Why Oracle’s Cloud Is Not State of the Art

If you listen to Oracle’s quarterly earnings calls, you might get the impression that all is right in the world of Oracle cloud. After all, it was just last year in Q4 2018 when Oracle announced that it had seen growth in its cloud adoption and had $1.7 billion in cloud revenue for the quarter. 

But as I, and many other industry analysts pointed out at the time, Oracle was decidedly unclear in how it was actually earning that revenue from it’s cloud. Unlike on previous earnings calls, it lumped in software, infrastructure, and its cloud offerings into that larger revenue number, and there was no way to tell how much was actually being made off of its SaaS, IaaS, and PaaS products. As Stifel analyst Brad Reback said at the time, “While Oracle’s stable maintenance base is a cash cow, we believe the company is rapidly losing share in the most interesting areas (PaaS/IaaS) of infrastructure software.”

As I’ve argued before, I think Oracle’s claims that its cloud is not only being widely adopted but state of the art in terms of technology are exaggerated. 

One reason that Oracle may now be less than transparent in terms of their cloud adoption and usage is that the product isn’t being used because it lacks business-case to justify the cost and in some cases is simply not a better alternative functionally to what customers run today. 

Take Oracle SaaS for example, Oracle has been very public about their intentions to migrate existing ERP customers to Oracle SaaS where Oracle customers pay Oracle “three-to-one, sometimes more than three-to-one” than they pay today. If this is true, then the ROI would have to exceed 3:1 minimally, to “rip/replace/re-implement” existing ERP assets for Cloud SaaS versions. 

(Source: https://www.forbes.com/sites/jasonbloomberg/2017/07/11/oracles-cloud-strategy-ruthless-or-byzantine/ )

There is also a lot of evidence to support that contention that it isn’t being used because it doesn’t provide quality. Consider this account from one Oracle Cloud customer which has apparently leveraged a wide-range of Oracle Cloud Services. According to this customer’s experience, you need to consider how life is once you are implemented in the Oracle Cloud itself vs. the marketing hype beforehand (3X, 10X, 100X…) – things like the reality of performance, outages, disaster recovery, interoperability as well as the reality of what you may pay even with cloud credits and the quality of support you’ll receive. 

If we are to analyze these criticisms and seek to understand WHY one of the world’s largest software companies has struggled to make the shift to offering its software in the cloud, we can see a few signs:

For one, Oracle Cloud relies upon largely the same support processes and organization as their traditional on-premise software. In addition, Oracle does not run its own cloud data centers. It rents space from Equinix and other providers. Thus, if a problem occurs, Oracle relies on those providers to make customers whole. This adds a layer of support complexity between the customers and what is already widely acknowledged as not the most customer-friendly support organization in the world.  

Here is one consulting response to an Oracle EBS customer’s inquiry about lift and shift to Oracle Cloud Infrastructure (OCI). 

“We’ve completed a few migrations to OCI. Incl. production environments as well. But we are still not recommending it to our customers! Whereas on the other hand you can recommend AWS without thinking about it! One of the main issue we are facing when it comes to OCI is the Oracle support. With OCI your in exactly the same support as you’re with all other products. So, once you are facing an issue you’re locked in the huge standard support processes. Which maybe take days until you get a technical dev person and the issue solved. 

(Source: Oracle Applications Digest for Wednesday September 18, 2019: “Are you planning to deploy EBS in the Oracle Cloud Infrastructure? Or want to know more about EBS on OCI?”)  

One of the main benefits of moving to the cloud is the ability to quickly develop new applications at cloud-speed and cloud-scale. As I wrote in Forbes, Oracle’s cloud isn’t focused on supporting developers or creating an open ecosystem where it’s easier for apps to be built – instead the Oracle Cloud must first and foremost run on Oracle database, applications and middleware software, and Oracle-proprietary hardware.

An article in TechRepublic from March 2018 pointed out, citing a survey of developers, “Ask developers what databases they love most, and Oracle barely squeaks into the top-20 (in the twentieth spot). Amazon, Microsoft, Google, MongoDB, and other vendors all make the top-10. One area that Oracle does shine, however, is in the list of ‘Most Dreaded’. databases: Oracle comes in second, trumped in developer animus only by IBM’s DB2.”

The other challenge simply is Oracle too far behind to catchup to the market leaders in this space? For many years Oracle was a public detractor to the very notion of the cloud, calling it “Water Vapor” and “Gibberish”. 

Only once market dynamics dictated, did they shift their story, but by this time, AWS and others had a dramatic head start in a business that involves a fundamentally new way of consuming and operating IT resources compared to how Oracle has sold and serviced customers for 20 years. 

A TechRepublic article indicated that Oracle’s cloud growth was at 23% in the fourth quarter of 2018, which was less than half of the growth for AWS. As the author of the article notes, “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…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.”

Even relatively neutral industry analysts like Gartner, whom Oracle has had a paid relationship in the past, has called Oracle’s cloud a niche player in the larger cloud landscape. Gartner has also labeled Oracle’s cloud a “Tier 2 bare bones minimally viable product that’s not ready for production workloads”. An independent analysis by Brightwork research brought together many assessments of Oracle’s cloud, all of which illustrated the point that it is a flawed product that few people seem to want to use willingly when not compelled by Oracle due to a part of larger contractual negotiations.

All of this suggests that Oracle is struggling to adopt its business model to the cloud, while holding on to legacy software and support models and facing stiff competition from “Cloud-native” competitors. 

Compounding matters is a recent lawsuit against Oracle which claims 90-95% of Oracle Cloud deals in North America were the result of “Audit-Bargain-Close” sales tactics – where former employees, who had visibility into Oracle’s North American cloud sales, “confirm that 90-95% of those cloud sales were engineered deals, including ABC deals that were driven by “audits or the threat of audits.” Specifically, FE 2 reported that 90-95% of the cloud deals FE 2’s team dealt with had no “use cases” attached to them.”

(Source: https://www.tacticallawgroup.com/uploads/5/2/9/1/52915149/city_of_providence_v._larry_ellison.pdf) 

With all of these factors considered, it is reasonable to assume Oracle Cloud is struggling in adoption because the business case simply isn’t there compared either to what customers already run today or the other cloud alternatives that exist. With its software and hardware offerings, Oracle has been able to use its unique sales and auditing practices to expand usage. But those practices are not a sustainable business model with cloud when there are so many viable, high performing alternatives.

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Author: Dan Woods

My mission: Find technology for Early Adopters. Follow me on Twitter @danwoodsearly and on LinkedIn www.linkedin.com/in/danwoodsearly/. I am a CTO, writer, and consultant. For tech vendors, I help explain their technology. For users, I help find, select, and deploy new solutions that have explosive business value. I love to speak and share ideas.