Gartner reveals one big reason Oracle’s cloud hasn’t caught on

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by | May 31, 2018

Oracle is its own worst enemy when it comes to its cloud ambitions.

Oracle’s IaaS and PaaS businesses have registered tepid growth, despite a market that keeps dramatically lifting Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. There are, of course, plenty of reasons for Oracle to lose, but there are no good reasons for Oracle to lose like this. As Gartner has revealed in its latest Magic Quadrant report: “Oracle sometimes uses high-pressure sales tactics to sell its cloud IaaS offerings, including software audits or threatening to dramatically raise the cost of database licenses if the customer chooses another cloud provider.”

It’s the same old Oracle, but that’s not what customers want in the new era of cloud.

Work on the product, not the pitch

No one who has followed Oracle over the years will be particularly surprised by such sales tactics. One problem with this approach, however, is that it prevents Oracle from dealing with the real problem: The product.

Oracle’s second-generation product, named Oracle Cloud Infrastructure (OCI), was launched in November 2016. A year-and-a-half later, however, Gartner says it “remains a bare-bones ‘minimum viable product,’ and it is arguably too minimal to be viable for a broad range of common cloud IaaS use cases.”

Given that it can’t even muster an MVP, what’s it good for? Not surprisingly, it’s really only good for existing Oracle customers that are susceptible to Oracle’s high-pressure sales tactics: “Oracle application hosting, applications that use Oracle Databases on Exadata, and use cases that require bare-metal servers to be provisioned within minutes,” as noted by Gartner.

Yet, despite Oracle’s longstanding database dominance, OCI “has limited enterprise customer traction,” Gartner noted.

The sales tactics aren’t working, Oracle. Even as AWS accelerated growth to 49% on a massive installed base, Oracle told analysts it will be fortunate to grow 23% in Q4 2018, despite a Lilliputian base.

But maybe it’s impossible

As ZDNet’s Larry Dignan reported, while AWS and Microsoft dominate the cloud, Google has carved out a strong third place for itself by pushing its machine learning strengths. AWS is the cloud leader with the broadest portfolio of services. Microsoft offers a compelling hybrid story for customers that first invested in Microsoft’s server offerings and now want to get to the cloud. Each of the big three has solid differentiation. Oracle’s differentiation is that it’s Oracle. It turns out that this isn’t the kind of positive differentiation it can build a cloud business on.

This isn’t helped by another critical thing it lacks, but which each of the big three vendors has in spades: Operations experience. Expedia vice president Subba Allamaraju nailed this in a tweet: “There is a reason for large Internet scale operations companies to also become successful cloud companies. It’s the ops culture. Running a cloud, or even on a cloud, means becoming an operations company.”

Oracle, for its part, has no internet-scale business. It doesn’t understand the kind of scale that comes naturally to a company like AWS, which has been scaling out its infrastructure for years.

Perhaps this is one reason Oracle has been so slow to spend on data centers. Starting in 2014, Oracle kicked up its CapEx for cloud, with cumulative spending of $3.5 billion. While that sounds like a lot, the big three cloud vendors each spends about that much every quarter, as Charles Fitzgerald highlighted. Oracle has tried to convince the world that it spends less because its data centers are so much more efficient and powerful than those of the big three, but this is simply not the case.

Oracle, quite simply, hasn’t built a cloud product that the general market wants, and it hasn’t built a culture that makes its dedicated database customers want to invest deeper with Oracle. It’s a lose-lose proposition.


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