When you’re the co-founder and technology visionary of one of the most successful tech companies in history, you get to say what’s on your mind. So it was no surprise this week at Oracle OpenWorld, Oracle’s customer conference, that Executive Chairman and CTO Larry Ellison didn’t pull his punches when sizing up competition in the cloud market, reflecting on the sorry state of information security, and commenting on a range of other business and technology issues.
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How We Got To Where We Are Today
“We are in the middle, and I really do mean in the middle, of a generational shift in computing that is no less important than our shift to personal computing, when mainframes and minicomputers dominated our industry,” Ellison said during his opening keynote address.
It can still seem like the early days, as the biggest cloud companies generate only about $6 billion in revenue—relatively small by the standards of tech industry giants. But this transition to the cloud has been underway for over 15 years, he noted. The first cloud companies—NetSuite and Salesforce.com—were SaaS (software as a service) companies before the word "cloud" had even been invented, Ellison said, and even before them were the short-lived “application service providers.”
It has been 10 years since Oracle realized that it would have to rewrite virtually all of its applications for the cloud, as well as the supporting middleware and database, as part of the Fusion Project. Oracle’s SaaS work then led it to PaaS (platform as a service).
“Because if you sell someone a SaaS application, they might want to do more than just configure it…have it do things that they need in their particular company or their particular industry that we don't do in our SaaS application,” Ellison said. “So they need a platform for writing those extensions, they need a platform for integrating those SaaS applications with other SaaS applications and on-premises applications.”
Also around a decade ago, Amazon Web Services announced EC2, the Elastic Compute Cloud, renting compute and storage capacity as a service on the internet. Thus was born IaaS (infrastructure as a service).
“And lo and behold, after giving it a bit more thought, we eventually came to realize and understand that if we were going to be in the PaaS business, we also had to be in the infrastructure-as-a-service business, because if we wanted people to use our database in the cloud, they weren't going to use our database in the cloud with just our applications, just our SaaS applications,” Ellison said. “They had a lot of existing applications. They wanted to write applications of their own. They wanted to write them not all in Java, but in Java and new programming languages—Python, Ruby, scripting languages, programming languages, whatever you'd like to call them.
“So here's the irony of it all. We went into the SaaS business and came to understand that required us to be in the platform business. And we went into the platform business and came to understand we had to be in the infrastructure-as-a-service business. That's how we got to where we are today.”
We Have A Whole New Set Of Competitors
“In this new world of cloud computing, everything has changed. And almost all of our competitors are new,” Ellison said. CX (customer experience) application specialist Salesforce.com and ERP/HR application specialist Workday are the SaaS competitors Oracle sees most frequently, he said.
“We virtually never, ever see SAP. This is a stunning change,” he said. “The largest [enterprise] application company in the world is still SAP, but we never see them in the cloud.”
In the PaaS sector, Oracle’s biggest competitors are Microsoft, Salesforce, and Amazon. And what about in the IaaS sector? “Again, a stunning change,” Ellison said. Oracle competes mainly with Amazon in IaaS, and occasionally it sees Google, he said, but “we never see IBM.”
So this is how much our world has changed,” he said. “Our two biggest competitors, the two companies we watched most closely over the last two decades, have been IBM and SAP, and we no longer pay any attention to either one of them. It is quite a shock.… I can make a case that IBM was the greatest company in the history of companies, but they're just nowhere in the cloud. SAP was certainly the largest [enterprise] application company that has ever existed. They are nowhere in the cloud.”
Microsoft, Ellison said, is the only one of Oracle’s traditional competitors that has “crossed the chasm” and is now competing with it aggressively in all three cloud sectors: infrastructure, platform, and software.
Behold The Power Of Automation
In the IaaS sector, Oracle’s plan is to continue to at least match Amazon’s prices, and in some cases, like with archival storage, be the price leader, Ellison said. But price isn’t everything.
“The biggest cost to running these systems, even when you're in the cloud, is not necessarily what you pay the cloud service provider,” he said. “The biggest cost is how much labor is associated with consuming the technology. And we have doubled and redoubled our efforts to automate more and more things inside of the Oracle Database, inside of Oracle Middleware, inside of Oracle Applications.”
It used to sometimes take hundreds of steps to clone an Oracle Database or to set up an application that runs concurrently in two different sites so that they’re fault-tolerant. It was a very complex undertaking, Ellison said.
“Automation accomplishes two things,” he said. “One, it dramatically lowers your cost in consuming the technology and implementing these fault-tolerant systems. And second, it eliminates human error. If human beings are going through hundreds or thousands of steps configuring these systems, sometimes they make a mistake. So automation lowers cost and helps us meet our reliability goals. Very important.”
The key is making these systems much easier to administer and use—as well as much easier to learn, he emphasized. “Flying jet planes is very easy, believe it or not,” said Ellison, himself a jet pilot. “It's very easy to do, not so easy to learn. But once you learn it, it's pretty easy. It's not a lot of work. So we've got to make our stuff both easy to use and easy to learn to improve productivity.”
SAP Is Losing The Database War
For years SAP offered up lots of benchmarks for its database systems, Ellison said. But when SAP introduced HANA, its in-memory database, the company didn't use any of its existing benchmarks—“and they had a dozen of them,” Ellison said. They said they were going to write a brand new benchmark for HANA.
“Now, call me cynical,” he continued, “but I guess this was to make HANA look good. It was a benchmark that allowed HANA to distinguish itself. And we decided to run the same exact benchmark on Oracle. And we ran more than twice as fast as they did."
“By the way, SAP has not certified our benchmark. We've sent it to them…over and over and over again. And for some reason, they don't want to certify.…The facts are, the entire SAP cloud runs on Oracle, not HANA. SAP Ariba in the cloud runs on Oracle, not HANA. SAP SuccessFactors in the cloud runs on Oracle, not HANA. SAP Concur runs on Oracle, not HANA. I don't know what HANA runs, but it's not [SAP’s cloud applications].”
With Cloud Applications, Think “Extend,” Not “Change”
A common misconception is that companies can’t derive a competitive advantage from their cloud applications because they can’t customize them. “A lot of people misunderstand the concept of a cloud application,” Ellison said. “You can’t change a cloud application, but you can extend a cloud application.”
The distinction is important. Oracle never thought changing an application—on-premises or cloud—was a good idea, he said, and Oracle fully understands the need for competitive differentiation. Enter Oracle PaaS, which lets customers add screens and features to their cloud applications without changing the underlying code. “Workday doesn’t have a platform,” Ellison said. “Workday has no ability to extend their applications. None.”
Current-Generation Information Security Isn’t Cutting It
“We need much better security,” Ellison said during his Oracle OpenWorld keynote on Tuesday afternoon. “We need a next generation of security, because we are not winning a lot of these cyber battles. We're losing a lot of these cyber battles. We haven't lost the war, but we're losing a lot of battles. And it is a technology confrontation between sometimes nation against nation, company against company, hacker against…ethical technologist.
“And we have to rethink how we deliver technology, especially as vast amounts of data are moved to the cloud. If we're going to move all of this data to the cloud, we have to make sure it's secure, that that data cannot be stolen, that those services cannot be interrupted.”
Why Silicon-Based Security Will Win The Day
In extolling the virtues of the silicon-based security of Oracle’s new SPARC M7 processor, Ellison laid out why it’s best to push security features as low in the technology stack as possible.
For example, it’s better to encrypt data in a database that supports a range of applications than to encrypt each application individually because every one of those applications then inherits that encryption capability, he noted. “If you put it at the application layer, and you have another 4,000 applications to write, you have to put it in each of those 4,000 applications,” Ellison said. “It's better to have it at a lower level.”
Likewise, silicon-based security is better than operating system security because then every version of every OS that runs on that silicon inherits that security. “And the last time I checked, even the best hackers have not figured out a way to download changes to your microprocessor,” Ellison said. “You can't alter the silicon. That's really tricky.”
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