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Legacy roots still hinder Oracle and IBM cloud strategies

As IBM and Oracle look to shift away from legacy systems and hone in on IaaS, it won't be a clean cut. Still, each vendor has its sweet spot in the overall cloud market.

Oracle and IBM are two legacy IT vendors trying to transform into market-leading cloud service providers. And while their cloud strategies have evolved at different paces -- and carry their respective strengths and shortcomings -- both vendors grapple, in particular, with how to catch up to the likes of AWS and Azure in the public IaaS market.

"Building an IaaS service is tough, and many vendors have struggled in this area," said Lydia Leong, vice president and analyst at Gartner.

Oracle has launched a handful of IaaS services that support VMs, databases and storage. After several attempts to produce an IaaS offering with its internal resources, the company, a few years ago, took a different approach.

"Oracle hired a bunch of AWS executives and set them up as a skunkworks project in Seattle," Leong said.

Then, in 2016, Oracle rolled out the next generation of its IaaS platform, built on a modern and flat software-defined network. These advancements especially benefited transaction-oriented applications, such as e-commerce, as they could increase performance and response time. Overall, Oracle's IaaS service is solid but still well behind the market leaders in terms of breadth and functionality, Leong said.

Self-service capabilities, for example, represent one area where Oracle -- and IBM, for that matter -- hasn't been on par with the leading public cloud providers, said Larry Carvalho, research director at analyst firm IDC.

IBM, for its part, also continues its evolution from a hardware and software vendor to a services and outsourcing supplier. And the company has gradually migrated its hosting and outsourcing services to support the cloud.

But despite IBM's broad IaaS portfolio, its public cloud capabilities are still relatively minimalistic. "While the public cloud infrastructure of a service like Microsoft's Azure is software-defined, IBM is still transitioning away from being a hosting vendor," Leong said.

Consequently, the company has not been able to keep pace with the market leaders.

Both Oracle and IBM fare well with enterprises that have legacy footprints … but struggle to attract new, born-in-the-cloud customers.

"IBM's struggle has never been one of strategy, but of execution," Leong said. For instance, the vendor has touted a new generation of IaaS offerings that were supposed to debut by the end of 2017 but have yet to be rolled out.

In general, both Oracle and IBM fare well with enterprises that have legacy footprints and want to move some applications to the public cloud but struggle to attract new, born-in-the-cloud customers.

"[Their] public cloud services appeal to corporations with large volumes of legacy systems," Leong said.

Oracle and IBM cloud strengths

While Oracle and IBM haven't seen the same success as companies like Microsoft and Amazon in the public IaaS market, they each have their strengths in cloud.

Oracle, for example, has translated its success in the database management system, ERP and customer relationship management markets into a robust SaaS portfolio. Customers, including AT&T and Subaru of America, have moved or enhanced their legacy Oracle applications with Oracle SaaS features and will gradually add new features or move existing processes to Oracle public cloud.

Oracle has taken a similar tack in PaaS. The vendor had a foothold in that market from the purchase of Sun Microsystems and its Java programming language in April 2010. Oracle has also successfully incorporated new technology into its PaaS lineup to simplify the development process. Recently, for example, the company embedded some AI and machine learning functionality within its Oracle Cloud Platform service.

IBM, meanwhile, has garnered a lot of attention for its Watson AI offering, which is now a focal point for the vendor's overall public cloud push.

"IBM has been helping companies use Watson to automate manual programming functions and reduce headcount," Carvalho said. A range of organizations, including American Airlines and H&R Block, have showcased how Watson has improved their operations.

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