud is better from a technical debt perspective than having to do it yourself in-house," he said.

The race to catch AWS and Microsoft

Despite claiming an incumbent customer base, investment in infrastructure, and disparaging remarks toward competitors from its founder, Oracle still has some catching up to do if it is to challenge the likes of AWS and Microsoft.

In light of this, the question remains: is it simply too late to make ground in the cloud race?

“They have many years to catch up just to get into this race and billions of dollars that have to be spent. They are spending the money, how long they can afford to do that before the accountants start questioning the return [remains to be seen],” Warrilow said.

Local distributor, NEXTGEN, has worked with Oracle on cloud since the global Oracle Cloud Pilot in 2014, and distributes all the vendor’s cloud offerings.

NEXTGEN managing director, John Walters said the company has also invested in the vendor’s cloud offerings.

John Walters - NEXTGEN founder and managing director
John Walters - NEXTGEN founder and managing director

“We are continuing to see strong evidence of cloud sales accelerating across the country, giving the channel a significant opportunity to harness that momentum,” he said.

“Oracle’s investment in now providing Oracle Cloud Platform and Infrastructure solutions locally will increase the momentum,” he said.