Enterprise software giant Oracle is betting on its Autonomous Database platform as the cloud wars heat up in the South African market.
This was revealed by Niral Patel, Oracle SA’s MD and technology leader, in an interview with ITWeb last week.
There is a flurry of activity in the local cloud computing market, with a number of multinational companies launching new data centre facilities or forging key alliances in a bid to outdo competition.
This year, US-based software giant Microsoft announced the opening of two data centre regions in SA. Last October, Amazon Web Services (AWS) also said it would bring its data centres to SA, opening an infrastructure region in Cape Town in the first half of 2020.
AWS also reaffirmed its commitment to investing in the South African market at its African AWS Summit held earlier this month.
IBM’s recent acquisition of Red Hat in a $34 billion deal is also expected to have a significant impact on the cloud market, as the companies aim to “accelerate innovation by offering a next-generation hybrid multi-cloud platform”.
Vendors have realised they are better off forming alliances rather than taking the risk of being left behind.
Last month, Microsoft and Oracle announced a cloud interoperability partnership enabling customers to migrate and run mission-critical enterprise workloads across Microsoft Azure and Oracle Cloud.
The tie-up means enterprises can now seamlessly connect Azure services, like analytics and AI, to Oracle Cloud services, like Autonomous Database.
Tightly contested market
According to market analyst firm IDC, worldwide spending on public cloud services and infrastructure will more than double over the 2019-2023 forecast period. It says with a five-year compound annual growth rate of 22.3%, public cloud spending will grow from $229 billion in 2019 to nearly $500 billion in 2023.
Oracle, which has carried the “late entrant” tag in the cloud market, believes its Autonomous Database will be a differentiator in this tightly contested market.
Oracle Autonomous Database is a cloud-based technology designed to automate many of the routine tasks required to manage Oracle databases, which Oracle says can free up database administrators to do higher level and more strategic work.
“Our on-premises business continues to be very important to us. We have a massive install base related to our on-premises business and that’s not going to go away,” says Patel.
“We continue seeing customers investing in our hardware platforms, from an on-premises perspective. We continue to see our infrastructure platforms growing as well.
“We have placed some significant bets for the future success of Oracle in our ability to win in the Oracle Autonomous Database space. We have the Autonomous Database and the Autonomous Warehouse, which we essentially see as key differentiator in terms of us and our competitors.
“We have seen some significant wins in that space and, as a result of those wins, we are seeing customers remove costs over their business; removing the threat of human error where, for example, a supposedly technical expert incorrectly patches a database and brings down a whole banking platform,” he adds.
Patel adds that Oracle’s share price recently hit new highs, and this is being driven by the cloud successes the company has managed to deliver, globally as well as locally.
In its fiscal 2019 Q4 results and fiscal 2019 full-year results published last month, Oracle’s total quarterly revenue was $11.1 billion, up 1% in USD and up 4% in constant currency compared to Q4 last year.
The company says cloud services and licence support revenue was $6.8 billion, while cloud licence and on-premises licence revenue was $2.5 billion. Total cloud services and licence support plus cloud licence and on-premises licence revenue was $9.3 billion, up 3% in USD and 6% in constant currency.
SaaS vendors
IDC’s latest annual market share results show Oracle gained the most market share globally out of all enterprise applications SaaS vendors for three years running – in CY16, CY17 and CY18.
“We are starting to see the significant adoption from an Oracle Cloud perspective across our stack – from a SaaS, PaaS and IaaS perspective. Our relevance to our customers is related to our cloud offerings and we are seeing a big element of growth in that space,” says Patel.
“We are seeing customers putting mission-critical workloads on our cloud platforms,” he adds.
On Microsoft opening data centre regions in SA and AWS also looking to do the same next year, Patel says: “Competition is very healthy, as this demonstrates that the market is ripe for cloud adoption, utilisation and consumption.”
He points out that Oracle’s strategy is very different from its competition. “We bring the value of Oracle Cloud to a customer in their data centre behind their firewall, and we call that Oracle Cloud at Customer.
“If I look at the South African enterprise sector, a lot of our customers have invested in hundreds of millions of rands in their own data centres, and we are leveraging on those investments. We are not saying ‘ignore the investments that you have made for years and now invest in our data centre’. We are leveraging on their existing, current and past investments and bring in our value proposition related to our cloud to that existing investment.”
Global hyper-scalers
According to Kieran Frost, research manager at IDC, the biggest players in the South African cloud market are undoubtedly the global hyper-scalers – Microsoft’s Azure and AWS. He points out that Huawei, IBM, NTT and Oracle are all smaller players attempting to carve out a foothold in the market.
“While Oracle has some good penetration in the enterprise space, they are challenged by the breadth and depth of offerings available in both Azure and AWS, as well as by the relatively expensive commercial model they deliver,” says Frost.
“Historically, there has been a perception that Oracle’s focus on retaining proprietary technologies has led to them making integration with other players difficult – a key requirement as organisations begin to adopt a broader range of product sets built for purpose.”
He believes this perception may shift as Oracle’s recent announcement of its alliance with Azure (particularly when using Azure in conjunction with Oracle’s Autonomous offerings) is a significant move away from this stance.
“This being said, the perception in most of the market is that they’re a software company with cloud-based offerings, rather than a cloud company.”
Commenting on Oracle’s bet on its Autonomous database, Frost says: “Cutting through the marketing around the product, there is significant overlap in feature sets between, for example, some of AWS’s database offerings, and Oracle’s Autonomous Database. They will be challenged to prove significant benefits beyond what these offerings can bring to bear at the price points on offer.”
He points out that Microsoft’s data centre launch has had a significant impact on the market, adding that the simple advent of a hyper-scaler landing a data centre in the country removes many of the standard challenges to moving production workloads to the cloud (eg, that latency was prohibitive, or that data residency requirements prevent adoption).
This, in turn, has caused an uptick not only in Azure revenue, but also in other clouds, he explains.
“Evidence of this trend can be found in the banking sector, where Standard Bank (among others) has shifted production workloads to the offshore, public cloud in AWS – a move that will be a strong signal to other verticals in terms of the credibility of these infrastructures.
“We’ve also seen impacts in adjacent markets, with the likes of GoDaddy launching South African operations shortly after the Azure go-live – placing enormous pressure on local players in the Web hosting space.”
Frost believes if Microsoft’s landing had the macro-effect of shifting broad perceptions of cloud, AWS’s landing will mark the beginning of the fight for market share between the two cloud giants.
He notes many organisations will likely adopt a multi-cloud, hybrid strategy, utilising services from both Azure and AWS, but also other SaaS infrastructures (such as Workday or Salesforce.com) in conjunction with on-premises technology.
“However, roughly 80% of spend by organisations will be focused on a single cloud provider, and so both cloud giants have been aggressively pursuing market- and mind-share,” Frost concludes.
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