The News: Oracle today announced Oracle Compute Cloud@Customer, a rack-scale cloud infrastructure that enables organizations to use Oracle Cloud Infrastructure (OCI) compute services anywhere. With Compute Cloud@Customer, customers can develop, deploy, secure, and manage workloads using the same software stack as OCI in deployments as small as a single rack. See the complete Press Release about Oracle Compute Cloud@Customer on the Oracle website.
Oracle Compute Cloud@Customer: Disrupting the Hybrid Cloud Landscape
Analyst Take: The high-octane world of hyperscaler cloud computing has an industry stalwart, Oracle, looking to break the dominance of the big three. Standing in the same league as the titans of cloud technology like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP), Oracle is carving a niche for itself as a force to be reckoned with. In terms of market share, it may be sitting in the fourth spot, but do not let the current standings mislead you.
The outstanding growth of Oracle of late has been fueled by the cloud applications and infrastructure businesses, which achieved a combined growth rate of 50% in constant currency in the last quarterly earnings. The infrastructure business experienced a remarkable 63% growth for the full year and an impressive 77% in the fourth quarter. When you look at this trajectory against the other vendors, Oracle is either gaining share or, more accurately, getting enterprises to migrate their most critical applications to the cloud.
How is Oracle pulling off the herculean task of competing with AWS, Google, and Microsoft? There are three primary factors at play. First, Oracle is not shy about pouring resources into its cloud infrastructure. With deep pockets from highly profitable software franchises, Oracle is investing heavily in infrastructure and new service areas, such as AI. Currently boasting more than 40 cloud regions and 100 availability domains globally, Oracle Cloud Infrastructure has significant reach. Second, it has a magnetic appeal for enterprise customers drawn to OCI’s emphasis on stringent security, regulatory compliance, and reliability – a trifecta that’s non-negotiable for businesses dealing with sensitive cloud-stored data. Third, OCI’s aggressive pricing strategy has proven to be a game-changer. Often undercutting AWS, Azure, and GCP, OCI is becoming the go-to-choice for AI workloads and cost-conscious businesses.
Moreover, from our view, Oracle is strategically committed to advancing the multi-cloud era by making cloud interworking a portfolio development and marketing priority. For example, Oracle is committed to getting the interconnect latencies to the equivalent of two data centers acting as one data center, effectively minimizing latency issues, and making them feel as one cloud to customers. We anticipate that Oracle’s interconnect model will serve as the approach that all hyperscalers and most cloud service providers will adopt. Business customers will continue to drive the demand to use whatever service they want in the cloud that is best suited for any workload while avoiding lock-in with a single cloud provider.
Focus on Hybrid Cloud Priorities
Hybrid cloud solutions have become increasingly central to the strategic underpinnings of businesses as they merge the advantages of the public cloud’s scalability and consumption-based pricing with the control and security inherent in on-premises infrastructure. In some verticals, public cloud adoption, while much touted, is still below 20%, especially in highly-regulated industries such as banking, telco, and governmental entities.
Businesses can use hybrid solutions to operate applications and workloads in both realms, significantly enhancing performance, scalability, and cost-effectiveness while complying with regulatory requirements. Noteworthy offerings in the space include AWS Outposts, Azure Stack Hub, IBM Satellite, Google Distributed Cloud Edge, Oracle Exadata Cloud@Customer, and now Oracle Compute Cloud@Customer – each enabling businesses to run respective cloud services on their premises. These solutions not only provide the flexibility to define the right combination of public and private cloud resources to meet business needs but also ensure seamless IT operations, improved visibility, and stringent control over the complete IT environment.
However, not all these hybrid cloud solutions are equal in terms of capabilities and in terms of importance to their companies. We find that Compute Cloud@Customer is a huge disruption to the public cloud on-premises market, as it is a true extension of the cloud to the customer’s premises. From our view, it is disruptive because it changes the paradigm by significantly raising the bar on what customers can do and experience when the cloud is placed on their premises. It changes the on-premises public cloud market by providing more complete application and middleware services. And when combined with Exadata Cloud@Customer, it delivers what can be viewed as an incomparable experience.
Unlike Amazon Outposts services that have not changed in 4 years, we find Compute Cloud@Customer is a complete IaaS, and Oracle is highly focused on it. Unlike Azure Stack, it is a single provider to engage, with considerably greater scalability and no need to pick your own hardware vendor and hire an Azure Stack operator. And unlike GCP Cloud Edge, it is not severely constrained in scale or function.
In the grand scheme of the cloud marketplace, hybrid cloud solutions have taken on an increasingly prominent role. As more businesses adopt cloud computing, they seek effective ways to maximize their investment, and hybrid cloud solutions provide this through the amalgamation of public and private cloud benefits.
Hybrid cloud solutions promise improved performance by allowing applications and workloads to operate closer to the end user, thereby reducing latency and enhancing user experience. They also offer increased scalability, as businesses can conveniently add or remove resources from the public cloud as necessary. Furthermore, businesses can strategically reduce IT costs by utilizing the public cloud for non-critical resources while deploying on-premises infrastructure for more crucial ones. Finally, hybrid cloud solutions can boost businesses’ security posture by allowing them to allocate resources that require stringent security to on-premises infrastructure. In essence, hybrid cloud solutions significantly benefit businesses by enhancing their IT agility, reducing costs, and facilitating compliance requirements.
Exadata Now Has a Tag Team Partner
Oracle’s Exadata database platform has long had traction in the market with its ability to support mission-critical applications with unsurpassed performance and availability. Futurum’s Ron Westfall covered the latest Exadata Cloud@Customer X10M system featuring all-new AMD EPYC processors back in July. The introduction of Compute Cloud@Customer creates a new dynamic and a compelling value proposition for Exadata Cloud@Customer users. Although they both use the same basic CPUs, chassis, and OCI control plane, they are optimized for different functions: Exadata for Oracle cloud databases, Compute Cloud@Customer for applications and middleware. In fact, they are complementary offerings whose strengths customers can leverage cloud on-premises with their elastic and independent scalability of compute and storage, and, of course, “pay for what you use” cloud consumption models.
Looking Ahead
Oracle is a trusted supplier to thousands of enterprise customers globally and has long delivered mission-critical hardware solutions from the earliest days of the acquisition of Sun Microsystems. The announcement today builds on this rich heritage. When you couple the proven track record of Oracle’s innovation with the explosive growth of OCI, Oracle Compute Cloud@Customer makes perfect sense by bringing OCI compute services to customers’ data centers. As a complementary offering to Exadata Cloud@Customer things get most interesting, as you factor in the installed base of Exadata systems globally, this solution will gain traction with clients.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
Oracle Database Analyst Summit: Powering the Multi-Cloud Era and Liberating Developers
Oracle Cloud Infrastructure Doubles Down on Kubernetes with Oracle Container Engine for Kubernetes
Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
Steven engages with the world’s largest technology brands to explore new operating models and how they drive innovation and competitive edge.
