Never let it be said that Oracle chairman Larry Ellison does anything halfway. It took him some time to embrace the cloud, but now that he has, he’s put the considerable financial weight of his company behind the idea. This week the Wall Street Journal reported on the company’s plans to build a dozen new data centers around the world over the next two years in an effort to play catch-up with world’s cloud leaders.
“Two are slated for the U.S., two in Canada and one each in India, Japan, the Netherlands, Singapore, South Korea, and Switzerland,” according to the article. They’re are also planning one in China in conjunction with Chinese company Tencent. China’s data privacy laws require foreign cloud companies to partner with a Chinese company to do business there.
As Oracle makes its move, it finds itself far behind the rest of the pack. AWS has a huge market share advantage in the infrastructure market, where Oracle barely registers. It is trying to make headway in platform services. Just this week, the company announced plans for broader automation on its platform offering in an effort to differentiate itself.
But Software-as-a-Service remains the company’s biggest cloud strength. In its most recent earnings report, Q2 2018, released in December, Oracle’s reported total cloud revenue of $1.5 billion. Of that, $1.1 billion came from SaaS revenue, up 55 percent year over year.
Measuring up to the competition
The data center expansion announcement is all about keeping up with Jones. In this case, that’s the competition they have to climb over. While run rate, the amount of money a company projects to make over 4 quarters, is sometimes a misleading indicator, it does provide some means of comparison with the competition.
Oracle is on a $6B a year run rate across all of its cloud categories — platform, software, and infrastructure. That’s more in line with Google, which recently reported a $1B a quarter of combined cloud income, and Alibaba which reported $553M in overall cloud income in its most recent earnings report. All of these companies find themselves far behind market leaders AWS and Microsoft.
All of this means that Oracle has a lot of ground to cover to even get into the conversation. Perhaps the data center expansion will help. It will certainly give it local zones, which will be increasingly important with data privacy laws like GDPR coming on the books soon. While Oracle obviously has plenty of financial juice behind it, it’s lacking in significant market share, and it’s not clear that they can build their way to achieve that.
Photo: Arthur Caranta on Flickr. Used under CC by SA 2.0 license.
