Brightwork Research Study: The 2019 Oracle Database Usage
Executive Summary
- Oracle proposes a state of Oracle’s database and position that is not in line with reality.
- In this study, we analyze the main leverage points of Oracle’s database product and business model.
The Study
This is our study into the current state of Oracle.
Introduction
Oracle provides information. This is far less questioned or critically analyzed than it should be in the IT media market. IT media entities and Oracle consulting companies typically repeat what Oracle says. Both of these entities are aligned with SAP with IT media, seeing Oracle as a customer for paid placements and advertisements, and Oracle consulting firms looking to sell Oracle projects and forming common cause with Oracle.
For these reasons, IT media and Oracle consulting companies are poor sources of information on the reality of the Oracle products.
The Research Focus
| Research Focus | Description |
|---|---|
| The Research Design | We created this research to provide insights to those that have an interest in Oracle but are not would like more information on Oracle from the product perspective to help augment their decision making process in either a buying, competing or investing perspective. |
| Product Focused | Much of the coverage on Oracle, including that of the financial press is written by people without Oracle product knowledge. We specialize in software product knowledge, and we have many years of SAP and Oracle product knowledge. |
We will begin this research by describing Oracle’s overall design and then evaluating each of the main areas of Oracle.
Oracle: A Tale of Two Companies
Oracle can be decomposed into two of its most relevant businesses. These two businesses are highly intertwined, and they are entirely different than the story proposed by Oracle about how the company works.
The best way to misunderstand Oracle as a company is to listen to what Oracle says about itself. Our information about Oracle does not come from Oracle executives but from analyzing Oracle’s products, and from discussing Oracle with people with first hand Oracle experience.
[select-faq faq_id=’21371′] [select-faq faq_id=’21372′] [select-faq faq_id=’21381′]Undeclared Realities Around the Oracle’s Database
The Oracle database is well known as the core of Oracle’s business and what has allowed Oracle the cash flow to both make their large number of acquisitions as well as provided them with their account control.
- Oracle quite frequently makes inaccurate assertions around the Oracle database to customers, IT analysts, IT media entities, and to investors.
- We will fact check Oracle’s assertions and what it means for Oracle’s longer-term business model and Oracle customers.
The Typical Oracle Database Version of Oracle Database in Use
This research document uses expansion sections extensively to control the size of the document and make navigation easier. When the eye is closed, the section is compressed when selected. The eye will open. Just select again to close the section.
[select-faq faq_id=’21365′] [select-faq faq_id=’21366′]Oracle Versus Virtualization
Virtualization allows the software to be far more efficiently managed, and for hardware to be better utilization.
Virtualization is what has allowed the cloud service providers to rise to what they have become. Without virtualization, there is no modern-day AWS or Google Cloud. Virtualization can be run either in the cloud or on-premises servers.
[select-faq faq_id=’21366′]The Rise of Open Source Databases and What it Means for Oracle
- The rapid development and improved distribution of open source databases is an essential component of the Oracle story and Oracle’s future.
- As open source databases increase in popularity and prominence, there is a corresponding decline in Oracle’s centrality as a software vendor.
- One open-source database, in particular, PostgreSQL, is now known for being able to replace Oracle very effectively.
- The success of open source databases is calling into question many of the things that Oracle declares about their database. For years Oracle proposed that open source databases were not enterprise-ready. Now, with vast and high performing applications and data warehouses on open source databases, this contention is less frequently accepted.
Oracle’s Autonomous Database
Oracle has proposed that it created a massively new innovative and disruptive adjustment to its database. This combines AI with the database so that the database runs itself or is “self-driving.” While many without Oracle product exposure appear to find the claims made by Oracle quite reasonable, the view by those with Oracle database product exposure, and with the freedom to speak their mind, is very different.
[select-faq faq_id=’21376′] [select-faq faq_id=’21378′]About Oracle’s Support
Oracle is posing as an innovative, “growth” cloud company when it is a mature and declining on-premises vendor that makes little innovative progress and is more reliant upon its legal muscle than its software.
Oracle’s margin is in its support. Oracle is happy to sell software at a cost to obtain a support contract which contains a 94% margin. As Oracle’s support prospects go, so goes Oracle’s company and stock prospects.
[select-faq faq_id=’21370′] [select-faq faq_id=’21368′] [select-faq faq_id=’21369′]Oracle’s Cloud Issues
Oracle has reasonably successfully confused analysts on its actual progress on the Oracle Cloud. The reality of the Oracle Cloud has absolutely nothing to do with what is generally communicated by Oracle about the cloud. Furthermore, the Oracle Cloud is a serious soft spot of Oracle, and interacting with Oracle resources on the reality of the Oracle Cloud leads to be being shut out of further discussions.
[select-faq faq_id=’21373′] [select-faq faq_id=’21379′]The Issues With Oracle’s “Stuffed Accounts”
[select-faq faq_id=’21380′]Conclusion
Oracle’s public presentation bears little correspondence to how Oracle functions in reality. Oracle has taken to promoting itself entirely based upon what the investment community wants to hear.
Oracle Synopsis
| Oracle Postion | Description |
|---|---|
| The Reality Around the Oracle Cloud | Oracle will move to copy SAP's strategy of not investing in cloud but using its account control to markup the cloud services of other cloud service providers. This is what the Oracle/Microsoft Azure partnership is about. However, given the fact that a public cloud is price published and therefore transparent, it is unlikely that Oracle will be allowed to continually markup Azure to customers. |
| Oracle Support | We are not the first to refer to Oracle's support revenue as the Golden Goose. Oracle has optimized its support not to support customers but to attain an extremely high margin. Oracle will continue to lose support revenue to third-party support providers at an increasing rate. Oracle's lawsuits against third-party support providers like Rimini Street have essentially failed, and Oracle is vulnerable to losing more support business in the future and its margin. |
| Oracle and Database Hosting | Oracle will continue to lose on-premises database hosting to AWS. When this occurs, the account control at the migrating customer declines, and there is the likelihood of Oracle resources being shed from the customers. The Oracle resources are the main "lobby group" within companies to continue to invest in Oracle. |
| Oracle Database Marketshare Erosion | Open source databases and less expensive commercial databases like Microsoft SQL Server will continue to reduce the market share of the Oracle database. |
| Pressure on Oracle's Margin | Most of Oracle's margin is in its support which will increasingly see pressure as Oracle's database is increasingly understood as less differentiated. Oracle has reached the end of its ability to differentiate its database by adding more functionality or further growing the scope of the Oracle database. The fact that such a small percentage of Oracle customers are on recent versions of the Oracle database is clear evidence that Oracle customers do not see the new functionality of the Oracle database as worth either the expense or the extra software bloat. |
Oracle makes many aggressive proposals around its growth story. However, none of these stories are legitimate. On the contrary, Oracle is more likely to see its revenues decline (in place of more acquisitions, and therefore more financial leverage).
The Problem with Oracle’s Broader Value Proposition
This is another graphic from Rimini Street’s poll of customers.
Oracle’s substantial lock-in is preventing its revenues from eroding more than they ordinarily would. For example, I was recently advising a company that spent $4 million per year on support but was scared away from using a third party support alternative. Even though they barely used Oracle support because they had roughly 10% of their Oracle databases that that to be supported by Oracle. This meant the other 90% of their databases could not be removed from Oracle support (in the client’s mind). They did not like the value they were getting support, and they did not like Oracle, but they renewed their support because they felt they had to. This scenario is repeated over and over with customers paying Oracle not because they want to, but because of the lock-in that Oracle has.
These lock-in strategies are keeping Oracle’s revenues afloat. However, this is not a situation that can be considered a growth scenario.
References
https://seekingalpha.com/article/3965635-oracle-might-eating-porridge
https://www.crn.com/news/cloud/oracle-sales-stagnant-in-q3-but-fusion-and-netsuite-business-application-suites-booming
https://trends.google.com/trends/explore?date=all&geo=US&q=aws,oracle
https://www.forbes.com/sites/oracle/2019/06/24/larry-ellison-oracle-is-focused-on-our-star-products/
https://www.riministreet.com/Documents/Collateral/Rimini-Street-Research-Report-Enterprises-Rethinking-Oracle-Relationship-Cloud-Strategy.pdf
https://www.theregister.co.uk/2017/01/26/oracle_sues_employee_undo_arbitration_loss/
https://db-engines.com/en/ranking