Oracle parks its cloud tanks on SAP's lawn with 2 new data centers - but why?

Profile picture for user jtwentyman By Jessica Twentyman September 29, 2014
Summary:
Oracle is the latest US cloud provider to decide that having in-country data centers in Germany is a good idea, but is this a decision driven by opportunity or necessity in a PRISM-paranoid market?

How should the announcement that Oracle plans to open two new data centers in Germany be interpreted?

Is it:

  • (a) a savvy and SaaSy response to rising demand for cloud services in that country?
  • (b) a thoughtful reaction to the concerns of skittish German customers, wary of PRISM-style snooping by US authorities?
  • (c) a calculated act of aggression that will see the Californian company roll its tanks onto the lawn of German rival SAP?

tank-on-the-lawn
According to Loïc le Guisquet , executive vice president of EMEA at Oracle, the answer is (a) - with a dose of ( b) thrown in for good measure. (Presumably a splash of (c) just for flavor doesn't do any harm either, mind you!)

The on-message party line according to le Guisquet is this:

Germany has always been at the forefront of technology use and innovative approaches to business. At Oracle we are delighted to be making a further investment in encouraging our German customers to be even more forward thinking and to transform their businesses in line with the potential and possibilities that the cloud is unlocking.

So far, so anodyne - and, perhaps, a somewhat debatable endorsement of the willingness (or otherwise) of German CIOs to take technological risks.

Either way, the new facilities - in Frankfurt and Munich - will go live “in the next few weeks” and will be fully operational by the end of the year.

Other concerns

But when pressed further, le Guisquet admits that regulatory concerns have played a part in the expansion of Oracle’s data center estate. Let's look at the numbers.

At present, the company has 19 data centers scattered across the world, three of which are in Europe: two in the UK and one in Amsterdam, the latter three of course falling within the European Union (EU)  borders and as such are fully in accordance with EU data protection requirements and provisions as they currently stand.

(One of the two in the UK could have found itself falling outside EU borders had the Scottish referendum results last week gone the other way which would have created an interesting set of dilemmas, but that's all hypothetical for now, at least until the next outbreak of Braveheart-ery!)

That’s not good enough, apparently, for German customers. le Guisquet elaborates:

Location of data is only one factor in our conversation with customers [but] it’s an important one, one that many people focus on, [and] one that is relevant, otherwise we would not open these data centres in Germany. We feel it’s going to help us respond to customer demand.

But it isn’t just regulation that bothers Germans, he admitted. They also have “questions"  about security, for which we can read concerns about privacy and, more specifically, they're worried about being bugged and tapped into by the US spooks.

This is a well-established German mind-set and reaches up to the very top of government.  German Chancellor Angela Merkel was one of 35 world leaders whose mobile phone was allegedly tapped by the US National Security Agency (NSA). Earlier this year, she proposed the establishment of a European communications network that would prevent emails and other data from passing through the United States.


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PRISM exploitation drives EU’s data protection overhaul - diginomica.com

Warning: EU’s PRISM exploitation will cost US $35bn - diginomica.com

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That said, it is still unclear as to whether US companies have the right to withhold data from the US government in any case - even if it is stored overseas. Right now, Microsoft is battling demands from US authorities  to prevent having to hand over emails stored in an Irish data center.

Loic_le-Guisquet
Loïc le Guisquet

So what about that third hypothesis: that Oracle’s two new data centres represent a deliberate incursion on SAP’s homeground? For a start, it might explain why two data centers are deemed necessary for a country 27 times smaller (in terms of land area by square miles) than the United States.

But of course Oracle’s not the first cloud hopeful to pre-announce a German offensive (although it will certainly be the first to bring its plans to reality). In May, Salesforce.com announced plans to open data centers in France and Germany in 2015, following the launch of a UK data center around about now.

Miguel Milano, president of EMEA at Salesforce.com, said of that announcement:

Cloud computing is at the heart of growth and innovation in Europe, which is why Salesforce.com delivered full fiscal year 2014 revenue growth of 41 percent in Europe.

My take

Whether German data center investment will do much to boost Oracle or Salesforce.com in that country, or those surrounding it, remains to be seen.  A number of diginomica’s recent conversations with SAP users in that country show that, despite their misgivings over maintenance fees, technology roadmap, upgrades and more, few are prepared to switch to another provider anytime soon.

In other words, both Oracle and Salesforce.com may have overestimated German appetite for cloud technologies, especially those from US providers. But whatever the case, having data centers in country will do no harm to prospects, but the macro-political issues and the resulting PRISM-paranoia have a long way to go before they settle down.

 

Disclosure: Oracle, SAP and Salesforce are all premier partners at time of writing. Oracle covered most of my travel costs to attend OpenWorld.