You know what they say about the third time doing something. They say a lot and some of it is bound to be true even if it only means throwing away the high and low scores and dealing with what’s left like they do in Olympic diving competition. This is the third and final post on the Oracle-Salesforce announcements of this week, which I hope, will provide more light than heat. I reserve the right to discuss Oracle-Microsoft in similar detail though.
You know the basic outline at this point. Oracle and Salesforce have announced that they will work together on certain strategic issues especially integration to provide greater value for customers. Here are my considered thoughts having now heard from the CEOs of both companies.
- Integration is the key. With this announcement it appears a line has been drawn down the middle of the market. On one side is front office and on the other is the back, but we knew this already, didn’t we? The agreement to produce off the shelf integration that will solidify each company’s position in its respective marketplace and enable their front and back office products to instantly inter-operate and that sends specific signals to the market. Over the next nine years look to Oracle to spend less effort and investment in the front office. Siebel is getting old as is PeopleSoft and the Fusion approach is a slow burn. It will not surprise me if each side stays on the side of the fence it is building and produces front to back office solutions based on their integrations. For Oracle this would be an admission that their front office strategy won’t catch up. For Salesforce, it simply codifies what Marc Benioff has always said, that he doesn’t want to build ERP. Over time, look for each party to renew its innovation in its respective space. As I detail below, as a new paradigm comes into view there will be plenty of innovation on each side required — and that will only happen if they split the effort.
- Competition in the middleware and Linux part of the stack is simmering down. Oracle’s solutions in those areas are standardizing the industry and there isn’t a great deal of profit to chase there any more. Also, Oracle’s emerging dominance in cloud hardware with Exadata and related products militates for greater stack standardization.
- Oracle-Sun may be a big winner here as that unit’s Exadata storage system seems poised to become the de facto standard for public and private cloud data centers. The idea of public and private clouds no longer seems quite as foreign to Salesforce as CEO Benioff was touting his company’s decision to provide a separate instance of its system for the federal government. This decision is less about CRM than it is about application development, an area in which Salesforce has become one of the very dominant players.
- Security and related issues are becoming ultra important requiring new solutions. You can’t read the 2013 Verizon Data Breach Report without understanding the tremendous opportunity that the People’s Liberation Army Unit 61398 is providing companies like Oracle, Microsoft, and Salesforce. If we’re going to the cloud it has to offer better security than what we now have or all bets are off. Otherwise, the only good news might be your voodoo-like ability to order mooshi pork through your ERP system someday.
- Drop your tools, there’s something bigger on the way — get to work on it! Guys like Larry Ellison, Steve Balmer (of Microsoft) and Marc Benioff don’t come to these kinds of agreements without reason. The reason is a new paradigm which necessarily commoditizes conventional IT and even conventional cloud computing. It’s the Internet of Things or as Benioff (a board member of Cisco) said, the Internet of Everything. This is at once scary and hopeful. It’s scary to think of everyone and everything being connected to the network and hopeful that we will finally have the sophistication to optimize tiny processes that will, in aggregate make a huge difference as the planet races toward a human population of ten billion. We will reach a computer population that size long before the human population gets there.
That’s what I think everyone is suddenly gearing up for. President Obama gave a well received talk about the environment at Georgetown University this week. In it he told us that American business has always been able to innovate and engineer and provide the entrepreneurial boost we’ve needed to meet tomorrow’s challenges. Well, those challenges — especially energy and resource optimization and carbon abatement — are wrapped up in a new paradigm that is itself wrapped in the Internet of Things.
Paul Krugman’s column today in the New York Times expresses the latter half of it, the front half is where great value will be produced and huge profits stand to be made. On the back-end Krugman rightly predicts this will be a big economic stimulus that the global economy badly needs.
It’s rare that you can spot a paradigm emerging in real time. No one really understood what the steam engine or the industrial revolution it spawned meant when they happened. It took many decades to see the pattern emerge. Not this time. This week the future emerged; it’s been incubating for a long time and the future looks very interesting indeed.
I saw this headline on Yahoo Finance, “Oracle Has Big Plans To Beat Salesforce And Amazon In A $72 Billion Market” and it got me thinking about a lot of things.
First, the market in question is Infrastructure as a Service or IaaS and I didn’t think that Salesforce was actually in the IaaS market. This shows how far we still have to go in cloud computing just to get the terms right and set the playing field.
IaaS is all about computing infrastructure — the servers, memory, disks, operating systems, middleware, databases and maybe applications — that any modern business needs to support its information processing when it chooses not to manage all this by itself. Companies subscribe to IaaS services and it’s like Walmart for conventional IT. You know this.
Second, IaaS is part of a cloud industry that also includes software as a service or SaaS — systems that are centrally managed and subscribed to and PaaS or platform as a service. PaaS is the top of the heap right now, the place you go when you don’t want to manage the gear as in IaaS but still want a robust place to design, develop and manage applications that are embedded into your business processes AND to generate those apps for multiple platforms from a single design.
Interestingly, a PaaS provider probably, but not necessarily, is an IaaS provider by the simple logic that the “P” is software and it has to live somewhere. So this brings us to the headline and article and my issues with it.
Oracle has some very nice server, storage and in-memory gear that it acquired when it bought Sun or built once it had the Sun gurus on board and working with its database mavens. It can very well supply the IaaS market — those organizations that want to run their own IT shows but not operate their own data centers. Great! Amazon is in that business. Google is in that 0business. Oracle is in that business and it is trying to be in the PaaS business with its still-being-delivered Fusion platform. Salesforce is in the PaaS business but not really in the IaaS business except by accident of circumstance noted above.
The article quotes some succulent swipes between Marc Benioff, CEO of Salesforce, and Larry Ellison, CEO of Oracle, and Marc’s former boss. The quotes are old and largely irrelevant but you have to admit, these guys sure know how to grab a headline.
I honestly thought I was going to have to wait longer to hear anyone from Oracle talk about seriously focusing the company’s hardware and software lines on the Cloud. True, they’ve been saying cloud-like things for a couple of years but the pronouncements were features and functions that added something to the cloud discussion without going “all in” as some others in the industry have said. But last night CEO Larry Ellison did what I’d forecasted last week in a way that is uniquely Oracle but nevertheless a good, defensible (and somewhat debatable) position.
Here’s what I said last week in my forecast,
It seems this family of hardware (Exa-hardware) is built and optimized for very big jobs involving terabytes of data and gazillions of users. That’s exactly the kind of stuff the growing cloud computing movement might gobble up. Currently data centers are masses of commodity servers in racks running feverishly but without a layer of sophisticated management that would optimize their utilization and reduce costs…
The next logical step would be to endorse the Exa-hardware as a sustainability tool for a power hungry planet. I’m looking for some sustainability messaging from Oracle and it could even happen…
Sustainability is not alien to ideas like mobility, cloud, social and analytics, you can’t separate them. I think if Oracle wants to maintain its leadership position with many of the largest companies in the world, it needs to put a stake in the ground and become a thought leader here…
So last night, Ellison took aim at the cloud and announced Oracle 12c a database for the cloud that supports multitenancy, if you want it, and he announced the Oracle Private Cloud running on Exa-hardware and delivered as a tight bundle to customers who want to get to the cloud, simplify their lives, and not fret about managing all that stuff. He also announced Exadata 3, which can hold up to 26 TB of data – “All your databases.” The cool thing about Exadata 3 is that the 26 TB is all silicone based memory, it doesn’t count the spindles that are rapidly becoming secondary in a high performance enterprise environment.
He made some traditional arguments about the cloud being more efficient and economic and at some points came close to claiming credit for inventing it. Truth is he did have a hand in inventing modern cloud computing as a very early investor in Salesforce and NetSuite and as the Zen master for Benioff and Nelson. But his skin in the game had been relatively minimal.
Now, while there is plenty to like from a sustainability perspective, it should be acknowledged that what got announced is a bunch of half steps designed to get enterprise data centers into the cloud without much disruption. I think this means that Oracle, for the moment (which will be about a decade) will not be aggressively selling the virtualization that comes with multitenancy and as a result there will still be a great deal of wasted power and underutilization in some cloud data centers.
But in a decade we could see a switch flip and everyone will get religion about power consumption and pollution and the switch to virtualization will happen very quickly because some very large companies will have been prepositioned for the change.
Actually a decade might be a long time and 6 or 7 years might be more like it simply because Oracle has many competitors going to the cloud, most notably Salesforce, and that will accelerate the timetable.
The next step, which has to come this week, will be for the company to shift gears to software – cloud based software – that makes the cloud even more attractive. Look for this to happen especially in the CX Summit or whatever they are calling it, on Wednesday. That will be the day that Anthony Lye talks a lot about how the companies he bought last year – like RightNow and ATG and others – are making the Oracle cloud a serious competitor.
Achilles’ heel is still Fusion. What’s up with Fusion?
Finally, many, if not most of the big cloud computing companies are running fault tolerant data centers using conventional racks of blade servers and disks. That’s giving us 3 to 4 9’s of reliability but I think before we can hope to get to the 7 to 9 9’s that will make cloud truly ubiquitous and universal utility grade computing we’re going to need some re-architecting. Regardless of what you might think of Oracle’s approach to the cloud, the hardware is an appealing approach for that alone.
Oracle likes to message that 20 out of 20 of the top banks/pharmaceutical companies/whatever, use Oracle and it wouldn’t surprise me if they’re going for 10 of the 10 biggest cloud companies. That will take some work and given the multiple levels of competitiveness and lack of love between the players, that might take even more than a decade to happen.
Larry Ellison recently bought 98% of Lanai, a small Hawaiian island off Maui.
No, I am not making this up. If I could write fiction like that I wouldn’t be in this business. Or maybe I would but I’d be better paid.
At any rate, the article in the New York Times says Lanai has one gas station, no stop lights and two Four Seasons resorts with serious golf courses. It is formerly the largest pineapple plantation in the world (88,000 acres) and home to 3,125 people.
The previous owner had proposed building a 45-acre field of wind turbines to generate electricity that could then be sold to Maui. No word yet on whether Ellison plans to continue with the windmill plan. As in other parts of the world, the population of the island is divided into two camps — those who detest windmills and those who crave electricity.
Actually the two groups overlap quite a bit and this is where things get confusing for me. If you own 98% of the island, doesn’t that make you the feudal lord? And can’t you do pretty much what you want with the land short of opening a hazmat dump? Also, what’s the difference between a user group meeting and just living on the island? I’m not sure how this plays out so it will be interesting to watch.
There’s been no public announcement in the six weeks since Ellison bought the island so no one, even the islanders has an idea of what the future holds. With two Four Seasons resorts there is some speculation that the island could become some kind of hub for sailing. Perhaps a training center for America’s Cup competitors? I am sure all the confusion will be cleared up at OpenWorld.
“Almost seven years of relentless engineering and innovation plus key strategic acquisitions. An investment of billions. We are now announcing the most comprehensive Cloud on the planet Earth,” said Oracle CEO, Larry Ellison. “Most cloud vendors only have niche assets. They don’t have platforms to extend. Oracle is the only vendor that offers a complete suite of modern, socially-enabled applications, all based on a standards-based platform.” Larry Ellison, CEO, Oracle
Mixing metaphors and technology yesterday Oracle chief, Larry Ellison further defined Oracle’s vision for cloud computing. Years? Billions? Me thinks the man protests too much.
It’s a sure sign that a competitor is coming from behind when he tells you that everything the competition’s been working on and inventing for over a decade has now been eclipsed. The billions and planets and years — not to mention the billions in acquisitions — might have been better spent in competition rather than mounting what amounts to, but no one said, a Manhattan Project to pull your bacon out of the fire because you left your business model to stagnate for too long.
I am a fan of some of the pieces of the Oracle cloud though I see yesterday’s announcement more as a set of checkboxes with “me too” written all over them than words like innovative, groundbreaking, out of the box and the like. Let’s take things in order.
I am a big fan of any infrastructure that can raise everyone’s game from however many 9’s of reliability they have at present, to AT LEAST 7. With seven 9’s you get something like a bit over 3 seconds of downtime per year and that, or better, is what it will take to get us all off the fairyland ideal of cloud to the more prosaic, pragmatic and utilitarian concept of utility computing. The vision has always been computing delivered like telephone, electricity, natural gas or water and those utilities have much better than seven 9’s but seven is where it starts to get interesting.
So, Oracle’s use of all of its Exa-themed Sun devices for infrastructure makes a lot of sense. There’s a good deal of reliability built into Exa but not necessarily enough to deliver the cloud vision unless you also talk about redundancy and failover. They’re expensive too.
The alternative that even an Exa-box supported cloud will need to contend with is a well managed multiple site redundant hardware infrastructure with failover capabilities. Other utility services have failover and IT should be no different. So the hardware is nice but is it cost competitive with the alternatives?
The rest of Oracle’s announcements, which I thought were repeats of earlier announcements, spanned from database services to sites to various developer, analytics, social networking and document sharing services. In short, all the stuff that Salesforce has been dripping into the market for many years.
But what’s missing is telling. The Oracle announcement, while impressive, still lacks vision. There’s no hint of a changing of the guard and no advice to customers that the world that will use these products is vastly different from the one where the previous generation of on-premise Oracle applications held sway for so many years. Instead the message seems to be, here’s our erector set that you can use to approximate the Salesforce.com environment that your users are increasingly asking for. This, plus a bolus of consulting dollars, will help you beat back the barbarians at the gate.
Again, there’s a lot of good stuff in Oracle’s announcement, Ellison’s hyperbole aside. But there’s a widening gap in the market that has nothing to do with technology per se. It’s between vendors that get it and those who are still just pushing product out the door in the hope that customers will figure it out. Real cloud, social and mobile companies are not pushing product.