Oracle will soon release its Database 12c R2 and at least one analyst is betting that the product will fuel revenue growth for years to come. Of course, the wild card is open source database options and a bevy of offerings from the likes of Amazon Web Services and Microsoft Azure.
Jefferies analyst John DiFucci said in a research note that Oracle is about to hit an inflection point in its database business. The database is Oracle's entrenched product and critical to its future despite all the cloud talk.
We believe the imminent release of the 12c R2 ORCL database could add 8-9% of growth to annual revenue once fully realized, or ~2-3% if all new business is PaaS. The cumulative PaaS magnitude would grow faster, outstripping the equivalent license and maintenance contribution within 6 years.
Database 12c and its R2 revision, which typically serves as the starting gun for enterprise upgrades, is best known for its in-memory option and multi-tenancy capabilities. To be sure, software as a service vendors such as Salesforce have built their businesses in part on Oracle's database.
Here's the rub: Salesforce also has other open source options for databases in house such as PostgreSQL. Many of the companies Salesforce acquires either run on AWS or open source database options. Another issue: Oracle is going cloud first with its R2 release and on-premises customers will get it sometime in the second half of the year.
DiFucci estimated that Oracle customers will mix and match Database 12c licenses and platform as a service subscriptions. DiFucci's model is notable, but the following remains to be seen:
- Will Oracle customers expand their usage of the company's database or wean themselves off it?
- Are cloud database options becoming more viable?
- And will Database 12c R2 expand Oracle's wallet share or simply maintain the customer base?
In other words, this upgrade cycle for Oracle will be different from previous database rollouts. For starters, more of Oracle's revenue will be subscription based. In addition, there are more competitors than ever for Oracle. It's quite possible that SAP, which is using its HANA platform to prod customers to move off of Oracle databases, and Oracle are fighting yesterday's war.
I'd argue that DiFucci's analysis doesn't account for what I'd call seepage for Oracle. How much database business is leaking to AWS and open source options?
For instance, education company Pearson has moved from Oracle to an open source MySQL-based stack and Amazon's Aurora database. Pearson offers a testing platform that educational institutions use to pass students to new levels. Pearson's business spikes during testing season and then goes slow once school takes the summer break.
Jeff Schmidt, performance engineer at Pearson, has systematically moved his company away from Oracle. "We used to have data centers and an Oracle-heavy stack, but about 4 years ago it became clear that the whole thing needed a shakeup," said Schmidt. "We had to get out of data centers and up on the cloud and open source. We were getting killed with licensing costs from Oracle."
At first, Schmidt's team built out a MySQL stack that ran on AWS EC2. Pearson looked into AWS' initial database offerings such as RDS, but decided it wasn't up to par relative to its requirements. Later in Pearson's move from Oracle, the company reassessed AWS' databases moves. Aurora attracted the company and Pearson started moving its products to AWS for more than just compute, said Schmidt.
"We're hoping to move most if not of our EC2 space over to Aurora over the next year," said Schmidt. Pearson's Oracle licenses are negotiated at the corporate level so Schmidt's unit reports its usage each year. "Every year we're reporting less usage and our business unit is down to nothing," said Schmidt.
Schmidt isn't alone and declining Oracle database usage is tough to quantify. One thing is certain though. Models predicting Database 12c R2 sales should account for some element of share loss as more workloads move to Oracle rivals that weren't even in the game last database upgrade cycle.