If someone has to forewarn you that "BIG NEWS IS COMING!", rest assured that no big news is coming. That's what I thought when Oracle CEO Larry Ellison tried to soften another round of poor earnings with a pre-announcement that it would be soon showcasing "partnerships with the largest and most important SAAS companies in the cloud."
And it became sad but true "news" yesterday when Oracle announced that some of its software would run on Microsoft's Azure cloud service.
Yes, really. Try to stifle the yawns. (You, too, stock price.)
Two Legacies Meet In The Cloud
As Microsoft watcher Mary Jo Foley points out, this deal basically means that Oracle 11g and 12c databases, in addition to Java and WebLogic, will now run on Microsoft's Azure, Hyper-V and Windows Server platforms, whereas before only Windows Server was supported. It's not very exciting, as it's simply a way for Oracle to hedge its bets for those few customers that don't run its apps on Linux. To sweeten the deal, Microsoft has also agreed to run Oracle Enterprise Linux (OEL) on Azure.
Throw in the ability for Oracle licensees to migrate their existing licenses to the Azure cloud and Microsoft's ability to resell Oracle software and you have the deal in a nutshell. Which is not to say that this partnership will generate many deals.
As Cowen & Co. analyst Peter Goldmacher puts it, this deal amounts to "Two Old Men Talking About the Good Old Days." As he stresses:
In other words, this deal gives Microsoft platforms more of what the world's developers used to want, years ago, but nothing of consequence for modern developers.
If either of the two companies benefits here, it's Microsoft. Azure is already at a $1 billion run rate and, as I've written before, has a real chance of winning given its CIO following and embrace of open-source technologies. Because let's face it: these are the technologies driving purchasing decisions today, particularly for cloud applications.
By incorporating Oracle databases, WebLogic middleware and Java into the Azure fold, maybe, maybe Microsoft has done enough to squeeze out a few more market share percentage points for Hyper-V against VMware, which Cowen & Co. analyst Gregg Moskowitz stresses has been mostly limited to the SMB space. But given cloud developers' focus on mobile and Big Data applications, and their reliance on open-source technologies like Hadoop, teaming up with Oracle just doesn't feel like a long-term winning strategy for Microsoft.
Sadly, this deal could have been so much more.
What Might Have Been
You know what would have been big news? Red Hat Enterprise Linux (RHEL) running on Azure, rather than the troika of Linux distributions (SUSE Linux Enterprise, Ubuntu and now OEL) that Microsoft doesn't find threatening. Or an announcement that Oracle was officially abandoning its public cloud, which has attracted 5,000 customers but shows no signs of being anywhere close to seriously competing with AWS, Google, Rackspace or even Azure.
Or how about true portability of applications across Microsoft Azure, AWS, Oracle's public cloud, Rackspace, etc.? Or an announcement that Oracle was acquiring Hadoop vendor Cloudera, while Microsoft countered by acquiring Hortonworks?
Or maybe Microsoft should have gone rogue and focused on its most glaring need, applications, rather than another infrastructure story? Wells Fargo analyst Jason Maynard nails this:
[A]pplications drive infrastructure. It is very hard to be a winning platform vendor if there aren’t apps that run on the infrastructure. We think that Microsoft should renew its business applications commitment. There does not seem to be a meaningful focus at the company on its applications outside of Office, and at the same time it isn't maximizing the benefits of an ISV ecosystem. We think Microsoft should outline a clear applications plan, as this is the only way that the company can truly be a contender in the public cloud market.
So while Satya Nadella, Microsoft’s president of its server and tools business, spent last week talking up Microsoft's Azure leadership because Xbox Live, Bing and Office 365 all run on Azure now, perhaps his time would have been better spent this week talking about Oracle applications, and not merely its databases, running on Azure.
Back To The Drawing Board
No one should look at this news and the two companies are doomed. They're not. Both Microsoft and Oracle are exceptional companies with remarkable staying power in the enterprise. Microsoft has proven its ability to build its way back into the hearts and pocketbooks for CIOs while Oracle has managed to buy its way to continued relevance with the same crowd. No doubt they will find ways to do so now.
But this particular partnership isn't going to move the needle on either's business. Microsoft developers weren't clamoring for Oracle databases or middleware on Azure or Hyper-V (or Windows, for that matter). Oracle developers weren't praying each night for more Microsoft deployment options.
Rather, both these companies' followers need them to be far more aggressive in pushing into next-generation computing, which is predominately open source, rather than aligning old-school options.
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