Oracle is preparing to take on Amazon, Google and Microsoft with its own infrastructure-as-a-service technology, with its hardware destined to have a significant role in the strategy.
Oracle chief executive Larry Ellison revealed the plan in an earnings call last week: "Our new infrastructure-as-a-service [IaaS] offering provides secure, virtualised, compute and storage services in the Oracle Cloud or — and this is very important — an identical infrastructure service installed in our customer's datacentre as an Oracle-managed private cloud."
Ellison's statement suggests Oracle wants its customers to use Oracle's software and hardware for an on-premise cloud and go to Oracle as well for its public cloud. But this is a hard trick to pull off, and one that cloud incumbents Amazon Web Services (AWS), Google and, to a lesser extent Microsoft, have all steered clear of.
Microsoft is preparing to try something similar to this with its revamped Windows Server and System Center software, which connects to its own Windows Azure cloud, but has steered clear of hardware.
Amazon Web Services, meanwhile, has partnered with on-premise cloud specialist Eucalyptus and released its own 'Storage Gateway' software to make it easier for businesses to move data between their kit and its cloud but, again, has stayed away from hardware. Google, finally, has steered away from the on-premise world and its Google Compute Engine and Google App Engine services are a public-only play.
In fact, the only company that comes to mind as trying a similar thing is HP, which has been producing 'CloudSystems' for a couple of years. These pieces of storage and compute connect directly to HP's OpenStack-based in-development public cloud, along with Amazon Web Services and Savvis.
Of course, none of these companies have the huge hardware business that Oracle has, following its acquisition of Sun — and a key part of Oracle's strategy will be to find a role for its high-end hardware in the cloud, which is often characterised by vast amounts of commodity hardware.
Crucial time for Oracle
Oracle's OpenWorld event, which kicks off on Sunday in San Francisco, comes at a crucial time for the company.
It is facing competition from CRM competitors like Salesforce.com; new database technologies from companies like MongoDB; hardware rivals like SAP; and, now, from an entirely new breed of cloud companies. How Oracle navigates these waters will determine the company's chance of growing its share among younger, smaller companies.
Putting hardware at the heart of its infrastructure-as-a-service technology is one way to make hardware relevant to the cloud — in the company's most recent earnings release hardware sales dipped again and analysts suggested that the high-end 'Exa' cloud systems were failing to meet internal sales expectations.
Oracle's gamble is whether it can demonstrate some kind of performance or cost advantage over competitors when people use an all-Oracle cloud infrastructure. It's a message that needs to come out of Oracle OpenWorld next week.
An all-Oracle stack
As yet, there is not much evidence that a 'hybrid cloud' based around the same hardware stack on both sides has much value. Yes, Oracle has tuned its 'Exa' range of systems to work well with its own software and, yes, it claims its public cloud runs on Oracle hardware. What doesn't add up is how it can claim that by using an on-premise cloud paired with an Oracle cloud companies will get better performance than if they were using a mixed stack internally and Oracle on the other side, or vice versa.
There could be a chance that Oracle is being moved by customer demand rather than its own wider strategy
Along with this, Oracle has a historical commitment to single tenancy as the company believes this offers better security. While this may be true, if you operate a cloud model based around single tenancy, it is much more difficult to take advantage of the economies of scale that let companies like Amazon, Google and Microsoft consistently lower the price of their cloud services.
The measure of the value of the company's new cloud proposition will be how much — or how little — performance and costs change when you go from exchanging data with Amazon to exchanging data with Oracle.
IaaS is an unfamiliar area to Oracle. By launching a technology that sits far away from its core expertise of databases and corporate people management technologies, there could be a chance that the company is being moved by customer demand rather than its own wider strategy.
"What I'm seeing is that increasingly vendors in one area of cloud are offering other types of service as a complement," David Bradshaw, a research manager for software and services at IDC, says. "Their customers are asking for it."