As disruption from cheaper, smaller and more agile upstarts begins to have an impact on Oracle’s business, it reported its third losing quarter in the last two years, according to a report in the Wall Street Journal.
The WSJ article reported subscriptions slid 2 percent in the latest quarterly earnings report and the stock market didn’t deal well with news as the stock price dropped 9.7 percent.
Oracle is in fact just the type of company ripe for disruption by smaller more agile ones offering the same types of services, whether database management or CRM and marketing monitoring and automation (to name just a few of the enterprise categories in which Oracle has products), customers who once turned to Oracle are turning to cheaper open source and cloud alternatives.
As an example, the Wall Street Journal article cites the price difference for Oracle’s marketing software and the similar offering from rival Salesforce.com. Oracle charges $5,795 per user license with a 10 license minimum. Salesforce.com charges $125 per user per month for a similar service with a year commitment. Any way you slice it, that’s undercutting Oracle’s offering in a big way.
Oracle faces disruption on a number of levels. As a company trying to sell hardware and enterprise software to run on it, it faces competition, not only from Salesforce and other cloud alternatives, but from open source choices like Hadoop for data analysis and cheaper cloud infrastructure providers such as Amazon Web Services.
When companies looking to cut costs look at the bottom line, Oracle faces tough going against cheaper alternatives. What’s more, after years of aggressive pricing, customers are happy to find other options.
Meanwhile, in spite of the fact that Oracle has bought a number of cloud vendors over the last several years in an attempt to move some of its offerings to the cloud, it remains at its core very much an on-premise enterprise software vendor trying to sell a stack of software at a time when IT is looking for cheaper and faster vendors.
As the WSJ article points out, Oracle has a loyal customer base, but companies looking at new offerings aren’t looking to Oracle anymore when it comes to enterprise software, not when they can find alternatives that are far more economical — and that doesn’t bode well for the long-term future of the company.
What’s more, Oracle faces the classic “innovator’s dilemma” as defined by Harvard professor Clayton Christensen. They are forced to protect their most lucrative clients, and even though they must recognize the competitive pressure from younger, faster, cheaper companies starting out at the bottom end of the market and working their way up. Yet because companies like Oracle want to protect its most lucrative customers, they can’t afford to pay attention to the lower end ones the competition is gobbling up.
Oracle isn’t going anywhere because it has a bad quarter, but it’s the third bad quarter in two years from a company that used to consistently hit its targets and could be a sign that the disruptors are having an impact.
It can try to answer the disruptive forces, but it can’t fundamentally change what it is: A large company that was created to answer an enterprise need in a different decade under different market conditions. As such, it will very likely continue to suffer a death by a 1000 cuts as disruptive forces attack it at every turn.
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In this case, the data centers in Dublin run by Amazon and Microsoft got hit by lightning the other day causing them to go down. These things happen and it’s best if everyone stays calm when they do. Amazon certainly stayed calm as they stated the nature of the problem on the company web site — lightning struck the transformer next to the data center — and they even recommended a work-around while they fixed the problem, which was to launch another instance on a zone that was working. Not ideal, but it keeps you going right?
Microsoft similarly took it in stride and returned to normal operation later in the day. Not so bad right? It’s worth noting that Amazon did continue to have some problem due to a reported problem in its EBS (Elastic Block Storage) software.
The Microsoft outage affected a portion of the Business Productivity Online suite (BPOS). Business users were probably inconvenienced by the outage, but as I’ve written before, enterprise software goes down all the time and it’s just the way it is. Whether it’s cloud or on-premise, stuff like a lightning strike is going to happen and it’s really beyond anyone’s control.
Interestingly, some of the companies affected by the Amazon outage included high profile services Netflix and foursquare. I don’t want to minimize the effect any outage has on users because it can have a tremendous impact, but you also have to understand that one of the ways these services are even in business is by using cheap cloud computing power supplied by services like Amazon’s.
If foursquare and Netflix had to build their own data centers, it would have required a tremendous investment that might have been so prohibitive, these companies probably wouldn’t even exist without this ability to buy cheap server and storage space as a service.
If you do a quick perusal of the stories on Google News on the matter, there are couple with a sensational bent, but most of them are just straight news stories reporting on the nature of the problem. This is in stark contrast to previous outages where we have had reports of the end of cloud computing, harsh scolding of the companies involved and cries of general outrage.
Even a quick Google blog search, where you would expect more attitude and perhaps a dash of outrage is pretty tame.
So what does it all mean? It could mean we have reached a level of maturity I’ve been clamoring for. Or it could simply be that the dog days of August are upon us when fewer people are around to pay attention, and those that are, are too busy sweating in the heat to care about one outage in Ireland.
Either way, you can be sure there will be more outages, and at some point in the not-too-distant future, I’m hoping it won’t even be worth blogging about because it will be part of doing business in the cloud (just as it’s part of doing business on-site). That’s the day I’m still waiting for.
Photo by mikebaird on Flickr. Used under Creative Commons License. ]]>
But as Randy Moss, once said after a particularly testy exchange with the media, “The New England Patriots are 2-0. We got one in the division. So all you haters keep hating. We’re coming!”
Moss was right about one thing, if you want to go negative, that’s your choice, but neither the Pats nor the cloud are going anywhere, no matter how big the disaster. It’s not. So just take a deep breath and let’s see what we can learn from what happened last week.
Here’s what what we do know. Services like Amazon EC2 are a good thing. They give small companies like Reddit, Quora and Foursquare incredible scale and elasticity (the ability to scale up and back as traffic requires). And they can do it at a price that would be out of reach without scores of venture capital to build their own data centers.
Here’s another thing: What happened to Amazon can happen to anyone. As I wrote the other day on the Business Service Management Hub, “If it can happen to Amazon, it can happen to you because at its heart what is Amazon but a giant data center, whose core business is keeping other businesses going.”
That’s right, the idea that you are somehow protected from disasters like this because you keep everything behind your firewall is simply naive. A data center is a data center is a data center, and if it could happen to Amazon with all of its disaster recovery plans, it could certainly happen to you too, whether you believe it or not.
Perhaps, the best lesson to come out of this was what Patrick Corrigan wrote on Storage Bytes Now, and that’s an age-old one, don’t put all your eggs in one basket. Just as I’m sure, you spread your in-house data around various resources, don’t hitch your cloud wagon to a single vendor because when disasters strike like happened last week, you want a way to keep it going.
One way to do that is to make deals with more than one vendor. Corrigan was speaking in the context of storage and backup, of course, but it’s a lesson that could apply to any online infrastructure service. Just as your Exchange server goes down from time to time, taking the company email with it, so will your online infrastructure provider, as we learned last week in a spectacular fashion.
The take-away here isn’t to stay away from the cloud because bad stuff happens. It’s to realize that bad stuff will happen and try to find ways to mitigate that, just as you do with your in-house systems.
I’m probably being hopelessly naive here, but I’m hoping we can get past the point of a rash of this-is-the-end-of-the-cloud blogs and articles every time an outage happens in the cloud. It’s going to happen again, and it’s probably going to give you all cloud haters a chance to keep on hating — whether it makes sense or not.
Photo by Keith Allison on Flickr. Used under Creative Commons License. ]]>
Just about every IT pro probably has the secret day-dream project, the one they might build with unlimited budget and resources. Until the cloud came along, such dreams weren’t possible because hardware was simply too expensive.
It’s something that James Hamilton from Amazon’s Web Services team has been talking about for some time. Given that he sells these services for a living, you might justifiably question his motives, but all of that aside, Hamilton has a point (and he is after all a geek at heart, no matter who is paying him every month).
What services like Amazon’s have done is to take the hardware cost out of the equation, or at the very least put it within reach of people (or an Enterprise IT department) who have a dream, but don’t have the benefit of a venture capitalist or angel investor. Instead of deferring that dream, an individual can begin to build a company with a credit card, a laptop and an Internet connection.
It’s a fascinating, and according to the Network World article, Cycle Computing decided to test just how scalable this cloud service model might be. CEO Jason Stowe asked his engineers to build a 10,000 core Linux Super Computer using Amazon’s Elastic Cloud Service.
But Stowe being a business man didn’t just want to satisfy his geeky curiosity (although I’m betting that was part of it), he wanted to find a customer that could actually use that kind of computing power. And find it he did. Turns out San Francisco-based biotech company Genentech was actually interested in using such a virtual machine to learn how proteins bind to each other. (Whatever floats your boat, right?)
What’s amazing is they built it, Genentech used it and it provided the ultimate proof of the viability of cloud computing. It built up to the scale that was required — and in this case it was a pretty darn impressive level — and it was used for as long as Genentech needed it, and no longer. In other words, the client only paid for what it used and no more.
I can hear some of you saying, sure I remember time-sharing in the 70s and 80s, and to some extent it’s an apt comparison, but only to a certain point because there was a limited amount of computing power on those old mainframes. What makes today’s cloud services different is the ability to scale up and back in this manner.
Whether you’re a fan of the Cloud or not, you have to at least admit that this exercise was an impressive one, and it ultimately showed the power and the beauty of cloud computing. If you can think it, chances are you can build it now and without a huge investment to make it happen. Even if it’s a 10,000 core super computer.
Photo by Uriah Welcome on Flickr. Used under the Creative Commons License. ]]>
I don’t tend to go negative when it comes to the cloud, but the story earlier this month that Amazon Web Services cut off WikiLeaks for “violating the terms of service,” gave me pause. Instead of running scared, however, it could be a good ‘teachable moment’ about understanding your Terms of Service.
In a post on the Wall Street Journal’s Tech Europe blog, Ben Rooney reported that Dr. Joseph Reger, who is CTO at Fujitsu Technology Solutions, said that Amazon’s response to WikiLeaks showed a need for industry standards around the cloud. That’s because in his view, if it could happen to WikiLeaks, it could happen to you, and he has a point.
I’m sure Amazon feels it was in the right because it says WikiLeaks was using content that didn’t belong to it. Well, yes, technically it was, but it wasn’t a pirate site by any means Would Amazon have shut down the New York Times web sites if it had been using Amazon Web Services? I think not. So while Amazon’s lawyers are probably off the hook, as Dr. Reger pointed out, what they gained in legal points, they lost in public perception.
That’s because they played into the biggest fear that cloud critics have, and that’s the general sense of unease when your content sits on somebody else’s server and is in another company’s control. If Amazon decides you aren’t playing by the rules, you could be in the penalty box and your business severely compromised.
What’s most disconcerting about this action was the arbitrariness of it. It wasn’t a law enforcement official or a court ordering the content be taken down (although there were reports of State Department pressure). No, it was the lawyers at Amazon making the decision, and that should be frightening to everyone.
What this shows is the importance of understanding every word in your Terms of Service (ToS). In the new brave new world of IT responsibility, negotiating the ToS with cloud providers like Amazon is going to be Job One. Don’t rubber stamp it. Make sure you and your organization’s lawyers understand every word.
If you’re not happy, negotiate. And one point you should always place in the ToS is that under no circumstances will they shut you down without written notice and sound legal reasoning (meaning a court or legal authority has ordered it),
There really are a lot of positives about going to the cloud. This idea of only paying for what you use is very attractive, but there have to be clear rules about up time, governance and who can take your service down (and as Reger said, these should be codified into an industry standard). In my view, if you haven’t received a court order, you better keep me running. You don’t ever shut me down because you feel uneasy about my content (as with WikiLeaks).
WikiLeaks has been an object lesson on so many levels and the shut down at Amazon just provides one more–this time for IT professionals. The cloud has positives and negatives like any other approach, but you can reduce those negatives with smart planning and a clear ToS. If you haven’t learned this by now, you never will.