Is Oracle Cloud Building A Moat In Cloud City?

When equity analysts and investors ask me about “The Cloud Wars” and how the public cloud is impacting the traditional technology market, my answers usually start with the origins of each respective public cloud. Who were the first use cases of each public cloud, or public cloud service, designed for? How can each public cloud grow/compete/partner over time as it evolves from it’s core to serve other clients and use cases? What are the business and digital transformations these public clouds will enable and what are the related economic benefits from these models?

The Past

Understanding Oracle Public Cloud in this historical context is important as Oracle is investing heavily in cloud computing as well as increasing the volume of their public cloud marketing. The following definition of Cloud Computing, by Oracle’s then-CEO in 2008, was made more than two years after Amazon Web Services launched their virtual compute platform, EC2 ( and in our view is critical to understanding how Oracle’s senior leader viewed public cloud at this time:

Software startups born after the launch of Amazon EC2, were generally born outside of the Oracle software and product ecosystem. These startups deployed mainly open source software stacks on EC2. And these early adopters of EC2 grew like crazy because they hooked up software development and operations teams (more on DevOps here) to enable patterns of development and deployment that were not possible before public cloud integration. These teams also developed more efficient cost models for both consumption of public cloud as well as the related infrastructure support costs.

The fact that these startups (Netflix, etc.) were developing their offerings natively on EC2 may explain why Larry Ellison in 2008 didn’t have a more competitor-focused response with respect to cloud computing. The status quo for software development teams was already breaking in 2008 and Larry Ellison didn’t appear to be aware. Jeff Bezos, Andy Jassy and the S-team at Amazon Web Services knew the race was on because Amazon was already seeing the benefits of AWS internally and they could do the math on the $3 Trillion dollar global technology marketplace that they were disrupting.

The Present

We need to understand who the first use cases of Oracle Public Cloud are designed for and what transformation profiles do they create. Oracle’s 2016 OpenWorld served as Oracle’s public cloud debut for Bare Metal Cloud and it’s supported OS’s. The premise of the Oracle’s Bare Metal Cloud is that a client can take their data center environment and bring it natively over to Oracle’s Public Cloud, reducing the changes necessary to migrate including their Oracle software and related infrastructure. This migration approach to Oracle’s public cloud appears to ask clients to spend (significant) time planning/executing a parallel migration versus enabling a digital transformation as part of the migration.

In Cloud City Ventures’ view, the whole point of moving to public cloud is to break the status quo of current IT operations models. We find it difficult to justify asking clients to replicate their entire data center stack/SDN in a public cloud. Why would a client spend business cycles moving to public cloud if it doesn’t offer the ability for new software development initiatives? Migrating to Oracle Bare Metal Cloud appears to change only the underlying physical infrastructure ownership in the data center environment; instead of running it on client hardware you are now using Oracle’s hardware but you haven’t changed your IT operating model.

What DevOps or CI/CD patterns are being run on top of Oracle Cloud today to support software development by clients? Please use the contact us form if you are deploying software development processes in Oracle Cloud, we want to chat and would like to update this post with client case studies. These sessions at a recent Oracle Cloud event in San Francisco were the closest cloud-native developer use cases for Oracle Cloud we could find.

In Larry Ellison’s keynote presentation on 9/18/16, he stated “Amazon’s lead is over. Amazon is going to have serious competition going forward. And we’re very proud of our second generation of Infrastructure as a Service. We’re going to be focusing on it and aggressively featuring it not only during Oracle OpenWorld but for the remainder of this fiscal year and next fiscal year and the year after that.”  It appears that Oracle launched their Bare Metal Service, 8 years after AWS EC2 debuted, with a focus on competing and limiting public cloud competitors like AWS, Azure and Google to go after Oracle’s core business.

The Cloud City Ventures view is that Oracle’s current public cloud approach serves as a moat to guard the status quo of existing Oracle client deployments. Data points are available about Oracle’s strategy including the January 2017 licensing cost adjustments (Register) for Oracle clients running on a competitor’s public cloud. This licensing tactic negatively impacts Oracle clients’ financial incentives to migrate to AWS and other public clouds with their existing Oracle products. We think the Register is reporting a tactical data point about how Oracle’s public cloud offering will grow/compete/partner over time as their public cloud moat is constructed while prolonging existing on-premise customer deployments of Oracle’s software and hardware.

Last week (February 27, 2017) Oracle also expanded its Oracle Cloud at Customer Portfolio to include Database Workloads with Oracle Exadata Cloud Machine. “Continuing to help organizations simplify cloud adoption by bringing the benefits of the cloud inside their own datacenters, Oracle today announced the expansion of the Oracle Cloud at Customer portfolio with the availability of Oracle Exadata Cloud Machine.”

From the press release Oracle stresses the unique benefits of data center and cloud parity in their expanded offering. “The Oracle Cloud at Customer portfolio of services enables organizations to get all of the benefits of Oracle’s public cloud services in their datacenter. The business model is just like a public cloud subscription; the hardware and software is the same; Oracle experts monitor and manage the infrastructure; and the same tools used in Oracle’s public cloud are used to provision resources on the Cloud Machine.  This is the only offering from a major public cloud vendor that delivers a stack that is 100 percent compatible with the Oracle Cloud but available on-premises.”

AWS launched EC2 in 2008 with a focus of providing a platform for business transformation geared at software developers. After successfully migrating from Oracle to AWS Aurora (or other public clouds), clients can spend their next business cycles immediately transforming, modernizing software patterns and moving faster than their competitors. The whole point of getting to the transformation as quickly as possible is to not perpetuate the status quo.

The Future

Clients and partners should ask themselves if they are breaking the status quo with their cloud projects.  If they aren’t, you can guarantee that the competitors will be breaking it. Curious about continuing this discussion?  If so, please contact us and we’d be happy to discuss further with you.