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Oracle Exits Cloud Startup Phase

Larry Ellison, founder and CTO of Oracle, is now more bullish on the cloud than ever before, as his company is set to grow cloud revenues. Oracle reported its first quarter fiscal 2016 revenues on September 16 and cloud was identified as a primary driver of growth. For the quarter, Oracle reported revenue of $8.4 […]

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Sean Michael Kerner

Sep 17, 2015

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Larry Ellison, founder and CTO of Oracle, is now more bullish on the cloud than ever before, as his company is set to grow cloud revenues. Oracle reported its first quarter fiscal 2016 revenues on September 16 and cloud was identified as a primary driver of growth. For the quarter, Oracle reported revenue of $8.4 billion, for a two percent year-over-year decline. Oracle attributed the decline to U.S dollar currency fluctuations. When measured on a constant currency basis, Oracle reported a 7 percent year-over-year gain.

Cloud technologies led the way for growth, with revenue of $611 million for a 29 percent year-over-year gain. In terms of cloud segments, SaaS and PaaS revenues were the majority, at $451 million, while IaaS revenue was $160 million. In contrast, Oracle’s on-premises software revenues were reported at $5.8 billion for a four percent yearly decline. Hardware revenues came in at $862 million for a 1 percent gain.

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For Ellison, the Oracle cloud business is now just getting up to speed. Ellison said during his company’s earnings call that over the last three years, Oracle has been in the startup phase of its cloud business.

“We have developed services at all four layers of the cloud, a complete set of enterprise SaaS applications, plus our database and middleware platform services, plus compute and storage infrastructure services, and an expanding set of data systems, ” Ellison said.

Supporting all those cloud services are 19 Oracle data centers spread across 14 different countries. Ellison said that Oracle’s data center service delivery capacity has grown from 0.5 megawatt three years ago to 45 megawatts today. He added that Oracle has deployed over 8 petabytes of storage and over 40,000 physical devices over the last three years in support of the cloud.

“We now have in place the physical infrastructure to dramatically expand our cloud customer base,” Ellison said. “We are entering the rapid growth, scale-out phase of our cloud business.”

With the infrastructure in place, Ellison boasted that he expects Oracle’s cloud margins will double from 40 percent to 80 percent over the next two years.

While Ellison is bullish on the cloud, he was asked repeatedly during the earnings call about the continued health of Oracle’s on-premises software business. Ellison sees a path forward where Oracle will profit from software in the cloud and on-premises.

“We are encouraging people to run all their their development and test in our cloud as opposed to on-prem, which does imply a shift from database on-prem to our database service,” Ellison said. “That’s what we want them to do. We think that lowers their cost and raises our revenue and profits. We think it works very well for us.”

The move to the cloud is also set to cross-over into Oracle’s hardware product lines as well. Ellison briefly mentioned a new Exadata cloud service that he is set to formally announced at the Oracle OpenWorld conference next month.

“We obviously sell Exadata as a machine to run on-premise, the most modern way, most cost effective way to run our database,” Ellison said. So, you can run part of your database workload on-prem on that Exadata platform and part of that database workload in our cloud on that Exadata platform and with our management tool.”

Ellison said that from an IT administrator perspective, when leveraging Exadata on-premises and in the cloud, the administrator sees one pool of assets, with one management tool. That type of hybrid deployment enables an organization to run Exadata on-premises and in the cloud together, with the ability to move data back and forth.

“This coexistence of cloud and on-premise computing is going to be a decades-long process, if not forever,” Ellison said.

Sean Michael Kerner is a senior editor at Datamation and InternetNews.com. Follow him on Twitter @TechJournalist

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