What’s the news: Buried in the Q4 and all FY announcement of Oracle was the CAPEX figure for Q4 of the last Fiscal year. And it was for the first time in the last eight quarters – more than 2B. YoY it was a close to 1B bump from 1.1B Q4 last year to a little more than 2B this Q4. CEO Saffra Catz seems to like 1.6B CAPEX spend, which was the number in in 5 of the last 8 quarters. But two quarters were just 1B, now Q4 2B+.
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Why it matters: You can’t build out a cloud in the real world without massive CAPEX investment. Look at the AWS / Amazon, Microsoft Azure and Google numbers. On the flip side Oracle execs are smart enough to not throw good money after bad money – e.g. put CAPEX $s in a non-working cloud infrastructure. So, at any chance given to me since 2014 I asked CEO Mark Hurd – when will Oracle spend more CAPEX? The answer has always been evasive… But at its OpenWorld conference, Oracle unveiled the 2nd generation of its IaaS solution. It now seems to get the CAPEX it needs to get real.
MyPOV– Good to see Oracle finally putting the CAPEX where its ambition is. PowerPoint and keynotes are cheaper than datacenters, Oracle knows this – but as said above, why spend into something that you know will be replaced (e.g. one year ago, internally, IaaS Gen2 was happening) and will have to be replaced later… So, this is good commercial acumen. But it’s only one quarter and Oracle will need a string of 2B CAPEX quarters (or even more) to make IaaS Gen2 a real offering around the world. It was interesting to see earlier this year that Hurd claimed higher data center efficiency due to the Oracle engineered chip to click stack… it was worth AWS data center guru James Cameron to respond (worth the read here). In short: Data center efficiency matters.
Here is one more ironic aspect in the IaaS race: AWS, Microsoft, Google and IBM (as the other top 5 IaaS providers) – should all (of course secretly) be pulling for Oracle. Why? We estimate 30-40% of enterprise critical systems are running on – or are inextricably linked to an Oracle database. So far – nobody has moved a substantial amount of these systems – not AWS (Oracle AMI since 6+ years), not Microsoft (heck, Microsoft even brought Linux into Azure to run Oracle – 4+ years ago). Why did no migration happen? Re-implementation and testing of enterprise grade systems has multiple red tapes on them. Never break a running system… so, enterprises did not move these systems. Now, if Oracle cannot move these system with IaaS Gen2 / DBaaS, and the help of the pretty driven (to say it nicely) Oracle Salesforce… then these systems will stay on premises – for a long time. It would be withering 10% reduction year over year (the rate of replacement of running, enterprise critical systems. Good news for the Cisco, Dell, HPs etc. and all who make money with on premises IT investments. Not so good for AWS, Microsoft, Google and IBM… so therefore they maybe (secretly of course) pulling for Oracle to be successful to move its database to the cloud. Once they are there – even if on Oracle IaaS – competitors can start chipping at Oracle in the cloud… we have seen that game for decades already.
CxO Advice: This is good news for a CxO running Oracle systems. When your vendor’s IaaS is more efficient and becomes real – then you are in for better (and likely cheaper) cloud computing. And it is good for the market overall, as more competition improves offerings and keeps the vendors sharp, all to the benefit of enterprises. CxOs running the Oracle database should consider pilots and collect experience with DBaaS on IaaS gen 2. Enterprises can’t miss out on an option to run critical systems with lower TCO. If you are not an Oracle CxOs, look on what is happening, and ask for similar performance and TCO for your RDBMS running in the cloud. Potentially take advantage of aggressive Oracle pricing – migration is a two-way street.
Future of Work / HCM / SaaS research:
Also worth a look for the full picture
And if you want to read more of my findings on Oracle technology - I suggest:
Why it matters: You can’t build out a cloud in the real world without massive CAPEX investment. Look at the AWS / Amazon, Microsoft Azure and Google numbers. On the flip side Oracle execs are smart enough to not throw good money after bad money – e.g. put CAPEX $s in a non-working cloud infrastructure. So, at any chance given to me since 2014 I asked CEO Mark Hurd – when will Oracle spend more CAPEX? The answer has always been evasive… But at its OpenWorld conference, Oracle unveiled the 2nd generation of its IaaS solution. It now seems to get the CAPEX it needs to get real.
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| From Oracle Q4 2017 / FY 2017 earnings call material |
MyPOV– Good to see Oracle finally putting the CAPEX where its ambition is. PowerPoint and keynotes are cheaper than datacenters, Oracle knows this – but as said above, why spend into something that you know will be replaced (e.g. one year ago, internally, IaaS Gen2 was happening) and will have to be replaced later… So, this is good commercial acumen. But it’s only one quarter and Oracle will need a string of 2B CAPEX quarters (or even more) to make IaaS Gen2 a real offering around the world. It was interesting to see earlier this year that Hurd claimed higher data center efficiency due to the Oracle engineered chip to click stack… it was worth AWS data center guru James Cameron to respond (worth the read here). In short: Data center efficiency matters.
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| Larry Ellison at OpenWorld 2016 - with TCO claims of Oracle Gen2 IaaS vs AWS |
CxO Advice: This is good news for a CxO running Oracle systems. When your vendor’s IaaS is more efficient and becomes real – then you are in for better (and likely cheaper) cloud computing. And it is good for the market overall, as more competition improves offerings and keeps the vendors sharp, all to the benefit of enterprises. CxOs running the Oracle database should consider pilots and collect experience with DBaaS on IaaS gen 2. Enterprises can’t miss out on an option to run critical systems with lower TCO. If you are not an Oracle CxOs, look on what is happening, and ask for similar performance and TCO for your RDBMS running in the cloud. Potentially take advantage of aggressive Oracle pricing – migration is a two-way street.
Recent blog posts on Oracle:
- News Analysis - Oracle empties the barrel - Revolver style (6) Cloud News Analyses - read here
- Musings - Does Oracle and Accenture make sense - or never ever! - read here
- Progress Report - Oracle HCM Analyst Summit 2017 - Oracle HCM stronger and stronger - read here
- Event Report - Oracle OpenWorld - the HCM perspective - Almost no news, but wait... - read here.
- First Take - Early Oracle OpenWorld 2016 Keynotes - read here
- Event Preview - Oracle OpenWorld 2016 - What to expect, what to watch for ... will IaaS start Clicking? - read here
- Market Move - Oracle acquires NetSuite - Oddly consolidation means more options for customers - read here
- News Analysis - Oracle Unveils Suite of Breakthrough Services.. or short: Oracle Cloud Machine - read here
- Progress Report - Oracle Cloud - More ready than ever, now needs adoption - read here
- Event Report - Oracle Openworld 2015 - Top 3 Takeaways, Top 3 Positives & Concerns - read here
- News Analysis - Quick Take on all 22 press releases of Oracle OpenWorld Day #1 - #3 - read here
- First Take - Oracle OpenWorld - Day 1 Keynote - Top 3 Takeaways - read here
- Event Preview - Oracle Openworld - watch here
Future of Work / HCM / SaaS research:
- Event Report - Oracle HCM World - Innovation around the Core - read here
- Event Report - Oracle HCM World - Full Steam ahead, a Learning surprise and potential growth challenges - read here
- First Take - Oracle HCM World Day #1 Keynote - off to a good start - read here
- Progress Report - Oracle HCM gathers momentum - now it needs to build on that - read here
- Oracle pushes modern HR - there is more than technology - read here. (Takeaways from the recent HCMWorld conference).
- Why Applications Unlimited is good a good strategy for Oracle customers and Oracle - read here.
Also worth a look for the full picture
- Event Report - Oracle PaaS Event - 6 PaaS Services become available, many more announced - read here
- Progress Report - Oracle Cloud makes progress - but key work remains in the cellar - read here
- News Analysis - Oracle discovers the power of the two socket server - or: A pivot that wasn't one - TCO still rules - read here
- Market Move - Oracle buys Datalogix - moves more into DaaS - read here
- Event Report - Oracle Openworld - Oracle's vision and remaining work become clear - they are both big - read here
- Constellation Research Video Takeaways of Oracle Openworld 2014 - watch here
- Is it all coming together for Oracle in 2014? Read here.
- From the fences - Oracle AR Meeting takeaways - read here (this was the last analyst meeting in spring 2013)
- Takeaways from Oracle CloudWorld LA - read here (this was one of the first cloud world events overall, in January 2013)
And if you want to read more of my findings on Oracle technology - I suggest:
- Progress Report - Good cloud progress at Oracle and a two step program - read here.
- Oracle integrates products to create its Foundation for Cloud Applications - read here.
- Java grows up to the enterprise - read here.
- 1st take - Oracle in memory option for its database - very organic - read here.
- Oracle 12c makes the database elastic - read here.
- How the cloud can make the unlikeliest bedfellows - read here.
- Act I - Oracle and Microsoft partner for the cloud - read here.
- Act II - The cloud changes everything - Oracle and Salesforce.com - read here.
- Act III - The cloud changes everything - Oracle and Netsuite with a touch of Deloitte - read here.