When revisiting the Oracle earnings call of this week, it is pretty obvious that Oracle is trying to position Oracle 12c pretty much everywhere as the cloud database of choice. And not only position and try to sell – but make it an integral part of the cloud tech stack of well-known partners (NetSuite), lesser known partners (salesforce) and even competitors (Microsoft).
So here is what Ellison said(courtesy of SeekingAlpha, emphasis added) in the Q4 earnings call last Thursday:
Next week, we will be announcing technology partnerships with the most important –the largest and most important SaaS companies and infrastructure companies in the cloud. And they will be using our technology, committing to our technology for years to come. That’s how important we are doing 12c. We think 12c will be the foundationof a modern cloud where you get multi-tenant applications with a high degree of security and a high degree of efficiency, you at least have to sacrifice one for the other. Again, I would call them a startling series of announcement with companies like Saleforce.com, NetSuite, Microsoft all that happen next week will give you the details. These partnerships in the cloud I think will reshape the cloud and reshape the perception of Oracle Technology in the cloud. 12c in other words is the most important technology we’ve ever developed for this new generation of cloud security.
So let’s dissect and interpret this: Ellison makes it very clear that the aforementioned SaaS and IaaS companies will be using 12c for years to come. The design point of separating user data from metadata is the key architectural change of Oracle 12c from previous versions of the database. And he clearly mentions long term partners NetSuite and Salesforce, but also usual foe Microsoft. So what is going on?
The Cloud market matures
As Constellation Research has shown last week with our post The cloud is growing up – 3 signs from the news (see here) – the cloud market has entered a 2ndphase in which more vendors compete for less demand and at the same time need to accelerate their offerings – through acquisition (e.g. IBM buysSoftLayer), through bundling(HP announced Cloud OS) or partnering (e.g. Google andRedHat). And we have the most unlikely combination of partners now most likely working on a blended cloud technology tech stack.
Oracle’s ISV business
Let’s not forget that Oracle’s ISV business is an integral part of the Oracle revenue. And that for most of the last quarter century the largest Oracle ISV has been... SAP. So Oracle knows how to make partners successful on its database. And contrary to public perception, we are sure when the call was placed to 500 Oracle Parkway from One Microsoft Way in Redmond, Oracle was listening.
The other remarkable aspect is that now in a span of 20 years – back then it was Hasso Plattner with his decision to run R/3 development on Oracle’s database - and now Steve Ballmer (and maybe even Bill Gates) – choose Oracle as their strategic partner. Very, very few technology companies can muster that test over a 20 year time range.
The root cause for the expected Oracle Microsoft partnership lies deep in the history of Microsoft technical decisions. When it was clear that Microsoft needed a SQL database and it then partnered with Sybase – it made the decision to run SQL Server on the Windows technology stack – and only there. And that limited the number of cores that were supported and allowed the database team to – let’s be polite – not address scalability issues in the best way.
All this was hidden while the world was running applications on premise. And it was also hidden as long as the load on the database server side was manageable. Ever wondered why the Microsoft enterprise applications only had a SMB focus? And why Microsoft ran internally on SAP?
So this will be a key case study how platform decisions and technical debt can creep up on even one of the largest and most successful technology vendors. But kudos go to the Microsoft executives to as it looks like really jump over their shadows and address the technical issues through a partnership with Oracle.
Virtualization layer complications
So where will be the line in the sand between Oracle and Microsoft IP and products? Next up from the database in the technology stack – you will hit the virtualization layer – and here Oracle and Microsoft have their respective own offerings with Oracle VM and Hyper-V. We expect this is where Microsoft will draw a line and Oracle 12c will have to find a way to support Hyper-V.
At the end of the day this is a reasonable architectural fault line – as it protects the Microsoft application code to become virtualization layer agnostic – while it requires Oracle’s database to become compatible with different virtual machines. And this makes sense for Oracle as it comes back to its DNA as partner for ISVs – with the virtualization layer becoming something similar to the ODBC of the cloud age.
At the same time it gives Oracle the chance to optimize a little better with its very own Oracle VM – which will be key to pitch for the overall Oracle tech stack to the many ISVs, who do not own a virtualization offering themselves.
So this would be a reasonable compromise which ultimately is a win win for both sides, though short term it will but some architects in Redwood Shores in high gear.
Did Microsoft have options?
The only other real option that Microsoft could have looked at would have been IBM. And IBM would in general have been a more compatible partner than Oracle – at least from the general outside perception. And though this is speculation, Constellation is sure that Microsoft will have done some due diligence on Armonk’s DB2.
And then Microsoft could have gone more radical by e.g. looking at using Hadoop as a conventional data store (see here) – but that would have most likely pushed the limits a little too aggressive… but for a second - think of storing all the information that Microsoft applications use and create in one single and consistent data store. Not a solution for 2013 – but for 2014+. Obviously Microsoft’s need was much more immediate – like to run the Dynamics applications and get SaaS market share.
So why Oracle?
We don’t have the details, but the savings that the Oracle 12c database achieves by de-coupling metadata from user data achieves must be so impressive, that they even convinced Microsoft to partner. We cannot think of many other and better benchmarks for Oracle 12c.
And while the hint of NetSuite adopting 12c is not surprising – the adoption by Salesforce are another proof point of the achievements Andy Mendelsohn and team have put in place with 12c.
Both Microsoft and Salesforce know the SAP story – and how that 20+ year ago decision of Hasso Plattner to build R/3 on Oracle has shaped the Oracle, the SAP and the RDBMS markets and ecosystems. We are certain Microsoft did not make this decisions light heartedly. And surely Salesforce may have wanted to rid itself of the Oracle dependency. But ultimately the cloud business is all about cost of ownership – and if someone has a silver bullet – you need to have it, too – or your days may be counted as a competitive cloud vendor.
Oracle deserves credit that – again contrary to widely held public perception – 12c is available for partners, even widely perceived competitors – alongside their internal development of Fusion Applications. All rightful concerns of Oracle not supporting the platform for their own advantage – need to take a pause.
And we are really curious where Oracle and SAP are on bringing the SAP products to 12c.
Advice for customers
This is good news for Oracle and Microsoft customers. Microsoft customers get a scalable database under the Microsoft SaaS applications, Oracle RDMS customers get more usage of 12c and another way to build applications for 12c. And at the same time Oracle’s tech stack and applications teams have now an external benchmark that they need to be better at building on top of 12c than their relative competitors. So as a customer – wait, see and validate the expected benefits.
Advice for partners
For a Microsoft partner – this makes your business more viable in areas where before the sizing teams would have cringed and where the hardware cost could have been prohibitive. For the Oracle database partners this expands the addressable market. And for ISVs in general this is great news – as you may now have the choice to develop in Java or C# - with the latter no longer being limited by database capacity. You still may take a dependency on the cloud technology stack you will be using, but when HyperV will be supported by Oracle 12c – it may be an option to run your C# applications on an Oracle data center.
We congratulate both companies to the partnership and see this as net positive – Oracle is true to its technology partner foundation and Microsoft has solved a long term tech stack weakness that is exposed by the nature of the cloud. It’s now execution time for the technical teams and we look forward to learn soon about the first product and customer proof points – maybe as soon as the Build Conference this coming week.
The only negative: We are sad that one of the best April Fools headline is gone forever …