Does Oracle have a shot in the public cloud vs. Amazon and Microsoft?

Starting from scratch, Oracle’s got a solid foundation, but a long way to go, analysts say


Larry Ellison has voiced fighting words at Oracle’s OpenWorld conference this week, announcing that Amazon Web Services’ lead in the IaaS market is over and that AWS will have “serious competition going forward.”

But does Oracle actually have a shot versus AWS and the company many see as the second place vendor, Microsoft?

“It depends,” says Gartner distinguished analyst Lydia Leong, author of the annual Magic Quadrant benchmark report for the public Infrastructure-as-a-Service cloud market.

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On the plus side, Oracle has a large installed base of customers to sell its IaaS offering to. Despite losing some business to NoSQL newcomers, Gartner research shows that last year Oracle was still the top database management market vendor with 41.6% share in that $36 billion industry; Oracle’s a top 10 SaaS vendor too, according to Synergy Research. But the infrastructure cloud market is a different game, one dominated by AWS, Microsoft’s Azure and Google Cloud Platform. The Cloud Security Alliance estimates that those three vendors hold 82% share in the $22.4 billion IaaS market. Oracle is joining a crowded field of vendors looking to catch up with those top cloud providers.

Oracle has multiple positive attributes going for it in its fight for market share in the IaaS market. First of all, it’s got cloud industry talent, the result of a hiring binge over the past few years. Oracle’s senior vice president for cloud development is Peter Magnusson, a former Google engineer, and its vice president of engineering, Don Johnson, spent eight years at Amazon helping build AWS.

“They understand how to build a functional cloud,” Leong says about Oracle’s brass.

But Oracle is building an IaaS cloud from scratch, so the company has a long way to go. Last year at OpenWorld - nine years after AWS introduced its Elastic Compute Cloud - Oracle launched its IaaS cloud, which included virtual machines, databases and storage. This year Ellison unveiled what he called Generation 2 of Oracle’s public cloud.

Leong says what Oracle has built thus far basically amounts to a minimally viable product to begin competing with AWS, Microsoft, Google, IBM and the others already gunning for IaaS workloads.

“Today you should think of the new Oracle cloud IaaS as a significant improvement over what they had, a foundation that it looks like they’ll be able to build upon that’s been well executed in a relatively short amount of time,” Leong says. “It’s many years behind AWS and Azure, and it’s behind Google. But it’s a fundamentally sound approach.”

Oracle cloud: Generation 2

Generation 2 of the Oracle cloud has a handful of components beyond the basic virtual machines, block storage and database as a service offerings of the Generation 1 product. The virtual network controls physical hosts, providing customers with what Oracle claims are high input/output transaction speeds and low latency. A “flat” network – as opposed to a spanning tree network – means no two compute or storage nodes are more than two hops away from one another, says Deepak Patil, vice president of development at Oracle, who was formerly general manager of Microsoft cloud infrastructure. Connections between any two compute or storage nodes are all within 100 microseconds in each Oracle Availability Domain. Other components of the cloud include:

Oracle Bare Metal Cloud Services

Bare metal servers are non-virtualized physical compute nodes (meaning there is no hypervisor running to create virtual machines). Giving customers access to the physical machine is helpful for high performance applications, such as database, or running Hadoop, Spark or other applications with high input/output demands or that need a lot of memory. IBM has a bare metal cloud offering with SoftLayer, but Oracle says its bare metal will be faster-provisioning because of its software-defined network underlying it. The bare metal service will be available in early October.

Oracle Container Cloud Service

Latching on to the hottest buzzword in the cloud, Oracle has announced plans for a cloud platform dedicated to running and managing Docker application containers. It will include registries for tracking container images, application orchestration, scheduling and scaling services, Oracle says. It will be available around the start of 2017. Amazon, Microsoft and Google each have container platforms on their clouds.


Sensing an opportunity in the market, Oracle is expanding on its Cloud@Customer service, which allows customers to run infrastructure available from the Oracle Public IaaS cloud behind their own firewall. Cloud@Customer was previously available but new offerings this year include Big Data@Customer for analytics and Exadata@Customer. For all of these offerings, customers rent the infrastructure capacity and only pay for it as it’s used. Microsoft has a similar offering named Azure Stack, which has been delayed in coming the market. Neither AWS nor Google has anything like this.

Not just IaaS

Oracle officials say they have another advantage in the cloud: They will package IaaS with the company’s growing SaaS and Platform-as-a-Service offerings.

“Cloud is not just about infrastructure as a service,” says Oracle senior vice president for Integrated Products Amit Zavery. “The way we define it is software as a service, platform as a service and infrastructure as a service.”

Zavery acknowledges that Amazon was first to the market with AWS. But he notes that Oracle began offering SaaS 10 years ago, too. “They have a lot of catch-up to do in an area where we are already a leader,” he says.

More bluntly, Ellison in one of his keynotes said AWS is 20 years behind Oracle when it comes to SaaS.

The price/performance metric

One of Ellison’s chief talking points for Oracle cloud is its price/performance ratios. Oracle’s largest virtual machine instance size is larger than AWS’s top tier VM.

Leong, from Gartner, suggests taking this with a grain of salt though. Prices in the cloud market are known to change frequently, and there are many different accounting practices used to bill customers, from on-demand instances to reserved instances to spot instances. Vendors are constantly rolling out new VM instance sizes. too.

Furthermore, Google has more of a reputation for offering bottom-of-the-market pricing for infrastructure services compared to Oracle, which has not been known to be a company that wins on low-cost pricing.

What to watch for

Oracle and Ellison are no strangers to hype. It’s one thing for a vendor to talk a big game about the cloud; it’s another to actually see execution in the market at scale. Other companies, like Verizon, have proposed a large IaaS play but not followed through. Leong says Oracle has years worth of development ahead of it to get on par with IaaS market leaders.

“Oracle is a latecomer to the public megacloud market and is not yet a leader, but our latest evaluation of the global public cloud market shows it is coming on strong,” wrote Forrester cloud analyst Dave Bartoletti in an email, noting Oracle’s strong platform for hosting databases as well as Java apps. “While Oracle IaaS solutions are lagging today, and the IaaS business generates less than $1B (Forrester estimate), enterprises should not count Oracle out - the historic shift the vendor is making to the cloud rivals the shifts IBM and MSFT have made, and we're excited to see what's next.” 

Copyright © 2016 IDG Communications, Inc.

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