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Oracle Vs. Amazon: How Larry Ellison Sees It

Oracle

Financial analysts peppered Oracle Executive Chairman and CTO Larry Ellison with a number of questions concerning Amazon Web Services during a no-holds-barred Q&A session during Oracle OpenWorld 2015.

The questions varied, but they boiled down to a theme: Will Amazon eat Oracle’s lunch in the cloud?

Ellison told the analysts that Oracle watches Amazon “very closely.” But he also said he doesn’t consider beating AWS in the infrastructure-as-a-service business the most critical factor in Oracle’s quest to succeed in cloud computing.

“That’s not how we’re going to win,” Ellison said. “We’re going to win by being number one in applications and number one in platform, and I think being a really solid, top three infrastructure player.”

Oracle’s most immediate goal is becoming the #1 company in cloud applications (SaaS), where Amazon doesn’t have a significant footprint, and where Oracle has a huge portfolio of applications. Oracle also sees SaaS as more profitable than the IaaS business. Oracle’s portfolio of cloud applications include critical applications to help companies manage their financials, supply chains, manufacturing, marketing, human resources, sales force, procurement, logistics, and more.

“We’re on our way to being the leader in SaaS,” Ellison said.

Oracle’s other top cloud priority is being #1 in platform as a service (PaaS). Oracle’s platform includes Oracle Database Cloud Service, which lets companies access all the performance and security features of Oracle’s most advanced database, Oracle Database 12c, as an online service. Oracle’s PaaS also includes development and integration tools, such as Oracle Java Cloud Service and Oracle Integration Cloud Service, which allow companies to add features to their SaaS applications. Oracle PaaS also includes data analytics and visualization tools, including Oracle Business Intelligence Cloud Service and Oracle Data Visualization Cloud Service.

Amazon has a cloud database offering, Aurora, which was a big focus of Amazon’s re:Invent conference last month. Analysts challenged Ellison on why Aurora isn’t a major competitive threat to Oracle Database, which is the foundation of Oracle’s on-premises software business, is widely used across enterprise IT, and now is available as a cloud service.

Aurora is based on the open-source MySQL database, Ellison said, and Oracle offers its own MySQL database, having acquired the company behind MySQL as part of its Sun acquisition. “The Oracle Database really doesn’t compete with MySQL,” Ellison said. Customers would have to rewrite existing enterprise applications to move from Oracle Database to MySQL.

Oracle Database is the world’s most popular database, according to the ranking site DB-Engines, and MySQL is #2. Amazon’s new Aurora ranks #91.  Oracle Database is used by more than 310,000 customers, the company says, often for critical applications.

“It’s difficult to replicate all of that engineering,” Ellison said of Oracle Database’s security, speed, fault tolerance, data protection, and other features. “Cloud is a delivery mechanism. What gets delivered still has to be engineered and developed, and we have this huge lead in database. We just have to do a very good job of delivering that in our cloud, and we’re doing that.”

Oracle Not Conceding IaaS

While Oracle is focused on being #1 in SaaS and #1 in PaaS, the company does intend to be one of the major competitors in infrastructure as a service, Ellison said. He argues that success in SaaS requires a leading PaaS environment, and success in PaaS requires a strong IaaS offering.

As a point of comparison, when Oracle bought Sun, it wasn’t to try to outgun the likes of hardware giants Hewlett-Packard and Dell. Oracle intended to compete on the high end of the hardware market, while developing the expertise to create hardware that runs Oracle Database better than any other machines.

In IaaS, Oracle intends to be a leading player, mentioned in the same breath with the likes of Amazon and Microsoft, even if those two currently hold larger shares. Having that hardware and automation expertise to efficiently run its own databases and applications gives Oracle confidence it can compete head-to-head in IaaS.

In fact, Oracle isn’t shying away from challenging Amazon as the lowest cost provider in certain segments. IaaS is a commodity business, Ellison said, and Oracle thinks it can gain a cost advantage in certain cloud services, based on its engineered systems and automated system management. Already, Oracle offers its most basic storage, archival storage, for $1 per terabyte per month.

“We’re going to try to differentiate ourselves on security and reliability, which we think we can do,” Ellison said of the company's IaaS strategy. “That doesn’t mean we don’t want to be low cost.”

Throughout the week of Oracle OpenWorld, Oracle’s leadership stressed that the company intends to compete on all three layers of the cloud—applications, platforms, and infrastructure. Ellison wouldn’t rule out leading in IaaS—“There’s a chance”—but mostly he painted Oracle as a formidable competitor in IaaS. And in applications and platforms, he left no doubt that Oracle is aiming for the top slots.

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