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Jean is a senior industry analyst focusing her research on server technology, storage technology, database software and the emerging market for Software Defined Infrastructure (SDI).

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Oracle OpenWorld 2016: It's All About the Cloud

From the start of Larry Ellison’s Sunday night keynote on Sunday night, it was apparent that the dominant theme at the week-long  Oracle OpenWorld 2016 could be summed up in two words: The Cloud.

Ellison, now Oracle chairman and CTO, signaled the direction the company is taking – a strong move to support cloud deployments on-premises, off-premises – or both, via hybrid cloud. He identified Amazon Web Services (AWS) as a prime competitor – and reinforced that positioning in his second keynote on Tuesday. Oracle executives spoke openly of the strong influence Ellison is having on Oracle product design, since he stepped aside as Oracle CEO in 2014.

His central theme: Oracle is a fast-growing cloud company. In Oracle’s quarterly financial report, published Sept. 25, showed an annual run-rate of $2 billion in SaaS and PaaS revenues alone for the $36.5 billion company. It also showed 80%+ growth for these market offerings, year-over-year. Oracle also announced a second-generation IaaS service, leveraging Oracle Cloud data centers, with competitive pricing for other IaaS services from other providers, such as AWS.

Oracle made many comparisons to AWS in terms of cost and capabilities, but it did not highlight similar comparisons with Microsoft Azure, Google Cloud Platform and IBM SoftLayer. The competitive pricing is made possible by previous Oracle investments in internal infrastructure – much as AWS did when it first offered IaaS for test/development and cloud deployments eight years ago.

 

Oracle’s Portfolio for Hybrid Cloud

Ellison described an Oracle-wide effort to rewrite its software portfolio for SaaS and PaaS – a task now completed – and to introduce more IaaS services hosted by the Oracle Cloud public cloud. The leading products: The Oracle 12c flagship database, Oracle Fusion applications, Oracle WebLogic middleware, Oracle Enterprise Manager (OEM) systems-management software, Oracle ERP, Oracle HCM and applications for specific vertical markets (e.g. manufacturing, retail, transportation). Having a broad selection of industry-specific applications is a differentiator for Oracle, which both acquired and developed the applications internally over more than 15 years.

 

Enterprise Cloud Services

The cloud positioning is a clear sign to Oracle and its customers where Oracle is heading – with 19 data centers worldwide supporting Oracle Cloud services. Overall combined cloud services growth was about 40% year over year during fiscal 2016.

But Oracle’s strong suit – and chief differentiator, is the wealth of enterprise software that is now available for cloud deployments. High availability, reliability, security and other “ilities” rank high as priorities in the cloud portfolio, as more customers look to consolidate transitional enterprise workloads in their own data centers – and move many other apps and databases to cloud services.

To aid in this transition to hybrid cloud – which is taking place across the industry – Oracle is offering something new: Cloud@Customer, which installs Oracle’s engineered system (hardware and software), and is managed by Oracle, inside the customers’ firewall.

This is a new step in the adoption of cloud services – because it provides public cloud capabilities inside the organization’s firewall. The primary goal of this offering is to deliver a cloud-like experience for the many organizations that, for one reason or another cannot use a public cloud. Reasons for installing the on-site Cloud@Customer solution include concerns about security and the need to conform with data-governance/regulatory concerns in specific geographies.

 

What’s Different This Year

This positioning was very different from previous OpenWorld conferences, when IBM and SAP were named, year after year, as Oracle’s prime competitors. Now, the prime competitor named by Oracle executives is AWS. The cloud computing uber-theme pervaded each day’s keynotes and breakout sessions, pointing out the cloud-readiness across the Oracle products and services.

Oracle executives expect rapid migration to the cloud – which is a strong driver for Oracle’s move to update its software portfolio, to provide more cloud capabilities for SaaS, PaaS and IaaS.

 

How Soon Will Customers Adopt Cloud Services?

There is no question that most IT organizations are considering cloud – or have already moved part of their workloads to the cloud, leading to hybrid-cloud deployments. Often, that process begins by moving selected workloads – and seeing how that operationalizes the use of cloud services. Other workloads – applications or databases—follow, over time.

Oracle CEO Mark Hurd predicted a fast migration of key applications – with up to 80% of enterprise workloads running on the cloud by 2025. But there is a wider range of options – and many on-ramps to the cloud. Many Oracle OpenWorld sessions from vendors and customers made clear that companies will likely retain a mix of data-center infrastructure and connections to off-prem cloud services.

We believe the shifting and migration of workloads is happening – but that some enterprises will see a slower pace of adoption – given their expectations about SLAs (service level agreements), security or governmental regulations relating to on-site, or in-country, data protection.

Large companies named in videos or banners during the conference – many of which spoke in keynotes or breakout sessions – included Macy’s, Cerner, HSBC Bank, along with a variety of organizations, including ClubCorp, which manages data on behalf of private clubs, T-Mobile and Cognizant.

 

Key Takeaways

 Relating to the central cloud theme, here are key takeaways from the four-day OracleOpenWorld event:

  • Cloud is leading marketing and product development for the whole company. Ellison is chief catalyst within Oracle, as CTO, pushing R&D developers and engineering teams to optimize the performance of Oracle products for clouds and hybrid clouds.
  • Reframing of key competitors – Amazon Web services (AWS) and Workday vs. IBM and SAP. This was the most striking change in tone for this year’s OpenWorld. For Oracle Cloud, Oracle will manage the off-prem workloads on behalf of customers, Oracle executives said. The strategy is to have systems run and managed the same way on-prem, as off-prem – a vision that Ellison had mentioned more than five years ago, now available as Oracle services.
  • Addressing concerns about the cloud. Cloud@Customer, a new offering, will house Oracle’s engineered systems on-site at customers who would prefer to keep cloud computing “inside the firewall.” This can be viewed as a stepping-stone from on-prem to off-prem, prompted by customers’ concerns about security, and policies to comply with government regulatory policies (e.g. maintaining data within geographic boundaries, or regions).
  • Re-writing/updating software for the cloud. Expect Oracle to continue to update all major software products for the cloud. Examples include: Oracle Fusion applications, Oracle WebLogic middleware, Oracle Enterprise Manager (OEM) systems-management software, Oracle ERP, Oracle HCM and applications for specific vertical markets (e.g., manufacturing, retail, transportation). Now, Oracle plans to extend its existing channel partner ecosystem to sell more cloud-enabled versions of its enterprise software.
  • Cloud-first releases of new software. In the future, Oracle intends to release new versions of its flagship products in the cloud first; this has already happened with the Oracle Database 12c  Release 2 product, which is now being made available.
  • Balancing license revenue and subscription revenue. Cloud services are pay-as-you go, with revenue peaking during times when customers see intensive computing, such as seasonal busy periods [the holidays, sporting events and promotions], end-of-quarter, end of fiscal year. Oracle is betting that mission-critical apps will expand its total available market (TAM), and show strong growth overall, year-over-year.

 

Summary

The words ”enterprise cloud” best make the point that Oracle is offering the same enterprise feature-sets for off-prem cloud as it does for on-prem software. It’s worth considering that if the words “enterprise cloud” were emphasized in future marketing, Oracle could drive home the point that customers can retain the same enterprise “ilities.” As it competes with AWS, Oracle’s IaaS offerings should reflect the company’s historic affinity with enterprise workloads, such as ERP and database.

Those enterprise workloads have been made to run in the same way, whether they are on-prem or off-prem, reflecting Oracle’s work in 2015-2016 to support hybrid cloud throughout its software portfolio. Examples include: support for Docker containers, Kubernetes orchestration, and built-in, on-chip workload acceleration and security for Oracle’s SPARC-based hardware systems.

Oracle made clear that its strategy is to provide a broad portfolio of enterprise software and services for all three customer scenarios: on-prem, hybrid and cloud-based deployments. Its design goal is to provide end-to-end workloads and data portability, and integration between on-prem and off-prem deployment models. 

 

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Bozman HeadshotJean S. Bozman is a seasoned industry analyst with more than 20 years of experience as a consultant and industry analyst focused on the worldwide IT markets for databases, servers, storage and software. Jean's full bio

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