In the second of a three-part series on Oracle's cloud computing offerings, Network Computing takes a look at the vendor's position in the software and hardware markets. Part one, "Oracle Embraces Cloud Computing, the New Consumption Model," examined the evolution of the company's stance on the cloud.
With respect to how well positioned Oracle is in the cloud computing market, one wonders whether a systems vendor that owns a hardware stack, middleware stack and software stack is inherently in a stronger position than those that don't.
At Oracle's last earnings call in March, the company reported a 3% increase in GAAP total revenues to $9 billion, on an 11% jump in GAAP operating income to $3.3 billion. However, both GAAP and non-GAAP hardware systems products revenues were down 16%, to $869 million. President and CFO Safra Catz attributed the decline to "the continued reduction in some of our defocused product lines."
The good news is the company is sitting on nearly $30 billion in cash and marketable securities, so making more acquisitions shouldn't pose a problem. At the end of January, Oracle shelled out $1.5 billion to acquire RightNow, with the objective of integrating the company's customer experience software into Oracle's existing software portfolio to improve customer satisfaction. RightNow is a developer of four main software-as-a-service (SaaS)-delivered products: RightNow Web Experience for website management, including instant messaging and chat on shopping sites; Social Experience for managing the customer experience using social media; Contact Center Experience for serving customers over the phone or through a customer service website; and Engage for managing and analyzing customer feedback, service, sales and marketing information in all three areas.
Oracle finally started shipping Solaris 11 (S11), built on the Unix-based operating system it acquired from Sun Microsystems in a $7.4 billion bailout of the vendor in 2010. S11 took 14 months to move from preview to general availability, but prospects appear dim for what Oracle is calling the first fully virtualized cloud operating system.
As of six months ago, S11 was in production at more than 700 companies and deployed on thousands of Oracle's Sun ZFS Storage Appliances, as well as on the Oracle Exadata Database Machine X2-2 and X2-8 and the Oracle Exalogic Elastic Cloud-engineered systems. However, the company's market share continues to decline, and S11 may not turn the tide, according to Charles King, principal analyst at Pund-IT.
"Certainly, dedicated Sun shops will find lots to love in S11, but there are far fewer of those today than there were three to four years ago," King says. "Somehow, I can't imagine IBM or HP customers seeing S11 as enough of a driver to abandon those vendors for Oracle."
Oracle's Competition: IBM, Salesforce
Operating system woes and navigating the cloud computing market aren't the only challenges ahead for Oracle. According to a Clabby Analytics report, the SPARC microprocessor architecture will fail, too. This will leave IBM as the only maker of heterogeneous server solutions, and place Oracle into the x86-only camp with Dell and, soon, HP (when Itanium fails).
From a vertically integrated perspective, Oracle's biggest competitor is IBM, says King. "IBM, for instance, launched their SmartCloud services in June of last year, and it's actively supporting customers with platform-as-a-service, infrastructure-as-a-service and software-as-a-service offerings," he says. "Oracle has a very strong stack of middleware and software on its own, but they're not the only player out there doing this. Dell ... and HP are certainly in the hunt here, too; most of the major systems vendors are playing in this area to one degree or another."
The other infrastructure player in Oracle's cross hairs is Salesforce, King adds. Salesforce has become the de facto hosted CRM leader during the last few years. "Oracle's had Salesforce in its sights for a long time," he says. "Salesforce seems to be a clear target, and there's been a certain amount of irritation between the two for some time."
In King's view, Salesforce has been extremely effective at helping define cloud computing.
"Oracle, of the large vendors, seems to be the laggard here," he says of the cloud computing market. "The company has the tools to make an effective run in this space, but they're not there yet. So perhaps targeting a large, well-established cloud player would be a way for them to get fully up to speed."
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