Oracle is betting that by landing big cloud reference customers like TikTok and Zoom will be enough to get its infrastructure-as-a-service ambitions rolling.
As you've probably read, Microsoft became the luckiest loser on earth when it lost out to Oracle to buy the US part of TikTok from Bytedance. The deal is wrapped up in US/China tensions over technology, privacy and data.
Enter Oracle. In a statement, Oracle said:
Oracle confirms Secretary Mnuchin's statement that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider. Oracle has a 40-year track record providing secure, highly performant technology solutions.
It's unclear what this Oracle-TikTok deal ultimately becomes, but the software vendor would essentially be hosting and securing US data from the TikTok app. While Oracle and TikTok sound like an odd match, analysts say follow the money.
Evercore analyst Kirk Materne said in a research note:
The question Oracle is when will the positive momentum in the cloud businesses start to translate into more consistent revenue growth? The good news is that TikTok should help on that front, as if one assumes TikTok's cloud spend is roughly similar to Snap's, that would equate to ~$200-$300mn in annual revenue for Oracle (~0.5-1% boost to total revenue). Now, it's worth keeping in mind that that estimate could prove to be high given this would only be for TikTok's US assets, but even if it was $100mn per year, we believe the partnership helps create additional credibility for Oracle in the public cloud market.
Constellation Research principal Ray Wang was also constructive on the deal. Oracle with TikTok as a customer would win a battle for a coveted workload and could combine app data with its Data Cloud for an ad network. Oracle also wins some diplomatic points with US and China. "Oracle's skill in winning TikTok is a coup on the cloud front, the ad tech front, and in the geopolitical trade wards. With over 80% of the top 20 ad networks, portals, creatives optimizers, trading desks, and ad brokers leveraging data from Oracle Data Marketplace, TikTok builds on this lead," said Wang.
During Oracle's first quarter earnings conference call, CTO Larry Ellison made it clear that grabbing new infrastructure cloud customers was a priority. Oracle already has good traction in software as a service and accounts like Zoom and TikTok can help it win the full cloud stack. Oracle Fusion apps and Autonomous Database already run on Oracle Cloud Infrastructure so the company is also its own reference customer.
By landing big accounts like Zoom and TikTok, Ellison can say things like this:
Customers are picking Oracle Cloud Infrastructure and the Oracle Autonomous Database for a few very basic and very obvious reasons: much better security, much better reliability, much better performance and dramatically lower cost, much, much lower cost than AWS. And that's why people like 8x8, another video conferencing system, are moving entirely from AWS onto the Oracle Cloud. In fact, there is not a major video conferencing company that isn't talking to Oracle about moving to the Oracle Cloud.
We love that Zoom's usage of Oracle Cloud Infrastructure services delivered triple-digit revenue growth in sequential quarters, from Q4 last year to Q1 this year. OCI cloud data centers are opening all over the world at a record pace. We now have 26 OCI regions live around the world, edging out Amazon AWS, which currently has 24 regions. And we'll be adding at least another 10 regions in the next 9 months. We're not slowing down.
Now Ellison has been known to be a bit obsessed about AWS. TikTok will give him a few more reasons to yap.