Cloud

Why Oracle needs to follow Microsoft's lead in its cloud strategy

Microsoft didn't try to beat AWS at its own game, and neither should Oracle. Rather, the company should focus on legacy workloads to remain competitive.

cloudladders.jpg
Image: iStockphoto/mushakesa

Oracle talked a big cloud game at the 2016 Oracle OpenWorld, but it's arguably telling the wrong story. Oracle insists it will compete vigorously on price and also on innovation, claiming its complete cloud stack ownership gives it a competitive advantage against AWS. Neither, however, is true, and neither speaks to Oracle's most compelling strength in the cloud: Oracle's legacy enterprise business.

Though CIOs seem ready to pack up and leave their datacenters (and packaged software) behind, Microsoft has demonstrated that the best way to beat AWS isn't to ape it, but rather to hit it where it ain't: Legacy workloads. Sure, "megavendor transitions [are] difficult," as Gartner analyst Merv Adrian has suggested in light of Oracle's painful push to cloud, but a blended strategy could help Oracle make the leap.

Kiss that datacenter goodbye

Though CIOs have dragged their feet on public cloud adoption, lines of business and the developers who serve them have not. It's not surprising, therefore, to see a new McKinsey & Co. survey of 800-plus CIOs showcase a frenetic race by large enterprises to move workloads to public cloud infrastructure:

premise.jpg

So far, this shift is disproportionately benefiting so-called "hyperscale" cloud vendors like Amazon Web Services, Microsoft Azure, and Google Cloud. As the McKinsey report authors explained, "Enterprises have a clear preference for hyperscale providers because of the capabilities they offer, balanced with concerns about vendor lock-in." Today this translates into 48% of large enterprises moving at least one workload to these hyperscale clouds, but by 2018 that number is projected to jump to 80%.

SEE Microsoft Azure doubles its lead over Oracle, IBM

Oracle, with a mammoth legacy business to protect, has delayed its full-scale entry into the public IaaS market, even as it has acquired its way into the SaaS and PaaS markets in a significant way. Long deriding cloud computing as little more than "vapor," Oracle is now aggressively telling the market it's serious about the public cloud.

How serious? Serious enough for Larry Ellison to declare: "Amazon's lead is over. Amazon's going to have serious competition going forward."

To support this claim, Oracle rolled out a bevy of cloud offerings, with president Mark Hurd insisting that the company's ownership of "the entire [cloud] stack" means that Oracle will "get the opportunity to bring in best-of-breed components [and] also to optimize them as an integrated system." This is, of course, something that Amazon has done for years, so it's hardly revolutionary.

Also, Oracle isn't likely to beat AWS on price. Though Oracle has trumpeted 20% discounts on AWS pricing, Gartner's Lydia Leong has reminded us that this strategy hasn't done much for Google: "20% isn't sufficiently less in a world where Google competes far more intensely on price."

If not on price or innovation, where could Oracle dent AWS' fortunes?

Be like Microsoft

The answer very likely comes from Microsoft, the company that most closely resembles Oracle. Despite AWS' huge lead, Microsoft has managed to make Azure a strong competitor to AWS. But, unlike Oracle's public posturing, Microsoft hasn't chosen to go head-to-head with AWS. Rather, it emphasizes assets that AWS simply can't match: Its legacy business.

SEE Amazon still crushing cloud competition, says Gartner Magic Quadrant for IaaS

Early on, Microsoft has talked about the ability to blend Microsoft Azure public cloud workloads with enterprise data assets, and has done a superlative job of tying the two together. Oracle, which has a huge database and applications business, among other assets, could do much the same, even though it doesn't have the platform assets that Microsoft does.

Talking up innovation won't do it. No one can out-innovate Google in the area of data infrastructure, but Google cloud chief Diane Green has been quick to discard that innovation as a real competitive differentiator, given that AWS and Microsoft also offer these advantages.

Talking down prices won't do it, either. Public cloud pricing has been in freefall for years and it hasn't dislodged AWS' ability to charge a premium even as it lowers prices. No, to compete, Oracle's best strategy is to be both new Oracle and old Oracle, and help its customers make sense of the two worlds.

Also see

About

Matt Asay is a veteran technology columnist who has written for CNET, ReadWrite, and other tech media. Asay has also held a variety of executive roles with leading mobile and big data software companies.

Editor's Picks

Free Newsletters, In your Inbox