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April 12, 2017

Oracle serves a profitable slice of cloud

IaaS revenue sharesAmazon Web Services and Microsoft's Azure receive the established reputation for cloud resources. Oracle is the new player in the Infrastructure as a Service (IaaS) game. Within a month after Oracle announced sustained profitability on its cloud operations, Stromasys rolled out its plans for offering HP 3000 virtualization through Oracle Cloud.

Oracle's spring numbers showed the third straight quarter of increasing revenues overall, even while its business in application software declined throughout those months starting in mid-2016. Cloud growth, primarily in platform and software services, is making up the difference at Oracle. Oracle means to get its slice of the cloud's pie. Oracle is not on the chart from 2016. But neither is Salesforce, a company with 4 million subscribers. Revenues are not the only meaningful measure of the clout in cloud computing.

Rodney Nelson, an analyst at Morningstar, said the results show "new cloud revenues are more than offsetting the declines in software license sales." Oracle's CEO Larry Ellison said that Oracle Cloud will eventually be the vendor's largest business, outpacing revenues from the application suites that built the $40 billion a year giant.

The coincidence of a new platform for HP 3000s arriving on the cloud hosts of HP's most ardent competitor is profound. Hewlett-Packard's Enterprise business has cast off the futures of MPE/iX and OpenVMS, exiting markets that were still growing, albeit at low rates. The trends away from legacy infrastructures like proprietary OS on vendor-built hardware are mirrored in Oracle's shifts.

New software licenses, a measure tied to Oracle’s on-premise software business, declined in the latest quarter by 16 percent. The decline was smaller than the drop of 20 percent posted in Oracle's fiscal second quarter. This is the pattern HP's own Mission Critical Business operations followed. Ultimately, trends like that led to dividing HP into two companies. When profitable business shrinks, the computing model must be changed. Those changes track with the concept of eliminating the need for on-premise hardware to host MPE/iX operations.

Oracle's Cloud business includes the traditional Platform as a Service and Software as a Service divisions. It also contains the Infrastructure as a Service offering, the spot where the competition is sharpest for new business. In addition to Amazon and Microsoft, the IaaS pie has existing slices of Google, IBM, and Rackspace, among the major players. Oracle is still making its way to the table while it announces increasing revenues and profitability. There has been doubt about the future of IaaS at Oracle, but the latest numbers dispel some of that uncertainty.

IaaS provides what Stromays needs to host 3000s in the cloud. An IaaS vendor hosts hardware, software, servers, storage and other infrastructure components on behalf of its users. Some IaaS providers also host users' applications and handle tasks including system maintenance, backup and resiliency planning. Those are all tasks the MPE/iX community handled with on-premise staff and systems. Clouds such as Salesforce.com, the heartland of the ERP system Kenandy, hope to eliminate all hardware needs for client companies, except for the laptops, desktops and mobile devices that access the infrastructure.

IaaS environments like Oracle cloud will include of administrative tasks, dynamic scaling, virtualization and policy-based services. While that last item is more of a mainframe-grade artifact, admin and scaling are genuine needs for any company continuing with MPE/iX. IaaS customers pay on a per-use basis. The Stromasys-Oracle bundle includes one year of IaaS service. Some providers charge customers based on the amount of virtual machine space they use. This has not been mentioned in the Stromasys rollout of Charon on the cloud.

 

is further divided into three sub-segments:

  • Cloud (SaaS + PaaS) + On-Premise Software
  • IaaS
  • Maintenance and support

where SaaS = Software as a Service, PaaS = Platform as a Service, and IaaS = Infrastructure as a Service.

Note: This article assumes the reader understands the differences between the three major cloud business categories above (SaaS, PaaS, and IaaS).

Strong SaaS plus PaaS Growth, But IaaS Is a Different Story

After publicly attacking the idea of cloud computing for some time, Larry Ellison and Oracle launched the Oracle Public Cloud service in late 2011, and since that time, the company has touted double-digit growth year over year for its cloud-based business. In the company's recent Q2 FY 2017 press release, Chief Executive Officer Safra Catz notes:

"(For) four consecutive quarters, our Cloud SaaS and PaaS revenue growth rate has increased. As we get bigger in the cloud, we grow faster in the cloud."

Another quote from Founder and Chief Technology Officer Larry Ellison in the same releases states:

"We expect our...IaaS business will grow even faster than our skyrocketing SaaS business."

06:19 PM in Homesteading, Newsmakers | Permalink

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