What To Do About the Extreme Monopoly Implications of Hyperscale Public Cloud Providers

Executive Summary

  • Hyperscale public cloud providers are tremendously efficient, but they are natural monopolies.
  • Why the issue of public cloud monopolies needs to be discussed and regulated.

Introduction

It is only possible to name a few public cloud hyperscale providers. This is because the hyperscale providers have enormous economies of scale in their facilities as well as in how they enable their services to be easily consumed — and other factors. Even large vendors such as Oracle and SAP have been unable to provide a competitive offering to the hyperscale providers. (One might argue they could have put up more of a fight, but lack the appetite for such long term investment, Oracle for example prefers to spend money on stock buy backs).

How Monopolistic Are the Cloud Service Providers?

There is little doubt that these providers are monopolistic.

  • GCP’s parent company, Google has taken control over the majority of online advertising.
  • AWS, has a specific business model to eliminate competition from the markets in which they compete. AWS seemingly unlimited funding is described my monopoly expert Matt Stoller as a type of counterfeit capitalism, and it has many copycats in software and outside of software (see the links and quotes at the bottom of this article).
  • Azure’s parent company Microsoft, is well Microsoft.

Curiously, one of Azure’s arguments to customers is that AWS is such a monopolist, that they use the data they gather from providing cloud services, to compete against their customers, at least in some circumstances as the following quote explains.

Microsoft has been telling potential clients that if they use its Azure service, they won’t need to worry that they are placing valuable customer data or product information with a rival who can use the data to compete with them. According to the Journal, Julia White, corporate vice president of Microsoft Azure, said in an October interview that unlike with AWS, Azure is “not about using customer data and competing with them.” – Forbes

This is an amazing development, with one of the largest monopoly vendors in the enterprise software space making the monopoly argument against a competitor.

While this is all known, the far less frequently discussed topic is what to do about it.

Non Hyperscale Providers Losing Market Share

Data centers and colocation operators are steadily losing market share to the hyperscale providers. So much so, that as we cover in the article How Gartner and IDC Help Vendors Co-Opt Things, They Are Unrelated To, even huge companies like Equinix have found it necessary to change the narrative. They have turned to IT analysts like Gartner and IDC and paid them most likely a substantial fee to try to discourage companies from viewing Equinix’s “non public cloud” offering as relevant and as valuable as the public cloud. As we cover in the article, Equinix’s arguments, repeated through Gartner and IDC make little sense.

The Role of Regulation and Natural Monopolies

The answer to this is the same answer to any natural monopoly, namely regulation.

The definition of a natural monopoly is as follows.

natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors. This frequently occurs in industries where capital costs predominate, creating economies of scale that are large in relation to the size of the market; examples include public utilities such as water services and electricity.[1] Natural monopolies were recognized as potential sources of market failure early as the 19th century; John Stuart Mill advocated government regulation to make them serve the public good. – Wikipedia

The understanding of monopolies, much less natural monopolies in even the business general public, is quite weak. We accept highly regulated natural monopolies in areas ranging from railroads, water works to power generation, without giving it a second thought.

The prices paid for our monthly power bill are not set by the “market” and from among multiple options. In each city in the US, for example, there is one power provider — a regulated utility. Most of the world works in the same way.

A dam, which produces power, and is a natural monopoly does not work under a competitive model. First dams are extremely expensive to build and have large ecological implications. How does a “free market” work for dams? Should a second dam be allowed a few miles from this dam? That won’t work, as a dam creates lake behind it. 

Large infrastructure items like dams, railroads, power generation, water works, and hyperscale providers do not fit within the construct of open competition.

The outside of a Google data center. 

The inside of a Google data center.

The Failure of the Low Regulated Mobile Phone Services Market

In cases where natural monopolies have been fragmented, such as in the US with mobile phone services, the costs have become much higher than necessary. And there has been a duplication of infrastructure, and a corresponding increase in expenditures on sales and marketing. A discussion with any Canadian quickly illuminates how Canada kept their cellular service a regulated monopoly, to the satisfaction of many Canadians, whereas the US followed a “free market” model of trying to have multiple cellular service providers for what is a natural monopoly.

Why There is No Other Historical Solution than Regulation

There is no other answer to natural monopolies but regulation. Without regulation, natural monopolies coerce excess returns from their customers. This has been found to occur in virtually every case where a monopoly is present.

Currently, the hyperscale providers like AWS, GCP, and Azure provide low prices (with only AWS and GCP being public prices). Still, history shows that as these providers continue to drive out competition, these prices will not stay low. Low prices are the early stage of monopolies (and often used to justify the monopoly), mid and later stage monopolies use their market power to raise prices. Consumers lack alternatives to the monopoly, and once most of the competitors are run from the market, it is difficult for new entrants to bring back competition. Monopolies are also intertwined with government lobbying and protected by governments. With the rise of not only hypercloud public cloud providers but several giant technology companies (including Facebook and Apple), the size and influence of these companies are making them close to unregulatable.

Such political power is also suffused into policy unrelated to regulation but which nevertheless makes it even more difficult to compete with the monopoly. As an example, Apple barely pays taxes due to its tax haven in Ireland, and General Electric (an older monopoly) has many years where it receives a billion-dollar or more reverse tax from the US government. That is, it not only pays no tax but is paid to exist by the US government.

International Concern Over the Concentration of Hypescale Public Service Providers

While AWS, GCP, and Microsoft/Azure are multinationals with offices all over the world, they are all based in the US. As concentration continues to occur, each non-US country will have to come to terms with higher and higher percentages of government and private industry data being kept on US servers. And beyond the privacy concerns within each vendor, the US government has come up with a variety of excuses to obtain access to this data as is explained in the following quotation.

However, those using third-party cloud solutions are relinquishing some of their control over their business data. For example, the U.S. Cloud Act (Clarifying Lawful Overseas Use of Data) gives U.S. authorities access to data stored in the cloud – even if local laws in the data storage location prohibit it. Enterprises will increasingly use their data to create value – increasingly in real time, for example, in the production environment, ”said Dr. Karl-Ulrich Köhler, CEO of Rittal International. “Data sovereignty will be an important success factor for international competitiveness,” adds André Hiddink, product manager IT Infrastructure. – Data Center Works

The primary regulatory body internationally that has been able to fine and otherwise punish US companies has been the EU.

The US and Europe have had good relations for many decades. Still, it is difficult to see the US government accepting the current and predicted future situation if the roles were reversed.

This leads to the following quotation.

In the EU there is a move towards regulation to counter the dominance of the USA Tech giants which will hurt AWS, Google etc and leaves the door open for Tier 2 cloud providers (some using OCP hardware) that want to use colocation centers. This may or may not hurt Equinix if the EU include Equinix in with the other USA based companies.

I have been advised by a small colocation provider in the UK that provides an On Ramp services.

One of the main CSPs (mobile network provider) in the UK used them recently to connect to Google Cloud, and it was the only way they could do it apparently. And only networking gear was installed in their colocation center, that is no servers were installed. – Mark Dansie

And the following quotation also.

The European major digital project Gaia-X, an initiative of the German Ministry of Economic Cooperation and Energy (BMWi), is to start in 2020. The project aims to build a European cloud for the secure digitization and linking of industry and forms the basis for the use of new AI applications (artificial intelligence). In this context, the Fraunhofer-institute the initiative ‘International Data Spaces’. This virtual data room allows companies to exchange data securely. Compatibility of a proprietary solution with existing (cloud) platforms – interoperability – also exists. This means: geographically dispersed smaller data centers with open cloud stacks can create a new class of industrial applications that perform the first data analysis directly at the source of the data and use the cloud for later analyzes. – Data Center Works

Advice on Enjoying the SAP and Oracle Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Conclusion

The US has done very little in the past few decades to enforce its antitrust regulation, and without a national security concern (as all of the hyperscale providers are based in the US), the EU is the likely regulatory entity that would do something to regulate the market. The EU has a significant weapon in the fight, which is the EU market.

If forced to do so, the hyperscale providers would have to accommodate the EU regulations. The hyperscale providers are quite new, especially at their current scale. This is an issue that is creeping up on regulators, and that becomes more important as they continue to grow and pull market share from public cloud providers.

Quotes on Counterfeit Capitalism

These quotes are from a landmark article on capitalism titled WeWork and Counterfeit Capitalism, where the competition is primarily based upon access to capital.

Today I’m going to continue on this theme, and discuss the increasingly common tendency of capital markets to finance loss-making companies, which is an important trend I call “Counterfeit Capitalism.” The most hilarious example is WeWork, because it’s just such an obvious example of self-dealing couched in New Age management consulting speak. Its CEO, Adam Neumann, was just forced to step down. Both Neumann’s rise, and his fall, have important lessons if we want to correct serious errors in our political economy philosophy as a society.

This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. And Amazon has spawned a host of imitators, including WeWork. It has also reshaped venture investing. The goal of Son, and increasingly most large financiers in private equity and venture capital, is to find big markets and then dump capital into one player in such a market who can underprice until he becomes the dominant remaining actor.(emphasis added)

In this manner, financiers can help kill all competition, with the idea of profiting later on via the surviving monopoly. – Matt Stoller

AWS is profitable. However, it hasn’t been for long. And in fact, most of Amazon’s profits come from AWS, not from its larger retail revenues.

There are few companies that the capital markets would have allowed to make the investments that AWS did into its infrastructure. This is an extra barrier to entry, that is the capital markets allow some companies to go years without profits or only rarely profitable quarters, while requiring profits from other companies. Tesla is another company that the capital markets to make enormous promises, and to come to raise enormous sums of money, even when they repeatedly say they won’t.

Matt Stoller continues…

What predatory pricing does is to enable competition purely based on access to capital. Someone like Neumann, and Son’s entire model with his Vision Fund, is to take inputs, combine them into products worth less than their cost, and plug up the deficit through the capital markets in hopes of acquiring market power later or of just self-dealing so the losses are placed onto someone else. This model has spread. Bird, the scooter company, is not making money. Uber and Lyft are similarly and systemically unprofitable. This model is catastrophic not just for individual companies, but for their competitors who have to *make* money. I’ve written about this problem before. Amazon has created a much less competitive and brittle retail sector. Netflix’s money-losing business is ruining Hollywood.

Then Stoller goes on to explain the impact of this on society generally.

This kind of counterfeit capitalism is terrible for society as a whole. At first, with companies like Walmart and Amazon, predatory pricing can seem smart. The entire retail sector might be decimated and communities across America might be harmed, but two day shipping is convenient and Walmart and Amazon do have positive cash flow. But increasingly with cheap capital and a narrow slice of financiers who want to copy the winners, there is a second or third generation of companies asking Wall Street to just ‘trust me.’

As euphoria in capital markets takes hold, predatory pricing scheme come to entirely wastes capital on money losing enterprises, and eventually these companies become Soviet-style generators of white elephants and self-dealing. The men and women who run them have to be charlatans, because they are storytellers justifying losses.

One of the results was the establishment of the Securities and Exchange Commission, which was designed to stop monopolization and fraud enabled by stock manipulation. As it turned out, it worked quite well. And as corrupt as the SEC has become, these principles even work now, in 2019, under the Donald Trump administration. Pure disclosure and public markets managed to stop Jamie Dimon, Masayoshi Son, and Adam Neumann.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

References

https://en.wikipedia.org/wiki/Natural_monopoly

https://www.geekwire.com/2019/amazon-web-services-powers-tech-giants-profits-slower-growth-raises-new-questions/

https://datacenterworks.nl/artikelen/wat-hoort-er-op-de-trendlijst-voor

https://www.forbes.com/sites/petercohan/2020/01/06/how-much-of-amazons-73-billion-aws-profit-will-rivals-win/#4145bec5bcd7

https://www.geekwire.com/2019/true-amazon-profitable-nearly-two-years-even-without-aws-cloud-windfall/

https://mattstoller.substack.com/p/wework-and-counterfeit-capitalism

The Public Cloud Revolution Book

The Public Cloud Revolution: How Open Source is Displacing IT Mega Vendors

Interested in how to open source is powering public cloud providers like AWS and Google Cloud and what this means for the different modalities of computer hardware (cloud, on-premises proprietary server, mainframe, and appliances?). This book covers many topics that are greatly underrepresented in the common IT media coverage of these topics.

Why Government Entities Should Use Open Source Over Commercial Software

Executive Summary

  • Commercial software vendors are being subsidized by taxpayer dollars while keeping their code private.
  • Public money should go to public, not private code.

Introduction

Little thought is given when governments buy commercial software that is sold under a restrictive license.

However, upon reflection, this is a strange and inconsistent arrangement. This is because when the government funds something, it is typically placed into the public domain. This is true of public research and public publications as just two examples. For instance, in the US, when taxpayers fund the research of the Office and Management and Budget, their reports are available for everyone to see.

The Public Money: Public Code Video

The following is an excellent video that explains the concept of requiring government entities to direct resources into open source or public code projects.

The things pointed out in the Public Money: Public Code video is unseen. This is because the ASSUMPTION is that applications should be in the hands of private entities and closed.

It is normally assumed that governments should buy their software as the private sector does. However, governments have a public function, and this differentiates them from private companies that have no other charter except to look out for their concerns.

A Long History of Faking Innovation

Commercial vendors have a long history of taking from open source projects, making some small changes, and then marketing the work on the part of the open-source project as their own.

We cover in the article Why Both Superconvergence and Hyperconvergence are Hollow Marketing Constructs. Nutanix helped created the marketing construct of “hyperconvergence,” however, a major thing they did was take the open-source Linux KVM virtualization technology, add some tiny thing, make it private, and then claim innovation. One the basis of a slightly adjusted Linux component and their propriety dashboard, Nutanix claims to be a “one-stop-shop” for all data center needs. Their actual contribution to the “party” is a dashboard, and yet if you read the Nutanix website, it makes claims of revolutionizing data centers.

And this is the problem with commercial vendors. The profit incentive often drives them to make false claims. However, media entities and IT analysts can be hired to say that whatever the marketing department at commercial vendors has cooked up is correct.

The History of Commercial Vendors Ripping Of Governments

As for the government examples given in the video, in the US, government entities are known as easy pickings for the vendors. I am currently tracking several US government entities who are being robbed by SAP and by several SAP consulting partners. The Air Force once spent 1/2 billion on an ERP implementation from Oracle that they canceled after they figured out that Oracle had lied to them when they said Oracle ERP could replace all of the specialized Air Force systems.

Rather than buying ill-fitting solutions and exorbitantly priced solutions from SAP or Oracle, as it is taxpayer dollars, the US government could support open source, which is released back to the movements.

The video makes an excellent point and challenges existing assumptions by asking the question which can be paraphrased as follows.

Why are public taxpayer dollars going into the pockets of closed source commercial vendors?

Taxpayers should insist that open-source alternatives be evaluated first. However, right now, the opposite is occurring.

Under the Trump Administration, a highly functional award-winning and internally developed application called VistA at the Veteran’s Administration (VA) is being replaced by a commercial system from Cerner, which has also given large donations to the right places. This application is a horrible fit for the VA because it was developed for the private health care industry and has a significant functionality focus on billing management, which is irrelevant for the VA because the VA does not bill its patients.

Choosing to be Lied to By Commercial Vendors Like SAP

Various US departments are purchasing a database called SAP HANA right now.

SAP HANA is even a more limited option from a licensing perspective than Oracle. SAP HANA comes with what is called indirect access liabilities, which we cover in the article The HANA Police and Indirect Access Charges. And it means that the US government has restrictions as to how it can move data to and from the HANA database, which SAP uses to force companies into purchasing more SAP software and databases.

Even more appalling is that the US government is buying a database that has enormously false claims about its superiority to other databases How to Deflect That You Were Wrong About HANA. And the database has, in part, been reverse-engineered from open source databases!

And this is admitted to by SAP (although not willingly).

The Teradata v SAP Lawsuit

In a lawsuit against Teradata, as we cover in the article How SAP Admitted in Court Documents to Copying from MySQL, their defense is that they did not take the idea from Teradata (as accused by Teradata), but from MySQL!

Really?

Because this was denied for quite some time after published in the article that Did SAP Reinvent the Wheel with HANA? that HANA had been reversed engineered. And then, when pressed in court, it turns out this was true all along. It is interesting what lawsuits can get companies to admit.

If you are backward engineering your database from open source, then why are taxpayers paying a license fee and dealing with the license restrictions (and the INCREDIBLE license restrictions on HANA) for it?

HANA is of such poor quality that I proposed merely replacing it with an open-source database, but keeping the HANA name so that the executives could feel good about their purchase.

These are the types of topics that I consistently point out the IT media sphere will not touch. Why? Because commercial vendors and consulting firms exclusively fund them. I have been privy to how the ad sales departments at IT media entities work — and they continually send out emails to vendors and consulting firms and ask them to increase their advertising levels.

Conclusion

There needs to be serious discussion around this proposal because there is little reason for governments to be using public taxpayer dollars to fund commercial vendors. This is particularly when commercial vendors and their consulting partners have such a terrible history of taking advantage of government entities.

If governments began to fund open source projects, open-source would explode — because open source projects have proven to be extraordinarily efficient at converting funding to quality output. They are so good at it, that commercial vendor’s trip over themselves to try to take efforts from the public sphere and make it private, and claim that it was their invention.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

References

https://lnkd.in/dqm7Td5

https://www.geekwire.com/2019/interview-google-cloud-ceo-thomas-kurian-open-source-aws-working-military/

The Public Cloud Revolution Book

The Public Cloud Revolution: How Open Source is Displacing IT Mega Vendors

Interested in how to open source is powering public cloud providers like AWS and Google Cloud and what this means for the different modalities of computer hardware (cloud, on-premises proprietary server, mainframe, and appliances?). This book covers many topics that are greatly underrepresented in the common IT media coverage of these topics.

Will Thomas Kurian Bring Oracle’s Sales Sleaze to Google Cloud?

Executive Summary

  • Thomas Kurian, the head of Oracle Cloud, took the reins at Google Cloud.
  • The WSJ covered Kurian’s plans at Google Cloud. We ask a specific question from this coverage.

Introduction

The Wall Street Journal wrote an article (What’s Been Lacking at Google’s Cloud? Enough Humans), where the WSJ delves into Thomas Kurian’s plans as the recently named head of Oracle Cloud.

In this article, we will review the most important quotations from the WSJ article and provide our take on the likely changes to be put in motion by Kurian.

Thomas Kurian’s Observation on Google Cloud

The WSJ article begins by pointing out Kurian’s observations on Google Cloud after leading the organization for several months.

“Weeks into his new job as head of Google’s cloud business, Thomas Kurian identified a chief complaint from big business customers: They often didn’t have account managers to call.

Understanding corporate customers is precisely why Google hired Mr. Kurian, who spent two decades at longtime adversary and competitor Oracle Corp. , including running product development. Customers are happy with Google’s technology, he said, but not their lack of access to sales managers to cater to their needs—a basic business tactic.””

Oracle is not an adversary of Google or any other cloud service providers because they have a nearly unmeasurable cloud services presence.

Something left out of this observation on the part of the WSJ is how do Oracle customers feel about the Oracle Cloud, the division of Oracle that Thomas managed before he left to work for Cloud.

So how do they?

  • Customers were unhappy with the technology and customer service. You could access Oracle customer service, but it was and is exceedingly poor, with high turnover.
  • Secondly, because the Oracle Cloud lacks self-service capabilities, you end up having to reach out to people. Oracle’s solution to the Cloud seems to be people people people. It is ridiculous in that everything seems to require some engineer setting things up for you. This is one (among many reasons) that Oracle’s claims to have reached equivalence with AWS and GCP have always been ludicrous.

Oracle Cloud seems less like something built, and more like something that is built when requested. As Ahmed Azmi states, “if they come, we will build it.”

Unsurprisingly, Oracle’s CAPEX for the Cloud is tiny, as covered in the article The Problem with the Oracle Cloud and Colocation. AWS and GCP have built something; they are not just using their clouds to attract people and then put people to work building stuff after someone has asked for it.

Under Kurian, Oracle Cloud and now has no understanding of how to manage a cloud services operation, and they also have no idea how to build one, despite hiring people from AWS and GCP. This is something the WSJ should always keep in the back of their mind as they are listening to Kurian.

The WSJ continues.

Simplified Contracts?

“Mr. Kurian said he has simplified contracts for different types of businesses instead of a one-size-fits-all approach, and has moved to more predictable pricing, in a way corporate buyers appreciate. He intends to dramatically boost Google Cloud’s sales and support staff.

Google Cloud already had a simplified contract. Secondly, Oracle is known for the most byzantine contracts in enterprise software, and Kurian brought simplified contracts to Google?

That is a bit of a pill to swallow. Let’s spit that pill out.

On pricing, Google’s pricing has always been predictable and auditable, unlike Oracle Cloud’s. All of this is easy to verify. Let us go to our Google Cloud account.

Google Cloud, like AWS, has predicted costs for various instances. The price auto-adjusts as soon as you make a change to the deployment. Oracle Cloud has never had this. 

And Google Cloud already has far more transparent billing than does Oracle Cloud. 

WSJ should recognize that Thomas Kurian will say that he will do some things, but only a portion of those statements will be true. 

The WSJ continues.

Kurian = Customer Expert?

“There are certain things that you learn having dealt with enterprise customers for 22 years,” Mr. Kurian said in an interview.”

Kurian may have dealt with enterprise customers for 22 years, but it is not clear that he satisfied them. If you check Oracle’s customer satisfaction, it is the lowest in the software industry. So why does Kurian have any credibility when he makes this statement? Southwest Airlines knows how to satisfy customers. The Marriot Hotels know how to satisfy customers.

But Oracle knows how to satisfy customers?

The WSJ continues.

Kurian is Bringing Oracle Support Knowledge

“Google Cloud had prioritized developing technology over sales and support, said Gene Reznik, strategy chief at the consulting firm Accenture PLC, which helps clients deploy tech from major cloud services including Google’s.

“There is a lot of hand-holding required” with big corporate customers, Mr. Reznik said. But Google often had product engineers rather than account managers handle customer calls. “It really wasn’t their day job,” he said, adding that Mr. Kurian brings a corporate credibility to Google’s “consumer-centric culture.””

It is difficult to see who besides Gene Reznik thinks that Kurian brings credibility for customer support from Oracle to Google.

  • Oracle routinely receives the lowest rating for support. Comments on Oracle support are frequently laced with profanity for how Oracle support let them down.
  • Oracle’s support has a 90%+ margin because Oracle prefers to make its support revenue almost entirely margin versus investing anything in it or its support resources. We covered this in the article, How do SAP and Oracle’s Support Profit Margins Compare to Pablo Escobar?
  • Oracle spends a disproportionate amount of its money on salespeople versus people that “hold people’s hands.”

It is a bit curious how Gene Reznik missed all of this. Its almost as if Gene Reznik has no idea how Oracle operates.

The WSJ continues.

The Disaster Area That is the Oracle Cloud Can Be Overlooked Because of the Oracle Database?

“Mr. Kurian, who regularly met with customers at Oracle even as a top engineering executive, said he recognizes the challenge. He has his first big chance to lay out his vision for closing the gap with Amazon and Microsoft when Google begins its annual cloud-computing conference Tuesday in San Francisco.

There, he plans to pull from the playbook of Oracle, which has struggled in cloud computing but has been a leader selling database software.”

The assumption here seems to be that Oracle has been successful with their database because they are a leader in customer service or pleasing customers.

This is not true.

Oracle has very well documented monopoly power in the database market; it is not used because Oracle has demonstrated superior or even adequate customer service capabilities.

Time for Oracle’s Sales Sleaze?

“Mr. Kurian will detail a dramatic ramp-up in Google Cloud’s sales team and unveil new technology enabling programmers to develop applications that can run on Google Cloud as well as on services from Amazon and Microsoft—comparing it to Oracle’s widely used Java computing language.”

Well, of course. And where will these salespeople be primarily drawn from? Well, it begins with an “O.”

  • The pattern with Oracle is for companies that receive Oracle executives to be quickly inundated with ex-Oracle employees.
  • This usually rapidly decreases the ethics within this organization, and soon the pre-existing employees begin to refer to the new ex-Oracle employees as “the Oracle mafia.”
  • People who are good actors will often seek to leave a company after it has been infested by Oracle employees.
  • The overall moral tends to decline.

As for technology, it is doubtful that Kurian is enabling anything technologically within Google. Remember, the Oracle Cloud technology was and is terrible. Kurian had several hires from AWS and Google Cloud, but he was not able to get much out of them.

The WSJ continues.

Kurian’s Sales Changes

“Mr. Kurian declined to provide specific figures but estimated his sales force is between one-10th and one-15th the size of sales forces at Amazon Web Services and Microsoft’s Azure, which don’t disclose such figures. Within two years, Mr. Kurian expects his sales staff to be about half their size.

Some customers, though, hope Mr. Kurian won’t bring Oracle’s famously high-pressure sales approach. “As much as he brings the enterprise focus to the table, there are some who worry that he brings Oracle to the table,” said Andy Zitney, chief technology officer at the tech unit of McKesson Corp., referring to hardball sales tactics some Oracle customers had criticized.”

But the problem is that Kurian will bring not only high pressure and hardball tactics but a sales force that makes fallacious claims.

Oracle type claims.

Oracle, by all accounts, has the most dishonest sales force in enterprise software, beating out SAP, which holds the number two spot in our rankings. Kurian has 22 years of working for a company that sets the low bar for honesty in software.

Why would Kurian not bring this sales approach to Google Cloud?

Alienating the Google Cloud Engineers

And this is alienating to engineers. Google Cloud has some outstanding engineers. How will they appreciate being held responsible for statements made by new Oracle sales reps who are lying out of every orifice in their bodies?

I can say as a person who has been in this position, and they won’t like it.

When I worked out of the Singapore of i2 Technologies, I was covered on all sides by highly sleazy salespeople. This group would say anything to get a sale. The only experience any of them had with the software was reading marketing literature. One day one of the salespeople stuck their finger in my chest and told me…

“You need to get with the vision that the VP of Sales is creating for this company!”

He was hopped up on some sales extravaganza she had just attended. And took her ignorance out on my chest.

That particular office was just known for that. I was one of the few consulting resources in that office. The rest of the consultants in that office had been beaten down after years of abuse by these salespeople.

So what did I do?

I promptly found projects that were in other countries where I could get away from the sales team out of that office.

That is what unethical salespeople do to those with domain expertise, make them want to leave either the office or the area that they inhabit. And recall, Google Cloud engineers are incredibly marketable. They can be snatched up at a premium over their current salary. This means that Kurian’s legion of Oracle sales cheezeballs imported from Oracle has an excellent chance of reducing the technical talent within Oracle Cloud. The ex-Oracle salespeople will be looking for technical yes men, so there should be some turnover in Google Cloud organization as the less talented meeker replace some of the best talents that Google Cloud has.

In light of this, we developed the following advertizement for Oracle, which they can use against Google.

This could be an effective advertising campaign for Oracle against Google Cloud. Its a little confusing, but it could work. 

Kurian’s History at Oracle

As well as the underhand tactics being used to create and prop up cloud sales, the suit also notes that 22-year Oracle stalwart Thomas Kurian, then President of Product Development at Oracle – and responsible for leading their transition to the cloud, started selling a significant number of his personal shares. During the class period (March 15, 2017 to June 19, 2018) he sold almost 4 million shares which amounted to over $191 million. The court documents detail how a number of these stock sales came shortly before Oracle announcements which caused the share price to drop.

Potentially relevant is that Kurian took a leave of absence at the start of September 2018, and then resigned before the month was out. Apparently, this related to a falling out with Ellison over whether Oracle should open up more of their portfolio to run on Amazon AWS and Microsoft Azure. – ITAM Review

What Google Cloud Needs

Google Cloud does need improvements, but it is not necessarily adding unscrupulous salespeople from Oracle that will only increase business in the short term. We have little doubt that Google Cloud will see some growth in the next few quarters as their newly Oracle infused salesforce makes all manner of promises that can’t be kept. However, Google Cloud is losing business right now because they could invest more money into making Google Cloud more self-service than it is. Google Cloud is decent in this area, but with their internal skills, they could get better.

This is the same issue that we see with AWS. Standing up Google Cloud and AWS instances in various areas would be made more logical and self-service. For example, just doing basic things, like connecting a backup to the Google Drive API, takes too long and is overly complicated. This should be dead shot easy, but it isn’t. This is on our mind as we were doing this just recently. And we decided to go with a different backup provider because it was too complicated in Google Cloud. We were investigating ElasticSearch on AWS and ran into the same issue when attempting to create a sitewide search engine with more sophistication than is generally available. But again, this will be another research project for us. There are many opportunities to compete against the hyperscale providers, even if the price is higher, buy making the technologies more usable.

Why have these things not been made more straightforward?

So we have to spend hours reading the documentation to figure out how to get this done. We don’t want to talk to anyone at Google, and we don’t want our “hands held.” This should be worked out so that the customer can figure out how to do this.

Self-service is what separates cloud services from on-premises vendors that have tried to offer cloud services. It is not adopting the high sales orientation and top consulting and service support of vendors like Oracle. That is the exact opposite of what the Cloud is supposed to be all about.

Advice on Enjoying the SAP and Oracle Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Conclusion

The quality of information provided the customers went down when Thomas Kurian joined Google Cloud, and the more he brings in “his people,” the worse it will become. And it won’t stop at just impacting the sales side, overzealous and unethical salespeople alienate technical resources. This is a major reason that Oracle has not developed anything outside of their database where they have a particular and historical advantage in development. Oracle has not made 137 acquisitions because it is good at internal development.

  • This article by the Wall Street Journal did not analyze the statements made by Kurian to see if they fit with Kurian or Oracle’s history.
  • Kurian’s strategy is going to make Oracle Cloud more like the offerings of the major on-premises vendors, with more sales, more overhead, more sales exaggeration, and less of an emphasis on what makes cloud services self-service. The idea of cloud services was to work against the on-premises vendor model, not to copy it.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

References

https://en.wikipedia.org/wiki/List_of_acquisitions_by_Oracle

https://www.forbes.com/sites/danwoods/2018/10/29/four-common-mistakes-in-understanding-oracles-cloud-troubles/#49247c281df8
https://www.itassetmanagement.net/2019/09/19/oracle-cloud-class-action-lawsuit-a-deep-dive/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

How Appealing is the Oracle Global Startup Ecosystem?

Executive Summary

  • Oracle developed a program to push Oracle Cloud for startups specifically.
  • We review the logic of this program.

Introduction

Oracle came up with the idea to increase cloud sales by marketing to startups. This story illustrates both the disorganization within Oracle, but also a misunderstanding on the part of Oracle regarding the capabilities of Oracle Cloud.

Marketing the Oracle Cloud to Startups

We can still see Oracle’s Startup Ecosystem page.

Below, Oracle explains that they understand startups because they were once a startup.

Collaborate and Co-Develop with Oracle?

We Get It. We Used to be a Startup. In the global marketplace, one size does not fit all. That is especially true for today’s vibrant, diverse, and competitive startup ecosystem. Oracle is reimagining enterprise and startup relationships through true partnerships that foster collaboration and codevelopment while inspiring global innovation.”

These terms at the end of the paragraph are key. They are collaboration and co-development. Just imagine co-developing something with Oracle?

There are several problems with this.

  • Co-Develop with a Company That Cannot Itself Develop Products: Most people who know something about this consider Oracle to be primarily a marketing/sales organization combined with a law firm with a tiny technology component mixed in. Outside of its database, Oracle does not have a history of developing anything. Oracle lauds salespeople and attorneys while pushing down its developers. If you intend to co-develop with Oracle, you will be dealing with depressed and marginalized developers. Therefore, why is Oracle a good partner with which to “co-develop”? Oracle is a better partner if you want to learn how to sell products based upon false statements or how to sue companies, not if you’re going to develop a successful product.
  • Trust and Expose Your IP to the Worst of the Worst?: Oracle is widely considered the least ethical company in technology. Even their customers can’t stand them. How could any company reveal its IP to Oracle? Imagine who is going to walk away with the IP, you, or Oracle. With Oracle’s litigation capabilities, how do you win a case against Oracle for IP infringement? How much would that case cost to take even to settlement?

Do you want to co-develop with Oracle? 

If Oracle is not evil, then what is the definition of evil? If you have to change the meaning of evil not to be called evil, you are probably evil. We could run a survey to get views on who is the evilest entity in the software industry, but really what is the point?

Quotes from the Oracle startup program page continue…

“Startup Ingenuity. Enterprise Expertise. Global Resources.

Oracle’s mission is to build a thriving global startup community to drive the digital economy based on collaborative partnerships that enable next-generation growth, business development, and drive cloud-based innovation for startups throughout all stages of growth. The Oracle Global Startup Ecosystem works with startups at various stages, from founders in university-affiliated incubators to early stage to scaleups.”

No, this is false.

Oracle is trying to sell its Oracle Cloud.

Cut and dried.

Anyone who has worked for Oracle can tell you that the top leadership and most of the company only cares about money. It did not care about any of these things listed in this explanation. Oracle does not care about the growth of other companies.

We quote from Larry Ellison.

“It is not enough to win, all others must lose.”

Filed Under “Amazing”: Oracle Requires No Equity in Return for Customers Using The Oracle Cloud?

The fact that Oracle is not asking for equity is a selling point of the startup program. However, as we will see, the entire program is made up of highly suspicious promises. The program amounts to is getting startups to use Oracle Cloud in return for nothing some empty promises to promote the startup.

See the quote from Oracle below.

“What Makes Oracle Different, We don’t take equity”

Considering how little Oracle did for startups, it would be very odd for Oracle to take equity. This would be like Home Depot declaring that they do not ask for equity for you to come and buy building materials from their store. Right. You shop at Home Depot, and they don’t take equity. In the common vernacular, this is called being a customer.

Run by Oracle’s Global R&D Team?

Oracle tries to promote the idea of access to its R&D team.

“The program is run by our global R&D team

Oracle sales will most likely run the program. Oracle’s R&D team has enough problems and lacks the bandwidth to support such a program, and if we know Oracle, they will not give the R&D team more resources to support the program.

Oracle Has a World Class Product?

Oracle claimed on the startup program page to offer the following…

Startups benefit from world-class product and partner ecosystems”

This statement regarding having world-class product is strange because Oracle’s database is world-class, but it is not appropriate for startups and is described as follows.

“Oracle is kind of like an F1 racer – you need a full pit crew with years of training to keep it running at peak proficiency. Or you can just buy a Porsche (SQL Server).”
This is why the database is very rarely used by startups. It is simply too high in maintenance overhead. This is in addition to being many times more expensive than open-source alternatives that can do almost everything that Oracle can do. Still, more importantly, it can do 100% of what virtually any startup needs.
Oracle promises the support of the Oracle partner ecosystem. But this is a promise on which Oracle we predict will never follow through. The Oracle partner ecosystem is self-serving; they exist to bill Oracle customers and have no interest in promoting startups for free.

Helping Startups Grow, Providing Access to Oracle’s 430,000 Customers?

Possibly Oracle’s most significant promise that we doubt will ever happen is access to its customer base.

“Startups gain from engagement opportunities with Oracle’s 430,000+ customers.

Exposure to global marketing, events and PR resources”

And

“And it offers engagement opportunities with Oracle’s 430,000+ customers in 175 countries—providing pathways to growing a startup’s business locally, regionally, and globally.”

And

“This is a multimillion-dollar investment with the global resources and expertise of our mentors, customers, partners, technologies, and more. Additionally, Oracle will further support startup ecosystems through active participation with global and local sponsorships, events, PR, thought leadership, and other resources.”

Now, this is the promise that Oracle would help the startups grow by allowing startups access to Oracle’s customer base. Anyone who knows about Oracle knows that they are a poor fit for startups, and their cloud is not functional and entirely uncompetitive with AWS, GCP or Azure. However, this is offering something that all startup need, and here Oracle is promising some exposure to Oracle’s massive customer base.

 

You can get a sample pitch on the startup program from this podcast.

Free Oracle Cloud Credits?

A big selling point of Oracle Cloud for startups is that in the beginning, it would be free with cloud credits.

Free Oracle Cloud credits

This is key.

Startups were going to need cloud credits to use Oracle Cloud. By using the cloud credits, startups could be claiming to use Oracle Cloud, and Oracle could count them as a customer. And Oracle needs to report customers for its cloud. But the cloud credits have been tiny…in the 5k to 10k range.

Oracle is continually offering free starter access to the Oracle Cloud. Oracle compensates employees for clouds sign-ups, they provide various goodies in return for signing up, but they have put the cart before the horse. You first have to build a usable product before free trials have any effect. This demonstrates how extreme the Kool-Aid drinking at Oracle has become. They cannot evaluate the capabilities of their products. This happens when executives with no product exposure don’t know what they are promoting. Even today, if you engage with Oracle resources on LinkedIn, they will tell you Oracle Cloud is good! And “you should try it!”

  • Oracle resources persist in telling us to try Oracle Cloud before we judge Oracle Cloud, even on articles where we explain we tested Oracle Cloud.
  • Most Oracle resources have ruined their credibility with us because they continually tell us things that we know to be false. No reality seems to penetrate Oracle.

And the problem with Oracles cloud credits has been brought up by Palisade Compliance.

“Under the “Monthly Flex” payment plan Oracle is pushing most aggressively, customers pay Oracle in advance for cloud services, which they may or may not fully utilize. Ask Oracle what happens to those services you don’t use.

Those same terms mean if you over-utilize, you will incur a penalty – much like overage charges on a mobile phone plan with limited minutes. Rather than getting a volume discount, the more you use the software over your cap, the more you’re going to pay.

You can pay more than what your contract appears to require. The rules on when discounts do and do not apply are complex and tend to result in customers paying more than they would expect, according to Palisade’s analysis.

Make sure you understand whether, in the process of adding cloud credits to your contract, Oracle will be adding or changing other terms of your existing licensing agreements for software not in the cloud.”

Cloud…..But Without Multitenancy, Self Service, or Flexible Termination?

All of these points discussed by Palisade Compliance are odd because one of the defining features of a real cloud is flexible termination. If one uses AWS or GCP, services can be shut down immediately, and billing ceased. Oracle offers none of this and is why (along with other reasons related to lack of multitenancy. One of which we covered in the article Why Oracle Cloud is Not Multi-tenant – and a lack of self-service capabilities) we have declared that Oracle Cloud and Oracle’s other cloud offerings are not cloud.

Those that are possibly lulled into getting started with Oracle Cloud should consider the quote from Mark Hurd.

“When a customer who is on-prem paying us support moved to the cloud, they pay us more money, They don’t pay us one to one, they don’t pay us two to one, they pay us more like three to one. In some cases more than three to one.” – Mark Hurd

Oracle (and SAP’s) Coercive Cloud

One should really consider this sentiment, as it is a problem with both Oracle and SAP and the cloud, and why both have been so unsuccessful. Both Oracle and SAP (and Deloitte and Accenture, etc..) view the cloud as a way to increase the cost of sale to customers. That is, their plan is to, in essence, hijack the cloud, make the cloud inefficient, provide services that are not at all cloud, to further upcharge their customers. We covered the coercive aspects of this in the article How SAP and Oracle Coerce Customers into the Cloud.

SAP’s entire strategy for cloud services is now about up-charging other cloud service providers, as we covered in How to Understand SAP’s Upcharge as a Service Cloud. Companies should stay away from entities that view the cloud through this lens.

Migration Credits and Technical Support?

Quotes from Oracle’s website on the startup program continue.

Migration credits and technical support

The technical support that is promised is already severely lacking for current Oracle Cloud customers, as all the entities that have used Oracle Cloud have reported to us up to this point. Oracle Cloud is unlike AWS and GCP in that you can’t set things up without reaching out to someone at Oracle. Oracle Cloud is not cloud. It is hosting.

Oracle created several blog posts that were designed to promote the startup program, but they did not matter because Oracle Cloud does not work. Media like this can only be leveraged if your product works. 

Thomas Kurian, Strategic Genius?

Thomas Kurian would have had his hands all of the Oracle Cloud Startup Global Ecosystem programs before he left Oracle and to join Google Cloud eventually. We hear a lot about how effective Thomas Kurian is as a leader, but this program appears to be doomed. It seems to be based upon the idea that Oracle has a usable cloud.

Who outside of Oracle thinks that is true? If one reads the Oracle message boards, Oracle Cloud is one of the most lampooned items in the enterprise software space.

Up to this point, Oracle Cloud and Oracle’s other cloud products like the ex-Fusion applications that are known as Oracle Procurement Cloud, Oracle Manufacturing Cloud, etc.. is that they don’t have to go beyond brochureware.

Oracle is not able to develop applications, and Fusion required development, which outside of the Oracle database, is not something that Oracle can do (all of Oracle’s applications are acquisitions, which stagnate in development after the acquisition). The concept or dare we say the strategy is to sell on-premises applications and the same application in “the cloud.” Then report the cloud sale while the customer uses the on-premises application. This is widely known in the Oracle community at this point.

Faux cloud has always been Oracle’s cloud strategy. Therefore, any program that moves towards customers using the cloud is not going to work. Oracle is a cloud company, but only for PR and Wall Street purposes.

In the movie, The Matrix Morpheus declared that…

“No one could be told what The Matrix is, you must be shown.”

Oracle Cloud is the opposite of The Matrix.

Oracle can talk about Oracle Cloud all day..

  • Oracle can talk about how they are ahead of AWS and GCP.
  • Oracle can promote Oracle Cloud with customers and Wall Street analysts.

…but the Oracle Cloud cannot be shown. (or should we say….should not be shown)

You can’t have a strategy where the customer uses Oracle cloud products. Thomas Kurian should have realized this. How could he have known? Well, he could have signed into Oracle Cloud and used it. We have to ask. As the head of Oracle Cloud, how many hours did Thomas spend using Oracle Cloud versus how many hours did he spend in meetings with other Oracle executives? The previous quotation from Larry Ellison was that…

“We eat our own dog food.” 

However, this does not seem to be the case.

What is the point of having such a fearsome reputation and being paid so much in yearly compensation if you can’t figure something like this out? Their top people are just not getting the job done.

Give us a call Oracle.

Problems with Oracle’s Startup Program

There are a few problems with the program that became immediately obvious.

  1. The Program is Anticompetitive: Oracle would gain users of its cloud by providing the lure of access to markets rather than based on the quality of the cloud offering. This is a tying arrangement. The startup gets something, in a completely unrelated field, for using SAP’s cloud. If this works, Oracle will report its cloud number to Wall Street as if the startups had selected Oracle Cloud without its relationship to accessing Oracle’s customer base. This was the thrust of the lawsuit filed by the Fireman’s Fund that Oracle did not make investors aware that many Oracle customers were coerced into the cloud as we covered in the article Oracle Sued for Making False Claims About Cloud Growth.
  2. The Program Sells Out Oracle’s Customers: Oracle does not promise access to customers because they think the startups had a good product or a product that matched their customer’s needs. Notice the offer is made to any startup that signs up for the program. So no matter how poor the startup’s product, will it be pitched to Oracle’s customers if they use Oracle’s Cloud. This means that Oracle is selling out the interest of their customers to gain startup cloud customers.
  3. Oracle’s Disaffected and Disillusioned Customer Base: Oracle has many customers, but few satisfied customers. Many Oracle customers already feel as if Oracle takes too much money from them, with many customers mostly dodging their sales reps, and hoping they don’t call. Many Oracle sales reps consider their unreturned calls on the part of customer’s rudeness, but there is a reason their customers don’t want to talk to them.
  4. The Program’s Perverse Incentives: This program creates an incentive to sign up for Oracle Cloud, but not use the program beyond the credits. Oracle can’t convince even large companies with little focus on technology to use Oracle Cloud, their ability to convince technologically savvy startups to use Oracle Cloud is far lower. But startups will sign up to use “something” if they could get access to Oracle’s customers.
  5. Oracle’s Customer Service and Bureaucracy: Anyone can begin using AWS or GCP immediately without speaking to anyone. Instances can be brought up or down without any human interaction. The Oracle Cloud does not work like this. Everything in the Oracle Cloud is manual, and you have to speak with an Oracle resource to get things done. Startups will not have the patience to deal with the high manual component of Oracle Cloud.

Advice on Enjoying the SAP and Oracle Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

 

Conclusion

The Oracle Startup program looks exceedingly unappealing. First, the solution being offered is highly uncompetitive, and we very much doubt any of the enticement that Oracle is stating regarding helping startups to sell into Oracle’s customer base will come true.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

References

https://seekingalpha.com/article/4168895-oracles-cloud-transition-match-success-stories

https://www.computerweekly.com/opinion/Why-Software-Giants-Are-Failing

https://www.oracle.com/startup/faq.html

https://blogs.oracle.com/startup-cloud-accelerator-oraclenext-podcast

https://www.riministreet.com/blog/oracles-cloud-programs-beware-a-wolf-in-sheeps-clothing

https://www.reddit.com/r/programming/comments/7imzth/that_time_larry_ellison_tried_to_have_a_professor/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

Why Cloud is at a Crossroads

Executive Summary

  • AWS and GCP have pushed the envelope on value and innovation.
  • However, monopolistic vendors like SAP and Oracle want to redirect the cloud into up charging and waste.

Introduction

While AWS and Google Cloud keep improving the value for customers, the fake cloud entities, SAP and Oracle are doing their best to confuse their customers about the cloud, and to try to make the cloud as expensive as possible and to maintain their account control. This is covered in the article How to Understand SAP’s Upcharge as a Service.

In this article, I will describe the battle of the pure cloud against those that would undermine the cloud. I will cover the fact that the hyperscale providers are partnering with highly corrupt consulting companies as well as the problems with executives leaving evil entities like Oracle to assume leadership positions in the hyperscale providers.

What SaaS or Cloud Is

SaaS and Cloud emerged as a more efficient delivery method of software that leveraged the infrastructure of the web along with database capabilities called multitenant, which means that a single database could serve multiple customers. This allowed a significant reduction in the cost of managing each customer. SaaS and Cloud vendors focused on more straightforward applications, such as HR, travel, expense management, and CRM. These were applications that most companies could deploy without having to perform customization.

This is what I call the pure state of SaaS or Cloud. This is an important distinction between pure SaaS or Cloud and co-opted or faux SaaS or Cloud. There are several reasons, but one of the most important reasons why is contained in pure SaaS’s or Cloud’s multitenant architecture.

Multitenant Architecture

This was an essential point as customization meant breaking the advantage of having multiple tenants on a single server and a single database. SaaS applications should have just one code base for the software used by all customers. This is referred to as a multitenant architecture. Lower sales and marketing costs also defined saaS and Cloud vendors. These vendors would allow customers to test their software by offering trials and to purchase the software incrementally. They often allowed customers to buy a single license on a month to month basis. True SaaS vendors want to get prospects to use their demo system as quickly as possible because it is their primary tool for turning a prospect into a customer. Faux-SaaS vendors use to access to a demo system (either online or in the standard demo presentation) to move the prospect to a standard on-premises sales process.

Similarity to Gmail

Just as with a Gmail account, each entity uses the applications independently without conflict or issues, even while others are using the same applications. Multitenancy is accomplished by setting up a separate database schema per tenant. Multitenancy is an essential component of SaaS. While the single-tenant design outsources the hosting of the application to a third party, multitenancy provides economies of scale to the management of users because only the data is separate. Pure SaaS vendors provide their hosting, and this allows them to upgrade their applications as needed. When another company performs the hosting, this may contribute to a staggered upgrade. When hosting is moved to a third party, it can indicate there may no longer be a multitenant environment.

Optimally, the customer should never even realize when their software is upgraded. For example, Gmail is often upgraded, but the users of Gmail don’t know when this happens because it is not apparent to the user. The same is true of Google Docs. , a new feature is added, or some backend change occurs, and you keep using the application. Over time you find out about the addition if you search through the help or if you receive an email from Gmail on the topic of how to leverage the change.

Fake Cloud

Many vendors who market their applications as SaaS are not truly multitenant, because they are not operating from one codebase. There could be many different versions of the application running on each hosted instance. Good examples of this are SAP and Microsoft.  Accordingly, the one code base SaaS model is not as prevalent as so-called SaaS providers would have us believe.

SAP frequently talks about hosting applications itself, but the vast majority of its hosted applications are only the result of acquisitions that were initially designed for the cloud. The reality is SAP sells a few of its internally developed applications as SaaS to be hosted by SAP. This issue, for instance, applies in spades when Bill McDermott makes comments about how SaaS or Cloud SAP is becoming, but leave out the analysis that S/4HANA Cloud only has tiny customers. Or when Bill McDermott continually brings up its Cloud offerings such as SuccessFactors or Ariba but leaves out how neither SuccessFactors nor Ariba offers flexible terms like pure SaaS vendors do. For instance, here are the terms for AWS.

“AWS offers a range of Cloud computing services. For each service, you pay for exactly the amount of resources you use. There are no minimum commitments or long-term contracts required. This pricing model helps replace your upfront capital expense with low variable cost.”

SaaS and Cloud Patterns

Those are pure SaaS or Cloud contract terms. But SAP does not offer anything like this. SAP uses on-premises terms that they have become accustomed to, and that lock in the customer, but they apply those terms, as much as they possibly can to their SaaS or Cloud applications. Additionally, SAP, by in large, does not provide pricing transparency. SuccessFactors was a well-regarded SaaS vendor even before it was purchased by SAP. However, SuccessFactors’ website has no pricing published, and no public trial available. We checked back in 2010, prior to SAP’s acquisition and also found no pricing published and no public trial available. So while SuccessFactors followed some of the rules of being a SaaS vendor, it is another example of a vendor that did not follow all of the SaaS rules

I don’t want to overstate the optimality of pure SaaS or Cloud vendors as a dependency is created, and of course, they also don’t like customers to leave. This video by Craig, one of the Founders of Arena Solutions, explains quite well how pure SaaS effectively aligns the incentives of the customer with those of the vendor.

 

However, if the SaaS or Cloud offering is faux SaaS or Cloud, then these incentives are not aligned, and one goes back to the misalignment that has plagued on-premises software, where the vendor has the incentive to sell the most software as possible whether it is implemented or not. Pure SaaS or Cloud vendors live on their rate of subscription renewal.

Accepting Cloud Washing

Those that cover SAP also miss out on reporting that a massive amount of SAP’s offering is not deployed on from the Cloud. That is, they allow Bill McDermott to present any story he wants without questioning it. And unsurprisingly, these same media entities also, in most cases, receive funding from SAP. In the example of S/4HANA, due to its ongoing development, it is not feasible for SAP to offer multitenant due to versioning. That is, different customers are using different versions of S/4HANA. This is why the following comment is entirely incorrect.

“However, there is no reason why a partner couldn’t duplicate this offer for its customers – even exploiting HANA’s multi-tenancy feature included as part of SP9.” – Diginomica

It turns out there is a big reason why customers won’t be able to address this. And that is due to versioning. And does Diginomica happens to be funded in part by SAP? So big surprise Diginomics repeats anything that SAP tells it to say.

The Crossroads

Companies now want to move to the cloud, and the question is whether the on-premises vendors with basically nothing to offer for cloud services (that is you SAP and Oracle) can use their marketing muscle and their control over their consulting partners, IT media and user groups to get their customers to make bad decisions.

These are powerful companies that will get a number of customers to engage in huge cloud waste. Several years from now, articles will be written about how the cloud transition, in many cases, leads to no price increase or price increases. What will be left out from those articles is that SAP and Oracle added a significant margin on the actual cloud service, and they added that margin for doing nothing.

SAP’s Two Cloud Areas (Not Offerings)

SAP has two distinct areas of cloud service coverage. One is SAP Cloud. SAP Cloud is the portal through which companies can be upcharged on cloud services from AWS, GCP, and Azure.

The second area is called the “HANA Enterprise Cloud” or HEC, which is SAP’s name for what amounts to the outsourced cloud.

SAP has no interest in doing the hosting work themselves, and so they have opened the gates to any operator that will agree to allow them to keep a large margin.

Furthermore, because of the lack of quality control on the HEC cloud partner ecosystem, HEC is experiencing substantial failure rates. Oracle follows a similar cloud model to SAP. Is this the same thing happening with Oracle?

The Problem with Cloud Partners

Mark Graham states the following on this topic.

What I have found is movement to the cloud often involves getting a “cloud partner” to help transition and then manage the systems. 

What is little known at first is that these “cloud partners” have less expertise managing the systems than the companies had in-house.  The companies hoping to reduce overhead actually find they still cannot reduce or re-direct their in-house support.   Something else that happens is companies realize that the cloud is not as inexpensive as they once thought.  It takes in-house people to manage the usage of the systems to optimize cost savings.  Also, if a few errant programs/poor coding kick off they will find costs going up.  When they had “restrictive” hardware in-house they didn’t have to worry as much about this happening. The flexibility of the cloud environments is more limiting than they thought.  They have to pick what is available, get updates along with everyone else, and just can’t seem to get the cloud provider to work at 2:00 a.m. in the morning like they used to be able to do. The biggest reason to go cloud is to be able to scale and implement tools more quickly.  Of course if everyone is doing it you are not innovative. Finally, control over IP/data.

And Ahmed Azmi in response to Mark’s comment.

Thanks for sharing these lessons. I definitely relate especially regarding partner expertise. I have seen this unfold with some managed hosting providers. In one case, the internal IT backlog actually increased after the migration because change requests involved multiple teams in different time zones and no specialized product expertise. Your point about cost is spot on. Cloud is often more expensive than on-premises for many use cases. The real benefit is agility and lowering the cost and risk of experimentation via self-service and consumption based pricing with no upfront long term commitments.

SaaS or Cloud as Seen Through the Lens of the Big Vendors and Consulting Companies

To the prominent vendors and to consulting companies, SaaS and Cloud are entirely negative.

  • The prominent vendors had tended to use large and expensive sales and presales teams. They most often did not allow their customer to use their software as a trial before purchasing.
  • For consulting companies, SaaS and Cloud software would mean a significant reduction in their consulting revenues. Consulting companies rely heavily upon implementation business for on-premises vendors and are now trying to recast themselves as indispensable for SaaS or Cloud. The overall delivery model is more efficient, and that translates into fewer inputs for the same or more output. If the software implements quickly and is primarily implemented by the vendor, this leaves the consulting companies cut out of the loop.

Therefore, both the prominent on-premises vendors and the consulting companies were aligned against SaaS. Thus, both the leading vendors and the consulting companies concluded that if SaaS and Cloud could not be blocked (which they tried to do by playing on security concerns), then the next best thing would be to co-opt the concepts of SaaS and Cloud but undermine the actual model of SaaS and Cloud. Also, there was a dramatic change in how Wall Street interpreted and therefore rewarded companies that self-identified as SaaS or Cloud, giving those companies that either was SaaS or Cloud or posed as SaaS or Cloud substantial premiums in the marketplace. At that point, the decision on the part of the significant vendors was clear, they could not obstruct the movement to SaaS or Cloud (which was strategy #1), so they need to move to the second strategy, which was to co-opt SaaS or Cloud.

Revenues from Cloud to Exceed the Revenues from Y2K?

One of my favorite quotations is a senior partner at a major consulting company who stated that he expected the revenues from SaaS or the Cloud to exceed the revenues from Y2K!

That is, consulting companies would like their revenues to significantly increase by implementing software for which the history of the software delivery method has been not to have a consulting company involved. They want to adopt the marketing cache of SaaS or Cloud, but not be impacted by one of its primary benefits, which is to move consulting companies out of the environment. This intent is explained quite clearly in a quotation from Larry Ellison on this exact issue.

Larry Ellison once commented on the topic of cloud computing:

“The interesting thing about Cloud computing is that we’ve redefined Cloud computing to include everything that we already do.”

And…

“We’ll make Cloud computing announcements because, you know, if orange is the new pink, we’ll make orange blouses. I mean, I’m not gonna fight this thing … well, maybe we’ll do an ad. Uh, I don’t understand what we would do differently in the light of Cloud computing, other than market … you know, change the wording on some of our ads.”

That is right. Larry Ellison will be bringing out ads that will be actively designed to deceive you into thinking that Oracle offerings that are not SaaS or Cloud actually are.

Vendors such as Oracle, Microsoft, and IBM have been accused of “cloud-washing.”

A Replay of the Package Solution Fiasco?

If this sounds like a replay of the packaged software “revolution” in the 1980s and 1990s, it should. Custom solutions were replaced by ERP systems that promised to have all best practices. Companies let go of people supporting internally developed solutions, only to find that the external systems were not created for them. Deloitte and Accenture got rich billing for what was re-coding many requirements that were already covered by internal applications into ERP. Cloud knowledge in most companies is still low. We are seeing sort of a gold rush of very bad quality companies getting referred business from major software vendors. And the only reason they are getting the contracts is that they are “partners,” and the vendor can take their margin on top of the cloud consulting firm/provider.

Notice this quotation from an article by Mark Hurd, CEO of Oracle.

“The most important difference between consumer and business technology isn’t the amount of spending; it’s how the money is spent. Consumer tech spending is mostly on offense, as people buy the latest, most innovative devices, applications, and services to improve their lives. The vast majority of business tech spending is still on defense: maintaining, integrating, and protecting legacy systems.

In fact, most company CIOs still spend 80% or more of their IT budgets in this defensive mode, managing the applications and infrastructure they’ve had for a long time. That leaves precious little time and money for innovative new technologies, digital capabilities, and digitally inspired business strategies.

Those legacy applications, as well as the servers, storage, and other infrastructure that support them, amount to a form of technology debt. Think of the staff time and maintenance fees companies must keep plowing into their on-premises systems as mounting interest on the tech debt—time and money that do nothing but keep companies at status quo.”

The legacy argument was used by ERP vendors to denigrate the internally custom-coded applications that the ERP vendors wanted to replace. We covered in the article How SAP Used and Abused the Term Legacy. Now the term is being repurposed to apply to on-premises environments.

But there is a problem. Migrating to the cloud is proving far more complicated than initially thought.

Notice the following graphic from IDC.

We have several questions about this study. The study declares cloud repatriation activity (great term, by the way, kudos to whoever created it). As you see from my previous statement, a lot of scammers and shady operators are making deals with SAP and picking up cloud contracts. (which are hosting contracts because they cannot convert/port SAP to cloud and the terms are on-premises terms — with contracts going out for around five years).

These cloud deals have a high failure rate. The vendor is pretending they are involved when they are not. So an important question is how much cloud failures are related to customers going to the wrong place for information on the cloud.

In our book How to Leverage AWS and Google Cloud from Oracle and SAP Environments, we explained that one should never look to vendors like Oracle or SAP for advice on the cloud. But this is what companies are doing. They are listening to IBM or other incumbent vendors when they could go directly to AWS or GCP or other real clouds and begin testing themselves.

How to Dilute the Terms Until they are Utterly Meaningless

The most significant marketing budgets in enterprise software are maintained by the largest software vendors and the largest consulting companies. Therefore, this gives them enormous power to reframe SaaS or Cloud in a way that benefits them. SAP, for example, has zero interest in offering pure SaaS or Cloud software. Deloitte has zero interest in implementing SaaS or Cloud software, and for self-evident reasons. Interestingly, this goes without comment.

  • SAP: One of the most controlling and extractive software vendors in enterprise software is suddenly interested in providing its customers with flexible lower cost applications?
  • Deloitte: Deloitte is a consulting company that routinely pulls out $50 to $100 million out of clients for low quality finished systems suddenly wants to be sidelined and see its revenues shrink dramatically because it “believes” in SaaS or Cloud? Because Deloitte is concerned with the value being delivered on projects?

And this ridiculous narrative mainly goes without mention. Most analysts repeat what SAP says in their articles, and assumes that it is true. That is, they grant SAP SaaS or Cloud status before SAP has proven the capability. They spend no time trying to understand if SAP is producing a misleading press release by adopting SaaS or Cloud terminology.

What they would like to do is to undermine the terms so SaaS or Cloud becomes utterly meaningless. So that basically, the customer and Wall Street think they are getting SaaS or Cloud, but that everything from the terms is changed to the cost, and especially the cost is as high or even high than for on-premises software. The more that the big consulting companies and the prominent vendors can co-opt SaaS and Cloud and reduce its benefits, the more they can ensure that they lose no business during what was supposed to be, and still has the potential to be a massive change in the enterprise software market.

Cloud Washing by SAP and Oracle

SAP has been relentlessly bringing out press releases as to how dedicated they are to SaaS. SAP has created products that are explicitly designed for cloud washing. This is covered in the article The HANA Cloud Platform Designed for Cloud Washing. SAP has also come out with entirely impractical adjustments to the SaaS or Cloud concept called the hybrid cloud, which is entirely disingenuous and is a way for SAP to necessarily rebrand it’s on premises offering in a highly confusing manner to customers. SAP has to do this because most of SAP’s application sales are still on premises. This is covered in the article SAP’s Cloud Chaos Offering with Hybrid Cloud. Pure SaaS or Cloud vendors do not have to twist themselves into pretzels the way that SAP does because pure SaaS or Cloud offers real cloud naturally. Arena Solutions, Salesforce, etc.. do not bother with these types of shenanigans. SAP has been hiding who is hosting much of its software. This topic is covered in the article How SAP Has Secretly Been Outsourcing Hosting. 

Cloud Terms for SAP?

One of the most surprising developments is that SAP has become a significant promoter of its products as SaaS or Cloud, but it uses SAP terms and conditions, which are anything but SaaS. SAP does not allow you to cancel quickly on a month to month contract. Quite the contrary, SAP has long term contracts and restricts and controls its customers.

SAP is moving into full harvesting mode. HANA puts in a series of rules and regulations which, combined with indirect access, create a maze that customers have to walk through. In this time where we thought SaaS was going to open up IT implementations to greater freedom, SAP has adopted or co-opted the term SaaS but is becoming even more controlling than it was previously. And in the short term, this will probably drive revenue (financial analysis is not my area, so that is a guess), but in the long term, it makes SAP obviously out of touch and vulnerable.

Paying Top Dollar for the Worst Possible Advice

If you follow SAP, Oracle, or SAP or Oracle partner’s advice, you are headed for significant cloud waste. They have to make their customers give them a considerable markup because that is their model. We are seeing the deceptive advice on the cloud provided by these companies first hand as we are sent documents from clients. The problem is once again; there are virtually no independent consulting entities. Each of them is aligned with one of the major vendors, and that means supporting the markup doctrine that will allow the vendors to meet Wall Street objectives.

If a consulting firm does not follow the marketing talking points of the vendor, they will be appropriately punished by the relationship management arms within those companies. Overall this is a bad time to be taking advice from any consulting firm with a history of on-premises consulting. It continues to amaze us how companies are paying top dollar to consulting firms so they can get the absolute worst advice on the cloud.

Giving Out Fake Information on the Cloud

Oracle has the worst explanations of the cloud we have ever read. Oracle keeps hiring people at the top of the market from AWS and Google. Still, the Oracle Cloud is not improving, and the Oracle explanations of cloud in the product documentation are entirely nonsensical. Larry Ellison’s statements where he tries to critique AWS or state that it costs less to run the Oracle database on Oracle Cloud are altogether false. 

Why Major Consulting Companies Ruin the Cloud

Something that should be eliminated, as a concept, is that major consulting companies have any interest in improving the condition of their clients. The major consulting companies are first and foremost focused on their bill-ability – and the problem is that their bill-ability is directly contradictory to the interests of their “clients.”

Trusting Major Consulting Firms on Technology Advice?

No major consulting company can be trusted to provide advice on technology because no major consulting companies place their client’s interests above their own. They have not fiduciary responsibility to their clients. SaaS is the most crucial development in enterprise computing, but significant consulting companies are slowing its adoption? They do this because SaaS will mean that they shrink as entities and the software vendors take control of the implementation and the maintenance, at a far lower cost.

Major consulting companies have a severe conflict of interest when it comes to advising buyers of low support applications because they make more money from high rather than more moderate maintenance applications. Correspondingly, they are significant proponents of the highest implementation as well as maintenance applications, and why they have come out so strongly against SaaS.

Accenture published a document entitled “Why Big Systems Are Here to Stay,” which perhaps should have been called “Why Big Systems Are Here to Stay: Because We Make Tons of Money That Way.” In this document, Accenture makes the following contentions:

“And a third advantage of an ERP environment has to do with how data is managed, integrated and secured. If not properly integrated, cloud and software-as-a-service solutions can create a more chaotic, less reliable and less secure data environment.”

Data Management and Advantage for ERP?

This is an interesting contention because ERP environments have zero advantage over non-ERP environments concerning data management or integration or security. ERP systems that I evaluated within companies often have the lowest data quality of any software category, particularly for the tier 1 ERP vendors as the applications have such dated data management tools. As for integration, ERP systems may be integrated to themselves, but the tier 1 ERP vendors are some of the most difficult systems to integrate other applications. As for the security argument, ERP systems are not more secure than different software categories.

The above Accenture statement also confuses the topic of ERP systems versus SaaS systems. SaaS is a delivery method for software; ERP is a category of enterprise software. SaaS can deliver as an on-premises solution or any application, including ERP. If ERP systems are on premises, they are more secure than cloud or SaaS applications, but that is a different issue.

Overall, the evidence is severely lacking to support the statement made in the Accenture paper, and it should qualify as FUD (fear, uncertainty, and doubt). Accenture’s main financial incentive is to slow the movement towards SaaS solutions and away from tier 1 ERP because its how they make a lot of money, and they have far less control once the application is delivered via SaaS. Instead, the software vendor tends to take over consulting and support. Interestingly, nowhere in the paper does Accenture mention how it makes money (which is with on-premises consulting and support) and how this may influence its “recommendations.”

Accenture Says….

Accenture goes on to say that the best approach is a hybrid (that is some on-premises and some SaaS) and then proceeds to make another self-serving proposal, that this IT ecology must be managed by using a trusted “broker.”

So, who’s in charge of managing this complex hybrid system? The answer lies in the rising trend of using an integrator or trusted broker. This brokerage can act as either a consultant or as a managed services provider. This holistic or managed services approach enables companies to treat their IT resources as just that and also provides a new level of flexibility for companies and CIOs.

And who would this trusted broker be?

That is right, Accenture!

After spending decades overcharging and misdirecting their clients to all the wrong software in the on-premises environment, Accenture would like to be handed to keys to managing their client’s IT solution architecture in the new on-premises/SaaS “hybrid” environment.

How to Understand Thomas Kurian’s Move to Google Cloud

Thomas Kurian recently left Oracle and joined Google Cloud. In this article, we will review the implication for Google Cloud.

Implications of the Move by Kurian

The Register described it as follows:

“Kurian was the database giant’s cloud supremo, and oversaw much of its product development. He seems to be a natural fit for Google Cloud: as an experienced enterprise IT vendor executive, he follows in the footsteps of industry veteran Greene in trying to smarten up Google Cloud so it can compete against Azure and AWS for business.”

This is a significant happening, and it is for several reasons. One is that both AWS and Google Cloud are gunning for Oracle’s business. So far, AWS has been in the lead in going after Oracle, but this move is signal that now Google Cloud will have the ability to make going after Oracle even more of a priority.

The Experience of Migrating Workloads to Google Cloud

Mark Dalton of AutoDeploy explained this in the following quotation.

“One thing that is dramatically different from Google Cloud and everyone else is their 100 percent concern for open source software. They take this very seriously. Migrating our workloads to GCP requires the most robust OSS documentation I’ve ever seen. Google has dedicated resources who review the content and will reject your product if it is not documented with 100 percent accuracy. Thomas Kurian is going to have to adjust to that modality. But aside from that this make GCP a serious competitor to AWS. Thomas Kurian is brilliant, awesome to work with, and laser focused and dedicated to his engineers. This is going to work very well.”

Thomas’ Motivation is Sky High

Another question is around Thomas Kurian’s motivation. Kurian, it is rumored, left Oracle because he clashed with Ellison over the direction of Oracle Cloud, with Kurian preferring the strategy of leveraging the IaaS of both AWS and Google Cloud. At the same time, Ellison favored competing directly with AWS and Google Cloud.

“Think of all the Oracle customers Kurian knows. All of the customers that have told him Oracle Cloud is”customers who have struggled with Oracle Cloud Infrastructure, it’s stability, and offerings.”. He’s going to open that Roledex and start offering beta trials, incentive discount pricing, and bundled offerings.”

Kurian’s First and Second Steps at Google Cloud

Now Kurian is going to have a real cloud to offer rather than Oracle Cloud. Mark Dalton lays out the likely outcome in this quotation.

“So Kurian will go after the ERP workloads first, which is the obvious place to start. This is especially true of PeopleSoft. The PeopleSoft model is so spread out he can offer a very compelling case to move to GCP. Now, bundle that with BigQuery. Would you rather have a team of specialists on OBIEE, which is a difficult to install and maintain, or would rather have one or two dedicated resources that can get BQ up and running and making that data in your ERP accessible? The answer is obvious.”

Mark lays out the following strategy as stage two for going after Oracle’s business.

“He’ll use Kubernetes to orchestrate containerized solution sets for Oracle products. Want to run Hyperion in GCP, click a button, done. Lower cost for GCP, lower cost for the customer.

IBM’s acquisition of RedHat shows that there is a market demand for rapid deployment models for enterprise customers. Google does not need to invest 8 billion dollars. Google Cloud has the software to facilitate these new operating models, built, deployed, and operating at scale.”

Will Thomas Kurian’s Sales Approach be Successful at Google?

The following quote is from Ahmed Azmi, which describes how he thinks Thomas Kurian, the new head of Google Cloud as of November 2018, will approach making changes as Google Cloud.

“I think Kurian will focus exclusively on Oracle accounts, the ones with the most pain first. Those low-hanging fruits are first candidates to migrate systems and apps to GCP. He only needs a few big references in the next months to get the ball rolling. It’s a BIG open question if Oracle sales reps will be successful at Google. Selling services is fundamentally different than selling products, getting paid in advance, and moving on to the next customer. Outside of G-Suite, Google sells tech NOT business apps. Their approach has always been developer-centric just like AWS and Microsoft. Oracle’s sales approach is top-down selling to execs and budget owners NOT developers. There’s a significant skill mismatch involved.

You know, an Oracle sales rep I used to be friendly with told me she had no interest in selling services. The reason being, as you said, she wanted to

“get in, get out and get paid.”

She said that software sales were great because there was no question of the customer service aspects of consulting, and the standard client issues. With software, the customer bought it, and it was cut and dried. On the “top-down” approach you describe, this reminds me of a quote from Dan Woods.

“Oracle understood very early that enterprise software is sold, not bought. To make a sale, you need an effective salesforce that is well equipped and highly motivated. You need a wide, deep, and highly motivated supporting ecosystem. Oracle has these elements and they have been the foundation of the company’s success. But the world of IaaS and PaaS is different. It is a developer-driven world. In an IaaS and PaaS cloud, software is bought, mostly by developers, not sold. All the salespeople in the world will not convince a developer to buy an inferior product. Oracle’s mighty sales machine cannot dominate this market; only better products matter. Right now, Oracle may fall further behind in market share in its IaaS and PaaS clouds.”

Thomas Kurian Lies to Geekwire

We took the most interesting and notable quotes from this interview and analyzed Thomas Kurian’s answers.

The Quotes

Kurian is Now a Fan of Open Source?

GeekWire: I was talking to Redis Labs CEO Ofer Bengal last week and he mentioned that in his view the new database services announced Tuesday was an initiative you pushed the company to do. How did this all come together?

Thomas Kurian: The background is fairly simple. We see a lot of customers wanting to develop applications using open source. Historically they wanted three things: They wanted a fully-managed infrastructure for the open source technology; second, they wanted enterprise support from the cloud provider; and third, they wanted the cloud provider to allow them to use their credits to consume the open-source offerings in addition to the cloud platform provider’s old products.

Well, Kurian’s position on open source will have to change, but at Oracle, they do whatever they can to undermine open source. This should be brought up by the interviewee.

Working in a Friendly Manner with Open Source?

We felt that many cloud providers were not working in a friendly manner to open source, and we felt that open source companies needed to have a cloud partner that would share the success of the platform with them. And so what we’ve done is a very simple thing. We’ve put together the leading open source companies, (and) they’re offering their services on Google Cloud as fully managed services. These products will be taken to market by Google’s cloud sales team and we will support it as a first class service in Google Cloud.

So we’re giving customers and developers choice by giving them ease of use, because they get a single console from which they can access all these technologies. We’re giving them the ability to get integrated billing, metering and consumption of procurement. And we are sharing our success with the partners.

How is that different from what Google Cloud had before. Our Google Console already had all of this. One has to be careful not to allow Kurian to take credit for things that existed at Google Cloud before he arrived there.

Open Source Companies Should Be Compensated for Their Hard Work?

“GeekWire: With respect to open source in general and some of the changes that have been contemplated by these companies, such as how cloud providers can use those open source projects, where have you come down on that?

Kurian: We generally feel that if an open source company has done the hard work of creating the open source technology and providing a solution that developers and customers like, they should be fairly rewarded for that hard work. And if their livelihood, if you will, is threatened by alternative forms of monetization, which is taking away their ability to monetize the technology that they invented, we don’t think that’s necessarily the right thing for the industry.”

Well, this was the exact opposite view that Thomas Kurian held when he worked at Oracle. Oracle’s view is that open source projects should get nothing. We quote from Larry Ellison.

“It is not enough for one to win, all others must lose.”

Google and Oracle Are Similar?

“GeekWire: This is the first time we’ve had a chance to talk since you’ve taken this new role and I wanted to check in on a couple of things. One thing that strikes me is that it would appear from the outside that Oracle and Google are two very different corporations. I was wondering if you could give me a sense, now that you’ve been around a few months, of how they are alike and how they are different.

Kurian: They’re alike and different in some ways. Every company that you work at is different from every other company that you work at, right?

I’ll give you an example. Engineers in all companies are roughly the same. They are very focused and disciplined on how they deliver software. They’re very keen on understanding customer needs. They’re very keen on delivering technical solutions to needs that customers have.

The way that Google brings its technology to market and the way that the relationship it has with customers are different than other companies. Partly because Google is such a technological powerhouse, but many companies in the industry look at it for solutions to their digital problems.”

Oracle is the worst and least ethical company in the enterprise software space, beating out SAP, which holds the number two spot. Google has been one of the better corporate citizens. Secondly, Oracle engineers and developers are frequently disheartened as they can’t mesh with the overpromising sales teams. It is challenging to see any similarities between these companies except that they both work in software.

Kurian Suddenly Found Ethics?

GeekWire: How do you feel about working with military customers when it comes to cloud and AI services?

“Kurian: We’ve made a public statement about it. We made a statement around our AI principles that’s publicly documented. We stand by them. We do work with a number of agencies around the world, but they’re always in compliance with our AI practices and principles that we publicly made a statement about.”

It is challenging to believe any statement regarding ethics made by Kurian, given his history with Oracle.

Google Loyalty

“GeekWire: With respect to the core cloud business, what do you think Google has to do to gain share in cloud computing? And what do you think is a realistic target for where Google might be in two to three years?

Kurian: We have the lowest customer churn of any cloud provider in the industry. We have amazing customer loyalty. If you look at the top 10 companies in virtually every industry: nine of the top 10 media companies, seven of the top 10 retailers, six of the top 10 utility companies, five of the top 10 financial services companies, five of the top 10 manufacturing companies, five of the top 10 healthcare companies around the world — not just in the United States –use Google Cloud for their business transformation.”

And Oracle Cloud, which is what Kurian was responsible for, had the highest churn. Kurian leads an approach where reps were told to get signups and where those customers would churn because that is what the Oracle Cloud leads customers to do. Oracle Cloud is a barely functional cloud, that is hosting, not the cloud. That is what Kurian is responsible. Everything Kurian is saying was the accomplishments of Google Cloud before Kurian got there.

Training More Sleazy Oracle Type Sales Resources?

So for us to grow, the primary thing is to scale our go-to-market organization. And we’re very committed to doing that. We just need to hire and train and enable a world class sales team at scale.

Today we have a great sales team, but we are far fewer in number than the other players. We just need to expand that. And as I talked to customers, they asked us to, one: expand our sales organization and our go-to-market teams. Second: specialize (that sales team) with deep expertise in technology and in industry. And third: make it easy to contract and do business with us. We are extremely committed to doing all three of them.”

We cover this topic in detail in the article Will Thomas Kurian Bring Oracle’s Sales Sleaze to Google Cloud? 

Thomas Kurian told a lot of lies in this interview. He minimized the differences between the Oracle Cloud and Google Cloud. Thomas made pro-open source statements without a hint of the implied hypocrisy. He may have taken credit for something Google Cloud already had, he made statements that pretended he was ethical, he took credit for things that were the exact opposite of what he was able to accomplish at Oracle Cloud. And the interviewer sat there as a passive punching bag for whatever Thomas Kurian said.

Advice on Enjoying the SAP and Oracle Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Conclusion

The future of SaaS or Cloud looks increasingly murky. What was once an exciting application of a new software delivery method along with a series of open, transparent, and flexible contractual terms has been co-opted and diluted by on-premises entities. Entities like SAP and Deloitte are intent not to change how they do business, which means ruining SaaS or Cloud, all while promoting the idea that they are in favor of SaaS or Cloud. However, SaaS or Cloud has a specific definition, and it can not be attained by merely slapping a sticker on a private hosted solution that is not multitenant. Because of the sway that the on-premises vendors and on-premises consulting companies have with IT media, it is rare for these vendors and consulting to be questioned when they create marketing literature that proposes that they are SaaS or Cloud. While there is some talk of Cloud Washing, consulting companies are seldom asked when they use the same on-premises consulting model while talking about being SaaS or Cloud-friendly.

SAP and Oracle customers must be wary of this time and the tidal wave to terrible cloud advice that is currently emanating from SAP and Oracle and their consulting partners and the SAP and Oracle user groups. The cloud is the best hope that companies have to reduce the account control of SAP and Oracle and to bring innovation as well as open-source into the fold. However, SAP and Oracle and the “coalition of the billing” sit on the other side of this issue. The last thing SAP and Oracle want is for their customers to become educated as to the cloud.

The same applies to major consulting companies. The major consulting companies have a business model around fleecing their customers and increasing costs. This is why it concerns when AWS has partnered with so many major consulting companies.

Overall the promise of the cloud is declining, as the cloud service providers are aligning themselves with on-premises consulting firms and bringing in executives from the least ethical on-premises vendors.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

References

https://lnkd.in/dqm7Td5

https://www.geekwire.com/2019/interview-google-cloud-ceo-thomas-kurian-open-source-aws-working-military/

The Public Cloud Revolution Book

The Public Cloud Revolution: How Open Source is Displacing IT Mega Vendors

Interested in how to open source is powering public cloud providers like AWS and Google Cloud and what this means for the different modalities of computer hardware (cloud, on-premises proprietary server, mainframe, and appliances?). This book covers many topics that are greatly underrepresented in the common IT media coverage of these topics.

How to Understand Thought Leadership Transition from SAP and Oracle to AWS and Google Cloud

Executive Summary

  • AWS and GCP have totally taken over thought leadership from SAP and Oracle.
  • What this transition means for the cloud.

Introduction

For a time, Oracle provided a distinctly differentiated product to the market in its Oracle database. For a time, SAP provided a distinctly differentiated ERP system. These two developments gave those companies great power. However, at this point, those products are not anywhere as distinct as when they were first introduced. Also, SAP and Oracle have grown into difficult vendors to manage with enormous senses of entitlement over the IT budget and with both vendors pushing the envelope as to what is legal to achieve their all-consuming revenue objectives.

Furthermore, if you implement SAP and Oracle’s products as they and their consulting partners stipulate, the result is the highest TCO in the industry. SAP and Oracle want this TCO hidden, and IT analysts and SAP and Oracle consulting partners are only too happy to help SAP and Oracle keep this information quiet. SAP and Oracle want pricing secret, so that pricing can never be determined without a lengthy interaction with their sales representatives. AWS and Google Cloud are offer price transparency because they aren’t software vendors, but service providers.

A Menu of Options

AWS and Google Cloud offer a menu of options; the prices are communicated to customers in real time for various services configuration. The customer chooses, and AWS and Google Cloud are happy to make money from any of them. We spin up AWS and Google Cloud services without ever talking to an AWS and Google Cloud sales rep, and you know what?

We don’t miss them. If we never interact with an Oracle or SAP sales rep again, that would be a good thing.

The following quote from Denis Myagkov further illuminates this.

“I think that SAP’s and Oracle’s myth department is propelling they database solutions without any context. It’s pretty weird to compare one database with another and not mention of its application. Any database is only a way to store some data somewhere and somehow and here we have the huge gap – what system will be consumer of they databases?

AWS and Google act like good merchants, they simply propose an assortment of different databases for developers. Maybe I’m wrong, but I prefer to choose tools for the task, but not vice versa.”

And this is the issue. When we debate SAP, but more Oracle DB resources, what we get back is how deep the Oracle database is in this or that. Also, how the World Data Center uses it for Weather or some other upper tier case studies (with all of the upper tier case studies open source databases ignored). However, the database is part of the IaaS, and the IaaS enables the database to do things, or it sets the boundaries for what is possible (for example, horizontal scalability, which is multi-location and based upon the IaaS).

Should anyone be surprised?

Because the database is what SAP and Oracle have to sell, as they have not figured out IaaS beyond having offerings that function more as propaganda (that makes Wall Street think there is something there, make it seem like they are hip and cool, etc..) That leads the industry in licenses purchased for shelfware.

Loving Bare Metal

Oracle loves promoting bare metal. Unsurprisingly, bare metal is what Oracle is offering. They cannot do the sophisticated things with multitenancy, etc. that AWS or Google Cloud can do. This is equally true of SAP, which for their internally developed products are designed to work on dedicated rather than virtualized servers. Bare metal is hosting; it is not a cloud. If hosting were the answer, IBM and CSC would be rising, instead of being companies that barely anyone talks about concerning the cloud.

Let us say that a salesperson wants to sell you an engine out of context with the value it provided to you. They could discuss its technical specifications. For example, it could be a very powerful engine (a selling point the salesperson chooses to emphasize) It may product 1000 horsepower. It may have a fantastic compression ratio, and so on. However, what about how it fits within the car and the daily use of that car? The salesperson can go into a lengthy monologue discussing very narrow characteristics of the engine. Pretty soon, if you listen to that salesperson, you will put that engine in your economy car. After all, it’s a great engine! Sports car advertisements are similar in that they sell a dream of a car, out on an open country road, that provides a very different experience in traffic, where you might prefer more legroom and an automatic. The vehicle may go 200 mph, but by the way, the speed limit is 65 mph (45 to 55 mph with traffic). That is the danger in listening to a salesperson who has something to sell and only one particular thing to sell.

Hasso Plattner’s Context Free Selling

Hasso Plattner engaged in this type of context free selling when SAP introduced its HANA database. First, nearly everything he said about HANA was not true, as we covered in the article When Articles Exaggerate SAP S/4HANA Benefits. However, let’s say for a moment; it was all true. Even if true, it would not improve the condition of the user, as Hasso and SAP have proposed. Also, it certainly would not be worth the price, maintenance overhead, and indirect access implications.

SAP and Oracle both like to pretend the car/road or the IaaS is immaterial to the discussion, and that the primary focus should be what they have to offer, which are applications and databases. And only commercial databases and applications, of course, no open source databases or applications are to be considered.

The Move Away from Proprietary Hardware

A critical component of AWS and Google Cloud is the ability to move away from proprietary hardware. AWS and Google Cloud have amazing economies of scale in hardware and data center technology and management. How could a company put together a hardware setup that is competitive on price or flexibility with AWS/Google Cloud? Those data centers have untold economies of scale. It’s like mass production, versus a job shop for an IT department. If we look at a big company, say Chevron, they are still not going to have the scale or competence of AWS/GCP. Does anyone look to Chevron for technology? Of course not.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

References

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

Our Experience with Migrating the Brightwork Explorer Application to AWS

Executive Summary

  • We migrated our application Brightwork Explorer to AWS.
  • We described our experiences with AWS and what it means for future application migrations.

Introduction

Brightwork Research & Analysis recently engaged in a development effort to create an application that could help companies monetize forecast error (rather than using the typical forecast error measurements) and which calculated parameters for MRP systems.

The software addresses two basic problems.

  1. Forecast accuracy measurements are often not performed in companies in a way that enables the company to focus on what to improve. The forecast error measurements used usually are too abstract and divorced from the financial impact can end up with the wrong items receiving the emphasis for forecasting improvement.
  2. In all the cases that we have seen over decades of working with MRP systems, they have had poorly optimized parameters (things like safety stock, reorder point, and economic order quantity) MRP systems (usually executed within ERP systems) do not have good ways of managing these parameters.

We consider the application that was developed to be a “Jiffy Lube” for forecasting and supply planning systems, allowing for an external analysis in a flexible tool, that then can provide values that help those supply planning and demand planning systems to work better.

Because of our background in SAP, the Brightwork Explorer was first targeted towards companies that ran SAP ERP or SAP advanced planning tools. But the application is vendor neutral as all systems regardless of the vendor use similar inputs that are calculated by the Brightwork Explorer. At this point, we were relying on CSV file import and export and were considering an interface to a particular application as future development.

We named this application the Brightwork Explorer, and we thought it would be instructive to describe our experience in migrating our application to AWS.

What the application does is less important in this story than how we decided to leverage AWS.

The Development of the Brightwork Explorer

We began the development of the Brightwork Explorer locally. The development occurred over video conferences with the coding performed in real time from interaction with the designer and business process owner with the developer logged into and coding on the designer and business process owner’s computer, and with some of the work performed by the developer on his computer. After the application was ready to be shared with users, the development was migrated to AWS. We chose PostgreSQL as our database and S3 to store upload files. We also started with a small server configuration to begin, as we would be breaking the application in with a small number of customers and even beginning with smaller test files.

Important Benefits from Using AWS for Our Application

There were a few critical business models that we decided to follow was to offer a cloud application.

This had three essential benefits.

  1. Lower Barrier to Implementation: We would never have to worry about getting a customer to implement our software on their server. They would not have to buy the software, but could first test it to see if it was a fit for their needs. This allowed us to make the software available to far more customers.
  2. Upgradeability and Reduced Maintenance Overhead: We planned to make many upgrades to the software, particularly in the first year. We would never have to worry about previous versions of our software “floating around” eating up maintenance efforts, and we could make our changes directly to our multi-tenant application.
  3. Accessibility: We could directly access any client’s data so that we could provide support. This significantly reduced our overhead. This was also true for companies that used the software. The Brightwork Explorer creates simulation versions, and those simulation versions can be shared among various users within one company.

Each time a combination of settings is saved in the Brightwork Explorer, it is saved as a simulation. This is a combination of settings that results in an aggregate number of values for inventory, costs, profits, pallet spot consumption, and several other critical items. The application allows simulations to be saved so others can review them.

After we decided on the cloud, AWS was the natural choice for us. This is the configuration we leveraged for the Brightwork Explorer. Those were the primary reasons for moving the Brightwork Explorer to AWS. However, for our purposes, we could have also used Google. Still, our developer for the Brightwork Explorer was more familiar with AWS, having used AWS for several applications in the past.

How Did the Brightwork Explorer on AWS Work in Practice?

All of these beginning reasons turned out to be true. Once we deployed the application, we received extra benefits that we did not list above.

Easy Collaboration With Our Developer

We are not in the same country as our developer, so AWS became a shared space for us to collaborate.

  • As it is our application, we controlled our AWS account and paid the AWS billing, but provided our developer with an account.
  • If we needed another developer to add something, we could create a new account for them to allow them access.
  • We had several types of collaboration. One was the collaboration with our customers. This was feedback provided by using the Brightwork Explorer application.
  • From this feedback, we determined what changes we need to be made.
  • We were testing a new application and “guinea pigging” our first customers (and telling them this, and not charging them for accessing the application in its early state).

One of the areas of change that we needed was the ability to delete simulations. We told the developer to make this change at 12:00 PM, and the change was applied, along with a second change related to date management at 2:02 PM the changes had been made. We refreshed the screen, and we were able to access the changes. There was no downtime.

Scalability

The second area of benefit of using AWS was scalability. We were going to be initially testing the software with just a few companies. Therefore, there was little need to pay very much for a higher performance and volume system on AWS because of the limited use.

  • So we kept our costs low in the beginning.
  • We will be able to scale the Brightwork Explorer to any size as new customers come on board.
  • This also allowed us to test the response from the market with minimal financial investment.

Conclusion on This AWS Case Study Experience

From multiple dimensions, we were quite pleased with our experience in setting up our application on AWS or Google Cloud.

  • Previously the Brightwork Explorer had been in a series of R and Python scripts that we ran on projects. And without a reasonably easy way to deliver the business logic through something like AWS or Google Cloud, we most likely would have never developed the application.
  • The effort involved maintaining such an application would have been overwhelming, and the Brightwork Explorer is only one of the things we work on, so we could not having it consume that much of our time. Indeed, if we had to distribute on-premises versions of the Brightwork Explorer, we would have lost interest in investing in the application and commercializing it for broader distribution that we think is an essential calculation for forecasting and supply planning systems.

Overall, we are quite pleased with our AWS experience. It is a small application and certainly not an example of anything that leveraged advanced features of AWS. Still, it allows us to get our requirements met quickly and to begin deploying to anywhere. While reviewing an AWS document on migration, we found the following quotations.

“Democratize advanced technologies: Technologies that are difficult to implement can become easier to consume by pushing that knowledge and complexity into the cloud vendor’s domain. Rather than having your IT team learn how to host and run a new technology, they can simply consume it as a service. For example, NoSQL databases, media transcoding, and machine learning are all technologies
that require expertise that is not evenly dispersed across the technical community. In the cloud, these technologies become services that your team can consume while focusing on product development rather than resource provisioning and management.

Go global in minutes: Easily deploy your system in multiple Regions around the world with just a few clicks. This allows you to provide lower latency and a better experience for your customers at minimal cost.”

We found both of these proposals to be true of our implementation on AWS.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

References

[i] This quotation provide an important distinction on virtualization. “It’s important to note that virtualization environments typically lack key capabilities of cloud systems – such as self-service, multi-tenancy governance, and standardized instances.” – https://assets.rightscale.com/uploads/pdfs/Designing-Private-and-Hybrid-Clouds-White-Paper-by-RightScale.pdf

[ii] https://aws.amazon.com/storagegateway/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

How to Understand AWS Services for On Premises with VMware Cloud for AWS for Hybrid Cloud

Executive Summary

  • AWS is being combined with VMware Cloud for AWS to provide hybrid cloud capabilities.
  • What this means for on-premises environments.

Introduction

AWS is becoming increasingly popular, but until very recently, there was an extra hurdle if you wanted to introduce AWS into your on-premises environment. And most of the infrastructure globally is by far on-premises. There are an enormous number of a virtual machine or VMware instances on corporate data centers, and on-premises virtualizations are one of the ways that allow companies to leverage the cloud.

The advantages of using VMware include the following:

“1. Cost Reduction: While most, if not all, of the remaining advantages, also contain the potential for cost savings, this deserves a mention of its own. Direct cost reductions come in the form of server consolidation, and operational efficiencies that are not available otherwise.
2. Optimize Licenses: Oracle and SQL Server are two prime examples of RDBMS products that license according to underlying hardware specifications. By optimizing the hardware, we can reduce the license footprint, while still gaining the other advantages listed here.
3. High Availability: HA solutions for Oracle and SQL Server databases are complex, costly, difficult to maintain, or altogether non-existent. VMware provides a lower cost, yet highly effective HA solution that is optimal for many workloads.
4. Recoverability: If your DR solution is for the database only, you are missing out on DR coverage for the rest of the application stack required to make that database work. VMware encapsulates the application stack and, when coupled with proper configuration and testing of replication, provides as close to perfect recoverability as any solution can get.
5. Development Process: Developers need systems and data that are like production in every way possible. When they get quick access to production-like development environments, development time is reduced, and features are more robust on release.
6. Test/QA: The optimum environment to test on is production itself. That can be risky, however, since the production system needs to keep your organization running. VMware allows you to provide an exact copy of the production environment to the Test/QA team without impacting your critical systems.
7. Deployment Flexibility: Do you want to move your database workload from one licensed server to another? Do you want the advantages of a private, hybrid, or public cloud environment? Do you want to create live datacenters that are thousands of miles apart, and be able to swing back and forth between them? VMware virtualization, coupled with stretch storage solutions from EMC can facilitate these options.
8. Security: Not only does VMware create a minimalized attack profile with its small footprint hypervisor, but also advanced security features like Trusted Execution Technology from Intel allow virtual machines to validate security down to the chip level.”

Changes Afoot on the On-Premises VMs

As we discussed in the book, there are many changes afoot with these on premises VMs.

  1. The number of VMs is being reduced as containers are becoming more prevalent, and containers reduce the need for as many VMs. This reduces “VM bloat,” and has the positive consequence of increasing server capacity due to the lower hardware overhead of containers.
  2. VMs are increasingly ported between on-premises and cloud, whereas in the past, they stayed on premises. This trend intersects with containers, as containers are more portable than VMs.

AWS, Google Cloud, and Azure are based on Linux LXC, which is an operating system based containerization. A major contributor of containerization code to the Linux kernel was Google.

Yes, you heard it right.

Azure on Linux?

Microsoft Azure works on Linux! All clouds based on virtualization and every single server functions as an application server. That is a SQL database, NoSQL database, video broadcaster, and anything else. Cloud providers assign specific instances to servers in proportion to the resources they demand.

And here is the problem. Virtualization or containerization is not applicable to SAP. Most of SAP’s products require their own server. The only choice is the physical location of such a server (cloud or on-premise).

This is why SAP’s inclusion of VMs and containers in the SAP Cloud are more of brochureware than anything serious that customers will end up leveraging.

And again, those VMs and containers are actually on AWS, Google Cloud, or Azure. With SAP not offering a PaaS and not doing much more than marking up AWS, Google Cloud and Azure services by in many cases a factor of ten (as we covered earlier in the book).

Infrastructure Efficiency

Curiously, while VMware created great opportunities for infrastructure efficiency, because of the adoption of far lower quality infrastructure tools that are proposed to IT departments as “standard” SAP environments suffer from deep inefficiencies. On SAP projects, the client always tells us to make changes in their development system or their quality system. However, once we begin using the development system or their quality system, we find that the systems are useless because they are not maintained.

On SAP projects, it is widespread for all of the boxes are years out of synch with each other. If VMware were being used and used correctly, these old instances would be blown away and replaced by recent copies of production. However, only some SAP components, like the SAP APO optimizer, can be placed on virtualization. This means that SAP projects it is commonly thought that a full system refresh is not possible, and instead, it seems these SAP environments are using some SAP tool to do a “system copy.”

The system copy tool that is used by recommended by SAP. And the outcome of this system copy tool? The result is all the boxes on SAP accounts are far out of date with production, and asking for a recent copy is like asking for the moon. As we have been told on SAP projects…

“It would be nice to make a complete duplicate of an SAP box, but it is not possible.”

This is odd because, on projects where SAP infrastructure tools are not used, this is commonplace. A new image can be made in less than an hour, yet for SAP customers controlled by the SAP paradigm, doing it is something that is planned for weeks. For some strange reason, the SAP System Copy tool works within SAP.

Why would that make any sense?

VMware Versus SAP’s Horrid Infrastructure Tools

VMware copies the entire stack. SAP promotes customers to use SAP software over all other non-SAP software because the SAP software is “standard.” VMware is not standard. If SAP System Copy is the official tool for SAP, then according to SAP consulting firms, customers should implement it. After decades these SAP consulting companies and SAP “Platinum Consultants” will attest that the best course of action is to go 100% SAP. Anything can be critiqued as not SAP by stating, “it is not standard SAP.”

VMware benefits from being used by all environments and VMware as the company is the premier virtualization vendor in the world, and thus know and are capable of all manner of virtualization that SAP is not capable of performing. This gets into an infrastructure efficiency question around what is called the SAP Basis. With Basis on SAP projects, everything seems to take so long and is so hidden. However, when one pops around AWS or Google Cloud, everything is right there, and one has transparency. The fact is that SAP infrastructure efficiency is very low. It is controlled by Basis resources, which are used to the SAP ways of doing things.

There is a growing chorus of companies with on-premises environments that would like to leverage AWS to at least some degree. In response to this, AWS introduced VMware Cloud on AWS.

VMware Cloud on AWS is a full VMware vSphere cloud that is deployed and runs on AWS. We have a screenshot below.

vSphere is VMware’s environment for hybrid clouds. vSphere supports many different types of workloads. (3D graphics, big data, HPC, machine learning, in-memory, and cloud-native) vSphere has been around for years and is widely used. VMware Cloud for AWS is an extension of vSphere for AWS.

Using VMware Cloud for AWS allows for on-premises companies to leverage AWS more easily. This means that privately hosted VMware deployment in a data center. VMware Cloud for AWS brings AWS’s Relational Database Service (RDS) to these corporate data center customers. This is designed to make the transition to the cloud more accessible to customers. All the standard databases apply. However, it also allows AWS Lambda, Simple Queue Service, S3, Elastic Load Balancing, DynamoDB, Redshift, and much more.

This is a significant development, as it simplifies the speed and simplicity of managing the migration to AWS.

How AWS Supports the Hybrid Cloud

AWS begin in the cloud, and for the longest time, the argument was between cloud providers like AWS and Google Cloud versus on premises. However, AWS’s value proposition has begun to extend to on premises. Also, the natural connection is through the on-premises virtual machine.[i] This is a massive change in the value offered by AWS. When AWS extends its services into on premises, it is now leveraging its software and not offering its hardware. Hybrid cloud is when workloads and data reside in both on-premises and the cloud.

AWS has clearly targeted growth into the on-premises environment. The following are a few more examples:

  1. AWS Firehose
  2. AWS EC2 or Elastic Computer Cloud
  3. AWS CodeDeploy
  4. AWS Storage Gateway
  5. CockroachRB/AWS RDS

Let us briefly get into each one.

AWS Firehose

AWS Firehose is used for hybrid environments to move the actual data to AWS. The VMWare Cloud on AWS provides a high-performance network through the Amazon Virtual Private Cloud (VPC).

AWS EC2 or Elastic Compute Cloud

EC2 or Elastic Compute Cloud’s console can be used to manage on-premises instances. This means that a single console can provide a company with a full picture of what they are managing. It costs AWS very little to do this, but it makes it even more likely that that customer will enable more AWS services.

AWS Storage Gateway

AWS Storage Gateway can be used for backup and archiving, disaster recovery, cloud data processing, storage tiering, and migration.

This is covered in the following quotation from AWS.

“The gateway connects to AWS storage services, such as Amazon S3, Amazon Glacier, and Amazon EBS, providing storage for files, volumes, and virtual tapes in AWS. The service includes a highly-optimized data transfer mechanism, with bandwidth management, automated network resilience, and efficient data transfer, along with a local cache for low-latency on-premises access to your most active data.”[ii]

The AWS Storage Gateway works in conjunction with VMware of (as one example) on the on-premises server. It then connects to the AWS SG service, which then enables the services on AWS.

AWS CodeDeploy

AWS CodeDeploy is a deployment service but not only to compute services such as Amazon EC2, AWS Lambda, but also to on-premises servers.

This is covered in the following quotation.

“AWS CodeDeploy makes it easier for you to rapidly release new features, helps you avoid downtime during application deployment, and handles the complexity of updating your applications.”

CockroachDB/AWS RDS

With multiple databases or database copies being deployed in various regions in the cloud and on-premises, several approaches have come forward to manage this issue.

For instance, both CockroachDB and Spanner are sold on the concept of “horizontal scalability.” This is very different from vertical scalability, which is more commonly discussed and is how large a database can become without losing its initial performance characteristics.

How Cloud Spanner compares to other database categories (according to Google).

Both AWS RDS and CockroachDB allows one copy of the database (called a node) to be on premises, with other nodes of the database to reside in the cloud, with the nodes kept in synch and therefore allowing full distribution of the database. A combination of nodes makes ups a cluster. AWS RDS and CockroachDB can be used on the public cloud or the private cloud, and hence is presented as also supporting hybrid clouds. The difference between the two approaches is that AWS RDS employs a master-slave model, where one database is the master and copies changes to the slave databases. CockroachDB operates under a design where all the nodes are equal.

(Initial image from CockroachDB)

This places the node closest to the customer. For a company with an on-premises node, having a multi-node database like Cockroach DB in the cloud can serve users in regions of the world where the company has no data center. This has a meaningful impact on speed, and is a perfect example of one of the benefits of a hybrid cloud, even for companies that plan to keep their on-premises location or locations.

This “need for speed” is covered in the following quotation.

“This problem is compounded by the fact that latencies quickly become cumulative. If your SLAs allow for a 300ms round trip between an app and a database, that’s great––but if the app needs to make multiple requests that cannot be run in parallel, it pays that 300ms latency for each request. Even if that math doesn’t dominate your application’s response times, you should account for customers who aren’t near fiber connections or who live across an ocean: those 300ms could easily be 3000ms, causing requests to become agonizingly slow.

If you need a gentle reminder as to why this matters for your business, Google and Amazon both have oft-cited studies showing the financial implications of latency. If your site or service is slow, people will take their attention and wallets elsewhere.”

The big selling point of multi-node databases is both the ability to keep an application up during a failure of one of the nodes. After the failure, when the node that failed is brought back up, it is automatically synchronized with the other functional nodes.

The example from the CockroachDB website shows a node as “suspect” in the upper right hand corner of the user interface. Of course, with CockroachDB, one (or more) of the nodes can be on premises.

Also, CockroachDB will allocate the traffic that would ordinarily be directed to Availability Zone 1 to Availability Zone 2. Client A is not directed back to Availability Zone 1 until the changed data from Node 2 and Node 3 (which would be kept in sync) is updated to Node 1. This means the database is “inherently high availability.” That is, no special configuration is necessary to make it high availability.

This is a simulation that shows how multiple nodes interact with one another.

We have been discussing this in the context of database failure. But it applies to the overall availability zone, as is covered in the following quotation.

“Individual datacenters and entire regions also fail, and many teams are caught by surprise when they do. To survive these kinds of failures, you should employ a strategy similar to the one you adapted for networking and availability zone failures: spreading your deployment to more geographies.”

In addition to unplanned downtime, this works the same way for planned downtime. This improves the ability to bring down a node for maintenance, bring the node back up, and have CockroachDB take care of it all. For those that use DropBox and synch across multiple computers, the principle is similar. All of the copying and synchronizing takes place without the user worrying about how that is done. All the user sees is that (after a few minutes if the computer is recently turned on and connected to the WiFi), the files on another computer are the same as the files on the presently used computer.

Although CockroachDB/Spanner is one approach, AWS RDS has a different approach, which is explained in the following quotation.

“DB instances using Multi-AZ deployments may have increased write and commit latency compared to a Single-AZ deployment, due to the synchronous data replication that occurs. You may have a change in latency if your deployment fails over to the standby replica, although AWS is engineered with low-latency network connectivity between Availability Zones. For production workloads, we recommend that you use Provisioned IOPS and DB instance classes (m1.large and larger) that are optimized for Provisioned IOPS for fast, consistent performance.”

SQL presents a fundamental problem to horizontally scaled databases. This is the fact that the data in the database has to be available on a single server. Without this, it will not be possible to perform JOIN requests. However, with the cloud, either standard or hybrid, there are multiple instances or nodes of duplicate databases. This is explained in the following quotation.

“Relational databases scale well, but usually only when that scaling happens on a single server node. When the capacity of that single node is reached, you need to scale out and distribute that load across multiple server nodes. This is when the complexity of relational databases starts to rub against their potential to scale. Try scaling to hundreds or thousands of nodes, rather than a few, and the complexities become overwhelming, and the characteristics that make RDBMS so appealing drastically reduce their viability as platforms for large distributed systems.”

AWS RDS uses a master-slave copy scenario where one master is copied to the other slave nodes. CockroachRB, the open source versions of Google Cloud Spanner, is, in theory, treats all of the nodes as if they are equal. AWS outlines the problem with this in the following quotation.

“In a Multi-AZ deployment, Amazon RDS automatically provisions and maintains a synchronous standby replica in a different Availability Zone. The primary DB instance is synchronously replicated across Availability Zones to a standby replica to provide data redundancy, eliminate I/O freezes, and minimize latency spikes during system backups. Running a DB instance with high availability can enhance availability during planned system maintenance, and help protect your databases against DB instance failure and Availability Zone disruption.”

The reason for this is there are have multiple master-servers; collisions of data will be unavoidable.

Also, performance on read/write will depend on the number of servers. With the master-slave design, that problem is eliminated. However, this means that the databases are not genuinely independent. They rely upon the master database. And the slave databases only provide read access, not write access.

Luckily, any database has about 5% of write requests and 95% of read requests. So, with the single master, you provide a full server only for write requests. In the case where a change is made, that change is sent to the master directly (bypassing the slave). This is considered far more robust than the CockroachDB approach of synchronizing multiple SQL databases.

Notice in this graphic, it displays the standard master-slave database model. What can be a Public Cloud contains the slave database, while the master stays in the Private Cloud, which is usually on premises.

Both approaches support a hybrid cloud. And many people think the AWS RDS/Cloud SQL approach is more practical, but this may change as technology continues to advance. It should also be considered that this problem goes away if a NoSQL database is used. This is why NoSQL faster and has no problems with replications.

We know of many projects where NoSQL works like a real-time DB for application, and then data in parallel transformed into a SQL database. For programmers, NoSQL is more beneficial during run-time.

AWS & OpenStack and CloudStack

Up to this point, we have discussed using AWS services and software to control the on-premises environment. However, open source cloud management projects like OpenStack and CloudStack allow AWS to be accessed, as well as any on-premises resources. This ability to connect to any cloud and any on-premises resources from one UI is sometimes called a “single pane of glass.”

OpenStack is truly impressive. We recommend watching this specific video, which shows how quickly things can be set up in OpenStack.

OpenStack can control AWS, Google Cloud, and other cloud resources, and it also runs on VMware, as explained by VMware.

“VMware Integrated OpenStack is a VMware supported OpenStack distribution that makes it easy to run an enterprise grade OpenStack cloud on top of VMware virtualization technologies. VMware Integrated OpenStack is ideal for many different use cases, including building an IaaS platform, providing standard, OpenStack API access to developers, leveraging edge computing, and deploying NFV services on OpenStack.”

What AWS’s Hybrid Strategy is Pointed Towards

With AWS pushing into on-premises, this means that AWS is not only offering services that run on its infrastructure but has extended its services to run on customer’s infrastructure. Some have argued that IBM and Oracle have the advantage when it comes to offering a hybrid cloud. This is due to IBM and Oracle already being on premises in their customer’s accounts. However, neither of these companies demonstrate much of an intuitive understanding of the cloud. They do not offer the ease of use that AWS offers, and once you use AWS for on-premises, you can, of course, use AWS’s cloud services.

The Oracle Cloud appears to have similar issues to the SAP Cloud, as it shows low usability, indicating that like SAP, Oracle is getting little feedback as to what should be improved.

Oracle has had a long time to figure out the cloud, and they don’t appear to be making progress. Oracle resources have continually told us to “try out the Oracle Cloud.” We have. And we do not want to use it. We suggest Oracle resources that indicate using the Oracle Cloud try it for themselves first, before being frustrated when told it is not usable. One has to have the software to be part of the hybrid cloud future. AWS and Google Cloud do.

AWS offering for on premises is an attempt to put a “straw” into on-premises environments.

That is, they will entice on-premises customers with free items (that cost AWS little to offer) that will make on-premises customers increasingly comfortable with the cloud. As time passes and as more AWS services are used, it will become increasingly difficult for these on-premises customers to justify investments into a more on-premises overhead.

(Graphic from the book Hybrid Cloud for Architects: Build Hybrid Cloud Solutions Using AWS and OpenStack)

This is the future desired state for IaaS providers. They see the hybrid cloud as an intermediate state to taking over the infrastructure of customers.

This is proposed by Elias Khnaser in the following quotation.

“The public cloud will host most workloads, and you will have just the most important things in the private cloud. So you are going to justify putting something in the private cloud versus putting something in the public cloud, as the prices fall as well.”

Their roadmap shows a large amount of collaboration to make the VMWare Cloud on AWS a success.

The caveat explained by House of Brick is that there may be restrictions. It may require a legal review by each Oracle customer planning on leveraging this new offering due to licensing restrictions.

“From these indications, it seems like a strong possibility that the VMware Cloud on AWS is in compliance with the requirements of the Licensing Oracle Software in the Cloud Computing Environment document published by Oracle. We will be doing more internal analysis of this possibility, as well as consulting with our legal partners, and the legal teams of the clients we are working with. Once we feel confident in making a more definitive statement, we will do so at that time.” – House of Brick Technologies

Conclusion

VMware Cloud for AWS is a may of melding on-premises environments with AWS. This will improve SAP and Oracle environments as VMware Cloud for AWS can serve as a “straw” into these on-premises environments that not only provides access to AWS services but allows AWS services to be used to manage on-premises resources. The overall announcement of VMware Cloud For AWS is a recently announced product as per the time of this book’s publication and is something whose full effect has yet to be discovered.

VMware Cloud for AWS fits directly into the hybrid cloud, which is how different clouds and on-premises environments interact with one another. Also, we addressed the topics of OpenStack and CloudStack, which allow the control of not only AWS but provide a single pane of glass on all resources (cloud and on-premises). AWS’s clear intent is to manage more and more of the customer’s overall stack. Currently, AWS has the bulk of its services towards the bottom of the stack (Network, Storage, Computer, Virtualization, and Operating System). Still, it is clear they will increase their top of the stack services in the future.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

References

[i] This quotation provides an important distinction in virtualization. “It’s important to note that virtualization environments typically lack key capabilities of cloud systems – such as self-service, multi-tenancy governance, and standardized instances.” – https://assets.rightscale.com/uploads/pdfs/Designing-Private-and-Hybrid-Clouds-White-Paper-by-RightScale.pdf

[ii] https://aws.amazon.com/storagegateway/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

How to Respond to SAP’s Arguments Against AWS and GCP

Executive Summary

  • SAP makes continuous arguments against AWS and GCP.
  • How valid is this argument against the cloud from SAP?

Introduction

SAP consulting partners usually will only know how to repeat the arguments that come from SAP. An SAP consulting partners intend to denigrate both the other systems used by a customer and to promote SAP Cloud. This is true even though very few SAP consultants use SAP Cloud. In the mind of the SAP consulting partners, SAP works best when 100% SAP is used. The use of SAP applications, SAP databases, SAP infrastructure, SAP development tools is strictly supported without ever needing to justify usage.

Not Being Able to Meet Requirements Does Not Count Against SAP?

In the mind of SAP and SAP consultants, any lack of ability of SAP’s applications to meet requirements can be attributed to either a lack of business process re-engineering or to custom coding in SAP, using SAP development tools and SAP’s proprietary coding language. It is the preferred strategy to recode any “legacy” application used by the customer into SAP.

SAP’s Connection to IaaS Providers

SAP has made accommodations for non-SAP IaaS. One can use SAP on AWS, Google Cloud, and Azure. We covered the topic in SAP’s Multicloud Announcement.

As of this book’s publication, there are 92 SAP related items available on the AWS Marketplace. This is, however, misleading as many are slightly different versions of the same basic thing. Most of the offerings are either HANA or the Adaptive Server Enterprise. The Adaptive Server Enterprise is one of the most confusingly named products, and it is a database. It was renamed from the Sybase DB, which SAP acquired.

The Real Point of Offering HANA and Adaptive Server Enterprise on AWS

Looking at the HANA offerings, they appear to be more out on AWS for marketing purposes or that is more specifically to get traction for these products and exposure rather than serious usage. The problem is that SAP’s databases are not competitive versus the other items AWS offers.

If we take the HANA database, it is a problematic database both from the perspective of cost and maintenance overhead. If HANA is used with all manner of liabilities, both technical as well as license/legal, as we covered in the article The HANA Police and Indirect Access Charges. SAP is offering license-free versions for developers to work with, once a company tries to activate it for production, the costs will dramatically rise, and then they will run into other limitations such as HANA’s limitations in clustering.

This is how SAP “boobie traps” its AWS offerings. Furthermore, HANA is a way for SAP to take over the data layer at companies, proposing that every database that touches HANA must either be HANA or must pay extra fees to SAP.

There are indeed limitations in running SAP on AWS and Google Cloud. However, the problem is that SAP resources are not a good source of information on this topic, as they are told by SAP that the objective is to get customers to adopt the SAP Cloud, as it is standard. This is particularly true if the SAP consultant works for a company that is a partner with SAP. As we cover in the article How to Best Understand the Pitfalls of Vendor Partnerships with SAP, consulting companies that are SAP partners lack any autonomy from SAP.

Advice on Enjoying the SAP Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Conclusion

The best way to handle SAP’s objections that customers should access the SAP Cloud instead of alternatives is by having the real story about how SAP setup their cloud to work against their customer’s interests, and to reinforce SAP’s account control.

The information provided to customers about both SAP Cloud and AWS and Google Cloud is unreliable. SAP allows customers to access AWS, Google Cloud, and Azure, but not in a way that makes any sense to use SAP Cloud. We can see no justification for using SAP Cloud when customers can open AWS and Google Cloud accounts and access so many more options and without SAP’s exorbitant markup. If customers use SAP or SAP consultants to consult on the cloud, it will lead to inferior outcomes. First, SAP has no idea what they are talking about when it comes to cloud, and second, all advice will lead right back into the clutches of SAP. SAP is also struggling with how to jam as much of their investments into on-premises technologies in the cloud context. ABAP is a perfect example of this, but there are many others. The SAP consulting firms are incentivized to redirect any customer questions about cloud back to SAP Cloud, which a non-starter as far as all three of the authors of this book are concerned. Those customers looking for advice on how to leverage AWS or Google Cloud (that is real cloud) for their SAP environment need to find advisors who are not SAP partners.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

References

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

How to Respond to Oracle’s Argument on Whether Oracle Can Complete with AWS and Google Cloud With Far Fewer Data Centers?

Executive Summary

  • Does Oracle make a curious argument that Oracle can compete with AWS and Google Cloud with far fewer data centers?
  • How valid is this argument against the cloud from Oracle?

Introduction

Oracle has needed to cover up for the inconsistency of their statements around their dedication to the cloud versus their relatively small investment in data centers. For context, while the aggregate spending of AWS, Google Cloud, and Azure were $31 billion in 2016, Oracle’s was only $1.7 billion.

Mark Hurd, CEO of Oracle, addressed this issue in the following quotation.

“We try not to get into this capital expenditure discussion. It’s an interesting thesis that whoever has the most capex wins,” Hurd said in response to a question from Fortune at a Boston event on Tuesday. “If I have two-times faster computers, I don’t need as many data centers. If I can speed up the database, maybe I need one fourth as may data centers. I can go on and on about how tech drives this.

Oracle has said it runs its data centers on Oracle Exadata servers, which are turbocharged machines that differ fundamentally from the bare-bones servers that other public cloud providers deploy by the hundreds of thousands in what is called a scale-out model. The idea is that when a server or two among the thousands fail—as they will—the jobs get routed to still-working machines. It’s about designing applications that are easily redeployed.”

Mark Hurd on the Missing Oracle CAPEX

Mark Hurd is not interested in getting in any discussion where the facts are obviously against his position. And why are discussions around CAPEX, or Oracle’s measured investment off limits?

Is there some taboo about discussing questions of investment?

One has to wonder about the honesty of a person who when confronted with a very reasonable question which goes directly to the storyline being proposed by Oracle (that they are competing on their data center investments), states they are “not interested in getting in a discussion” around that topic.

The underinvestment on the part of Oracle contrasts with AWS, which places three locations or data centers into any region it enters. This is to allow for redundancy in the region. Using Exadata servers at one location does not resolve that issue. As per Oracle’s explanation of its cloud posted as of October 19, 2018, Oracle only has 4 regions worldwide. These are Phoenix, Ashburn, London, and Frankfurt. That small number of regions naturally increases the distance to consumers of the services and is far behind AWS and Google Cloud. That means more network latency, and it is not something that will be addressed by Mark Hurd’s statements about Exadata, even if it were true.

The truth is that Oracle isn’t investing much into the cloud. Oracle has leased data centers that rely on the Internet instead of dedicated fiber to communicate.

  • Oracle has followed monopolistic practices through continual acquisition. However, there is a problem with Oracle extending this strategy to the cloud.
  • The acquisition approach doesn’t work in the cloud. Thus, Oracle’s approach has been to play defense and delay cloud adoption in its install base as much as possible. This is for instance, by raising database license costs for running on AWS/Azure, pushing hard for on-premise deployments of its own hardware, limiting choice by refusing to license the database for Google and IBM.

Hiding Cloud Revenue

Hiding their cloud revenue in June of 2018 and changing how they reported cloud revenue was a striking indicator for a company that had to cover for previous cloud projections that have not come true. It also triggered many analysts to question what Oracle was hiding. Last year, Google, Microsoft, and Amazon each spent more than 10 billion dollars on data centers each. How did Oracle spend its money? On $12 billion buying back its own shares. A better translation for Mark Hurd’s comments is that he does not need as much investment into data centers when he can use that same money to buy back stock. Curiously, when discussing CAPEX, Mark Hurd left out how much stock Oracle repurchased that year. This highlights just one example of how Oracle is managed for the short-term financial benefits of its top executives. Much like SAP, Oracle prefers not to make investments that they need to make to match the claims made by their marketing department.

Furthermore, this statement was made by Mark Hurd in April of 2017. But notice Mark Hurd’s statement in February 2018?

“The Redwood City, Calif., company said in February it planned to quadruple the number of giant data-center complexes over the next two years, taking on the market’s biggest spenders: Amazon.com Inc., Microsoft Corp. and Alphabet Inc.’s Google.”

Switching Direction

Why would Oracle need to do this? Remember, according to Mark Hurd, Oracle’s faster servers and databases should allow it to compete with AWS, Google Cloud, and AWS with a far smaller investment. Wasn’t that the story in April of 2017? Alternatively, perhaps does using Exadata servers with the Oracle database not help overcome Oracle’s lack of cloud investment?

But even if Oracle’s investments were where they needed to be, there is no evidence that they would be able to do what AWS and Google Cloud are able to do with their investments. That is, every dollar that Oracle spends on cloud infrastructure would not be as effective as a dollar spend on AWS or Google Cloud infrastructure. Therefore, the argument is the exact opposite of the one proposed by Mark Hurd regarding comparative CAPEX. To match AWS or Google Cloud, Oracle would need to significantly exceed AWS or Google Cloud’s CAPEX.

This is explained in the following quotation.

“The exact number of servers in Google’s arsenal is “irrelevant,” Garfinkel says. “Anybody can buy a lot of servers. The real point is that they have developed software and management techniques for managing large numbers of commodity systems, as opposed to the fundamentally different route Microsoft and Yahoo went.

Of particular interest to CIOs is one widely cited estimate that Google enjoys a 3-to-1 price-performance advantage over its competitors—that is, that its competitors spend $3 for every $1 Google spends to deliver a comparable amount of computing power. This comes from a paper Google engineers published in 2003, comparing the cost of an eight-processor server with that of a rack of 176 two-processor servers that delivers 22 times more processor power and three times as much memory for a third of the cost.

But although Google executives often claim to enjoy a price-performance advantage over their competitors, the company doesn’t necessarily claim that it’s a 3-to-1 difference. The numbers in the 2003 paper were based on a hypothetical comparison, not actual benchmarks versus competitors, according to Google. Microsoft and Yahoo have also had a few years to react with their own cost-cutting moves.”

Scale Economies in the Cloud

AWS and Google Cloud can get scale economies with their investment that is difficult for other IT companies, even giants like SAP, Oracle, and Microsoft to match. That is scale economies running server farms specifically. Again, SAP and Oracle began their lives as vendors, selling software, not running software. This gives them a huge advantage over vendors like SAP and Oracle that are in business to sell software and outsource implementation to someone else.

Advice on Enjoying the SAP and Oracle Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

References

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.