One of a series of articles analyzing the strategies the largest public cloud vendors are using to court enterprise customers. Previous installments looked at Amazon Web Services, IBM and Google.

For a company that was late to the cloud, Oracle has defined a clean, competitive strategy, articulated it more than most of its legacy competitors and is march in lockstep with its customers as they migrated. Oracle appears committed to its strategy and has already gone through the rocky process of changing its sales compensation model to create incentives for cloud sales.

While it’s still building its cloud, Oracle is executing at a pace that at least matches the evolution of its customers toward cloud strategy, writes Wikibon Analyst George Gilbert in “Understanding the Caveats of Oracle Cloud Deployment Options.” Compared to Amazon Web Services, Google Compute Engine and Microsoft Azure, Oracle is mainly a software-as-a-service (SaaS) vendor rather than an infrastructure-as-a-service (IaaS) or platform-as-a-service (PaaS) provider. It is focused on replicating everything it now offers as SaaS and database-as-a-service on its Exadata infrastructure, which will provide the highest performance for those applications. At this time it lacks many of the general IaaS/PaaS features, such as horizontally scalable infrastructure and third-party managed services, that the big IaaS providers deliver, but Gilbert that these issues are temporary, and that over time Oracle will expand the use cases it supports in its cloud.

Oracle’s major strength is its large captive market of users who depend on Oracle software, and in some cases hardware, for core business applications including financials, ERP and CRM. These users may complain about licensing costs, but they trust Oracle to provide dependable technology and world-class service. Oracle’s reputation is among the best in the industry, matched only by IBM’s, says Wikibon Chief Analyst David Vellante. And its systems are well integrated, allowing companies to share data and supporting analysis that can look across the entire company. The company continues to invest heavily in research and development focused on adding new capabilities to the “Red Stack” to meet customers’ needs, including mobile and cloud. Oracle founder and CTO Larry Ellison appears committed to driving that forward.

Sticky database

Will Oracle’s customers wait for that strategy to reach fruition? “The key to Oracle is the stickiness of its database,” says Vellante. Salesforce.com Inc. may have more advanced CRM features, and Workday Inc. may have better HR, but they have their own disadvantages, such as the lack of a full infrastructure stack.

In any case, Vellante says, Oracle is probably moving at least as fast as its customers are in cloud. By the time customers are ready to move core systems of record out of their data centers, Oracle will be ready to provide the cloud they need. In the meantime Oracle is providing managed services on-site on a rental model that eliminates the large capital expenditure of buying new Red Stack infrastructure. Vellante suspects that a portion of the “cloud revenues” Oracle is reporting are actually from managed services, which financially are a step toward cloud for its customers.

The big question

One question about Oracle’s future is its dependence upon the 71-year-old Ellison. If Ellison’s health were to fail, Oracle lacks a clear successor with his drive and vision. While co-CEOs Safra Catz and Mark Hurd are the most likely candidates, it’s unclear if either could fill Ellison’s large shoes. For the meantime, however, Ellison appears to be robust and energized by this new challenge. Giving up the CEO’s chair has freed him to focus more on corporate direction and technology development.

Another question is Oracle’s future beyond its core systems of record and whether it has a viable comeback to the crop of analytics-oriented databases and tool suites that are powering new growth markets. Vellante says Oracle should be okay. For one thing, systems of intelligence depend on data help in systems of record databases to support analysis, and Oracle dominates that market. Oracle has a NoSQL database, although it has little market share right now, that could become the basis for an Oracle answer to Hadoop and Big Data. What it lacks internally it can buy and integrate.

Oracle is doing exactly what it should do, focusing first on replicating the Red Stack on its cloud and then on extending that core engine into Big Data. It will get there, and everything it brings out will be thoroughly tested and integrated with the rest of its stack. Vellante believes it will just take time.

What should customers do?

The decision vector for Oracle customers or would-be customers is between an integrated, homogeneous IT portfolio or a best-of-breed approach. The answer, Vellante says, depends on such considerations as company governance structure, skill sets, cost implications, Capex vs. Opex preferences, cloud and development strategies and partnering implications.

To control annual license costs, customers should optimize their existing environments to minimize the number of cores they dedicate to Oracle’s stack. One area where the vendor excels is in tough negotiations based on thorough knowledge of all aspects of its contracts, and that will not change with cloud. Customers should treat negotiations with the vendor as an ongoing project. They should form a permanent cross-functional team with leaders from tech, lines of business, procurement, legal and financial operations to negotiate with Oracle. And they should start that work now, regardless of where they are in the licensing cycle, Vellante says.

For more, watch Vellante and SiliconAngle Founder/CEO John Furrier discuss Oracle in the video below.

Image via Wadams