Uncommon Wisdom

Dec 21 2010   5:30PM GMT

What’s behind Oracle moving its enterprise apps to Amazon’s EC2?

Tom Nolle Tom Nolle Profile: Tom Nolle

Fresh off of ramping up its server/networking connections for the year ahead, Oracle announced that it will be supporting at least some of its PeopleSoft and JD Edwards applications on Amazon’s EC2. This seems like a reversal for the company, which had initially seemed to reject the cloud computing model. I think it’s worth looking at the move to see if it reveals some hidden truths.

First, the revenue impact of the decision isn’t significant on its face, because Oracle will treat EC2 virtual machines just like customer virtual machines; the same license terms and rules apply. So what we’re seeing here is a model to accept infrastructure as a cloud service rather than to promote public cloud-based enterprise apps in Software as a Service form. But why even do that? I think that Oracle is realizing that the hybrid cloud is its path to enterprise prominence, and in particular a path leading past HP in a competitive sense.

Another factor is that Oracle’s database appliances are selling strongly. These appliances provide database management systems (DBMS) as a service, and thus could make it much more practical to have a cloud application access an on-premises database with reasonable performance. Thus you could argue that the hybrid cloud model is perfect to socialize Oracle’s appliances in a market that already seems to be catching on to their value.

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