Why is AWS a Bigger Threat to Oracle than SAP and Microsoft?

Last Updated on March 21, 2021 by Shaun Snapp

Executive Summary

  • Oracle has long-term competition from SAP and Microsoft.
  • Find out why AWS is the biggest threat of all to Oracle.

Introduction

Oracle is obsessed with AWS. Over the past couple of years, Oracle’s marketing machine has been completely fixated on Amazon’s cloud business. I knew something was up when Larry used most of his hour-long keynote at Open World ’16 in San Francisco to trash AWS’s slow first-generation cloud infrastructure. I really didn’t get it. Why’s Oracle suddenly locking horns exclusively with AWS? Knowing what I know about enterprise IT, that doesn’t quite compute.

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Does Dr. Spock Have Any Insights?

Eventually, I decided to ask the smartest person I know: Mr. Spock. Care to guess what he had to say?

Exactly my thoughts! Just consider the facts:

  1. AWS is 100% cloud-only. Oracle’s entire cloud business is 16% of total revenue. 84% of Oracle’s business is far more important to protect against competitors like SAP, Microsoft, and open source.
  2. Oracle’s cloud business is nearly all SaaS. AWS isn’t even a SaaS player (yet).
  3. Oracle core business, the database, is in clear and present danger from Microsoft. For the past three years, Microsoft SQL Server has displaced Oracle database as the leader in operational databases by worldwide commercial sales.

Logically, AWS isn’t even a major competitor, let alone a significant threat. Spock, however, is dead wrong because he’s operating under incomplete information.

Again, let’s look at the facts.

AWS has been poaching Oracle’s database customers at an alarming rate.

The Migration of Oracle Databases

By October 2017, AWS migrated over 40,000 databases to their cloud. The majority of which are Oracle instances. Why’s this a threat? Because these are AWS fully managed instances. This means AWS takes care of the full range of database administration work, including upgrading, patching, and security.

This is irresistible to many customers because they no longer need to keep as many DBA’s on their payroll. The savings are really quite significant. The operational agility is even better. This model is a no-brainer not only for small businesses but also for large companies trying to do more with less.

But that’s just an appetizer. Here’s the main course: A fully managed database is a trouble-free database. In other words, customers can easily drop the annual 22% maintenance and support fee they pay Oracle and save really BIG. That’s the existential threat because nearly 50% of Oracle’s annual revenue is generated from install base M&S. The cash cow is moving to greener pastures.

How Serious is the AWS Threat to Oracle?

The AWS threat is so serious, Oracle resorted to the most desperate anti-competitive measure the industry has seen in decades. In January 2017, Oracle quietly doubled its database license for instances hosted on AWS cloud!

Spock’s reaction to the news was sober!

Spock’s skepticism is rational. Once he verified the facts for himself, he got onboard: AWS is indeed a serious existential threat to Oracle.

The Upside?

The upside of the story?

Competition is fantastic. The monopolistic era in databases is long gone. Today, AWS offers fully-managed Oracle database instances for as low as $0.07 per hour. Even better, AWS promised to significantly lower the prices even more as they roll out the next wave of automation capabilities to their infrastructure. Oracle, on the other hand, is no longer sitting still.

On October 2017, Oracle announced a new line of autonomous products including a fully autonomous database. The new cloud service promised to cost 50% less than AWS and offer 99.995% availability!

That’s 2m:11.5s downtime per month. How great is that? A better product at lower prices.

Let the games begin!