OpenWorld 2018 wrap: Oracle struggles to grow its cloud business but AI-driven apps set it apart

It’s not OpenWorld without Oracle co-founder, Executive Chairman and Chief Technology Officer Larry Ellison leading the charge. With Ellison, whom Forbes magazine lists as the 10th wealthiest person in the world, still calling the shots, no one can deny that Oracle remains a fighter. Oracle rarely competes in any segment without a top-down commitment to win the predominant market share, nail down all the banner enterprise accounts and vanquish all rivals.

At this year’s OpenWorld at the Moscone Center in San Francisco, Ellison left no doubt that Oracle is not sitting still in the public cloud arena. On Monday, Ellison’s day one keynote showed him in classic form. He presented an in-depth discussion of the sophisticated cloud-optimized engineering of the latest version of the company’s market-leading database, Oracle Autonomous Database, while slamming equivalent solutions from a chief rival — in this case, the public-cloud database-as-a-service offerings from Amazon Web Services Inc.

Ellison would have savaged AWS under any circumstances. However, he delivered his OpenWorld 2018 keynote with a special vehemence that no doubt derived from the fact that Oracle is not the top dog in the public cloud arena.

In fact, Oracle is not even in the top three by market share. According to the RightScale 2018 State of the Cloud Report, only 5 percent of enterprises have adopted Oracle Cloud, compared with 68 percent for AWS, 58 percent for Microsoft Azure and 19 percent for Google Cloud Platform. Compounding Ellison’s woes, Oracle continues to show disappointing growth in public cloud revenues and has struggled to build its seven-year-old public cloud offering through a combination of strategic acquisitions and organic development.

Ellison on the offensive

So Ellison had nothing to lose by going on the offensive vis-à-vis AWS, as he has in previous years, though it’s clear that they are far from the only formidable rival that it faces in the market. With respect to AWS’ cloud databases, Ellison made the following competitive claims:

• Robustness: Ellison shared benchmark test results that compared Oracle Autonomous Database against key offerings from Amazon: Aurora, Redshift and even Oracle Database running on Amazon Relational Database Service, highlighting Oracle’s 99.995 percent service-level agreement guarantees versus Amazon’s 99.95 percent reliability and availability. He also claimed that Oracle Autonomous Database, unlike AWS’ cloud databases, can apply patches and recover from hardware and software faults without needing to bringing the database down: “If the [Oracle] database server fails, the database keeps running. If the database software fails, the database keeps running. It automatically backs up itself, it automatically recovers itself.” In contrast, according to Ellison, “they [AWS] don’t have active data guard. They have no disaster recovery. They have no server failure recovery. They have no software failure recovery. They’ve got no automatic patching.”
• Security: He touted the autonomous security features of Oracle’s Generation 2 cloud, while arguing that AWS has no autonomous features. “All the security is automatic,” he said. “If there’s a threat that’s discovered, the threat is killed automatically while the database is still running.”
• Functionality: He declared that the Oracle database can handle more advanced applications, such as “internet of things” and real-time streaming, plus the more basic combination of reporting and transaction processing within the same database, while claiming that AWS can’t support those workloads.
• Price-performance: Ellison claimed that Oracle is 45 percent faster than AWS in compute at a third of the cost, 80 times faster in a mixed workloads loading, five times faster in block storage, and twice as fast in networking.

All of those claims are highly debatable, and no doubt AWS is already sharpening its point-for-point rebuttals. But it’s not at all clear that high-profile tech billionaire pugilism will move the public-cloud needle in Oracle’s favor.

In fact, it would appear now that the window of opportunity has passed for Oracle to bootstrap itself into the top tier of public cloud providers through strategic acquisitions. This tactic, which Oracle has leveraged many times in the enterprise application market vis-à-vis archrival SAP SE — such as acquiring NetSuite, PeopleSoft and Siebel Systems — promises diminishing returns in the public cloud arena.

Even in the unlikely event that Oracle could acquire competitive offerings from Google LLC, IBM Corp., VMware Inc. and Alibaba Group Holdings Ltd., it would still not be anywhere near shouting range of AWS’ leading market share. And gobbling up disparate public cloud rivals probably wouldn’t dent Microsoft Azure’s impressive second-place momentum, which is fueled in great part by a continued streak of innovative R&D, global deployment, sharp marketing and aggressive pricing.

Much of what Oracle announced in enhancements to its cloud platform portfolio was simply table stakes necessary to stay in the competitive fray. Chief enterprise cloud enhancementsexpanded Oracle’s global footprint, deepened its security features and evolved the artificial intelligence-driven platform management functionality that was already present in the portfolio.

What’s next for Oracle

Going forward, Oracle’s strongest bet in the public cloud arena will be to grow its already impressive enterprise software-as-a-service application portfolio, though even there it remains behind the market-share leaders SAP and Salesforce in enterprise resource planning and customer relationship management, respectively.

It was clear from the other key executive keynoter — Oracle Chief Executive Mark Hurd — that technical innovation is the foundation of Oracle’s future-proofing strategy in the SaaS application market. In Hurd’s day two keynote, he made several predictions that support the pillars that are driving many of its announcements at OpenWorld. Hurd predicted that by 2025:

• AI will be integral to 100 percent of cloud applications.
• Customer interactions will be automated 85 percent of the time.
• Digital transformation will result in 60 percent of all IT jobs being in brand-new categories, such as supervisors for robots, smart-city technology designers, and AI-assisted healthcare technicians.
• Blockchain will be integral to trusted information exchange in “virtually all applications.”

With those trends in mind, Oracle’s announcements this week provide a clear foundation for deepening its cloud application differentiators. Wikibon is impressed with the breadth and sophistication of the new enterprise digital assistant capabilities embedded in Oracle Cloud’s enterprise resource planning, human resources, customer relationship management and customer experience applications, supporting AI-driven predictive, prescriptive, personalized and contextual decision guidance, what Oracle refers to as “intelligent process automation.” Likewise, Oracle announced several new  enterprise-ready blockchain applications for supply chain management.

In the enterprise cloud SaaS application market, Oracle is far and away more advanced than its rivals in embedding AI-driven contextual guidance in its solutions. In the coming year, Wikibon recommends that Oracle deepen and extend that functionality in several ways:

• Incorporate its AI digital assistants into robotic process automation solutions that enable knowledge workers to build intelligent software robots that drive a wider range of administrative functions than are supported out of the box in its Fusion Cloud Applications;
• Expand the range of out-of-the-box enterprise resource planning, customer relationship management, human capital management and supply chain management decision scenarios supported by Oracle-built and -trained AI within its cloud-based digital assistants;
• Incorporate Oracle’s blockchain platform its AI DevOps tooling, perhaps to provide an immutable log for end-to-end transparency of data preparation, modeling, training and serving steps for governance and compliance purposes;
• Launch use-case focused stacks of the newly announced Oracle Linux Cloud Native Environment to help bootstrap its customers’ development of containerized and orchestrated cloud-native AI digital-assistant microservices for public, private, hybrid, edge and multicloud deployments;
• Extend its AI digital assistants to its Oracle IoT Cloud for Industry Solution portfolio to drive prescriptive guidance into a full range of edge devices across industries and every business function;
• Provide partners and customers with a rich data science toolchain workbench, leveraging its recent DataScience.com acquisition, to support development, training and deployment of AI to address more complex, specialized and bespoke business requirements that would benefit from in-app digital assistants;
• Allow customers to embed their own bespoke AI models in these applications to tune the recommendations to their specific enterprise resource planning, customer relationship management, human capital management and supply chain management requirements.

Enhancements such as these will be necessary for Oracle to address the full range of enterprise requirements for digital transformation. Doing so well would help the company pull away from the pack in the one segment — beyond enterprise relational databases — where it remains in the top tier in market share: enterprise-grade SaaS solutions.