Oracle OpenWorld 2016 - Oracle CEO says AWS has the “ultimate lock-in strategy”

Profile picture for user ddpreez By Derek du Preez September 19, 2016
The Amazon-bashing continued on day two of Oracle OpenWorld, with CEO Mark Hurd pushing hard for attendees to understand Oracle’s competitive advantages.

Mark Hurd, Oracle CEO
Mark Hurd, Oracle CEO

Oracle’s push for competing with Amazon Web Services (AWS) on its Infrastructure as a Service offering continued on day two of the company’s OpenWorld event in San Francisco this week. The hard-sell to customers today focused on how AWS “locks-in” its cloud users, whereas Oracle claims that it has a more open infrastructure that allows buyers to easily move whenever they wish.

This is likely to prompt a few knowing smiles from attendees, given that traditional enterprise technology vendors, including Oracle, have a long history of doing what they can to make it difficult for customers to switch away from their systems.

During a press Q&A with Oracle CEO Mark Hurd today, he discussed how Amazon operates the “ultimate lock-in strategy”. He also spoke to the company’s investments in cloud, stating that Oracle now has the hard work behind it in terms of shifting away from an on-premise focus.

Hurd said:

We are the fastest growing scale cloud company in the industry. We are the only company delivering a complete portfolio. In the past we have spoken a lot about SaaS. Last year we really spoke about PaaS, those came to market and delivered a tonne of growth for us. This year we have spent a lot of time releasing more IaaS, really emphasising our direct competition with Amazon.

Our R&D is up $2 billion dollars over the past six years, that’s per year. We have rewritten everything we have done, we have had to do that while we continue to do what we do on-prem.

We have roughly doubled our salesforce. We have 10,000 cloud engineers. In our HCM application alone, we have 2,000 programmers alone.

At war with Amazon

We saw on the opening night keynote how now CTO Larry Ellison declare that “Amazon’s lead is over”. A bold claim considering that Oracle’s IaaS revenues pale in comparison to that of AWS. However, Ellison’s statement falls on the claim that Oracle’s IaaS offering is not only cheaper than AWS, but it offers twice the cores, twice as much memory, and four times as much storage.

The response to this has been fairly critical, considering AWS’s multi-year lead on Oracle. I questioned why Oracle would want to put so much focus - particularly at its main event of the year - on what is essentially a low margin, commodity business.

But having had discussions with people over the past 24 hours, the focus on IaaS for Oracle is important because currently its customers that are shifting workloads to the cloud are doing so with Amazon. If that happens, it then struggles to maintain a PaaS conversation with those customers, as well as other cloud discussions further up the stack.

If Oracle can retain that ownership at the IaaS level - it then has easier access for the more valuable deals. One Oracle exec said to me this week that “there’s no money in cloud”. He was being somewhat flippant, where he went on to say that it’s difficult to make money in cloud compared to what was possible on-premise. However, to get close to that, it needs to win the PaaS and SaaS deals - which it sees possible via IaaS.

Whether or not customers view Oracle as a serious alternative remains to be seen, but Ellison and Hurd are doing what they can to convince them that it can offer an attractive proposition beyond price. Hurd today focused on Oracle’s openness, compared to Amazon’s offering.

Hurd said:

Amazon’s got a lot of catching up to do with us in the applications market. I would say it’s impossible, but they can try. They’ve got a lot of catching up to do with us in the PaaS market. They don’t have native database technology. They take on open-source tools and make them lock-ins, extending them and making them only useable on their cloud.

We have got a different view, we will give you Oracle technologies on our cloud, we will give you all the open source technologies, then you can move those capabilities to any cloud you want to. Whereas Amazon says you can only Aurora in Amazon. So it really is the ultimate lock in strategy.

Going for the jugular

Server room interior © Oleksiy Mark -
Hurd went on to say that the “hardest thing to do is move up the stack”, he added that it is far easier to move down the stack, and as such, said that Oracle feels very confident about its ambitions. Hurd said:

We want to wrap infrastructure around our capabilities. Our point is to be open. Our point is to say our on premise customers can take their Oracle licenses and run them on Amazon. I think what we should do is go and get Aurora, do some work, then call up Amazon and say I want to take all the work I did on Aurora and I want to move it to the Oracle cloud. What do you think Amazon will say? No. You can’t do that. You’re locked in. This is proprietary.

Hurd is also said that AWS’ “IP isn’t very good”, and wanted to drive home the point that if you’re engaging with Amazon at levels higher up the stack, then, in Hurd’s opinion, you’re going to be stuck with Amazon for a long time. He said:

If you look at their ability to do database work…. If you said to me, forget Oracle for a second, in the database market, how much marketshare can Amazon take from Microsoft? How much marketshare can MySQL (Aurora) take from Microsoft? My answer would be, very little. Tonnes of programming on SQL Server, you’ve got to move all the that programming over, very few features on MySQL. To be very blunt with you, a lot of the Amazon stuff, they’ve been very good historically at infrastructure.

When you try to move up the stack, it obviously becomes harder, as you try to get more sophisticated with many of these tools and applications. We sit here with the most robust applications suite in the world, with the most robust paths in the world. Now we are saying we are going to take our innovation to infrastructure, to support it it and then give customers the ability to move workloads across cloud. It’s a very different strategy from the lock-in strategy that Amazon has.

My take

A strong pitch from Hurd. One that obviously is driven by Oracle’s desire to retain the relationship with its customers at the infrastructure level. Whether or not customers looking at AWS vs. Oracle IaaS will buy into it, is a different matter. But it would be silly to underestimate Oracle’s ability to challenge. I still have reservations about the focus here, I’d personally have rather seen more emphasise on Oracle’s value higher up the stack, but it’s obviously seen as critical for the company.

That being said, other issues remain. Most notably the company’s in-region data centres - something that Amazon has made huge strides in scaling. For instance, one customer said to me today that they need Oracle to build more and they need them to build more, quickly. Regional data compliance is becoming one of the ‘must have’ requirements on buyers’ checklists, and Oracle needs to ramp up its efforts in this area.