The real Oracle cloud strategy that may work vs. AWS and Azure

The Oracle cloud strategy is getting hammered these days. With product development chief Thomas Kurian's departure to head Google's cloud unit, Oracle's move to obfuscate its cloud sales and negative feedback on Oracle Cloud's maturity, it's no wonder that many people are writing off Oracle. They say it will never catch AWS and Microsoft and relegate it to the second tier of cloud infrastructure vendors.

I, however, am not one of those people. I don't doubt Oracle's ability to catch up, nor would I be surprised if Oracle eventually "won" the cloud wars. Although Oracle has made many cloud missteps, starting with then-CEO and now CTO Larry Ellison mocking the whole idea of the cloud in 2008, the company does have a unique cloud strategy that only it can pull off.

Oracle is not going to win the cloud wars by saying it has the best servers, networking, security, uptime, etc. Its hardware is commodity-based, its networking capabilities are the same as other vendors offer and its rivals all have sufficient high availability and security features.

If you want to know what the Oracle cloud strategy is really about, you have to ask yourself: What is Oracle really good at? What is it known for? Well, that's easy to answer. Oracle is really good at databases. Database software is its bread and butter. And that is exactly how Oracle intends to win the cloud wars: It's all about the database.

Only time will tell if Oracle's strategy is any good, but at the very least, we can call it different from anyone else's. Oracle has shifted the way it talks about the cloud and now says it has the best "cloud infrastructure technology." Ellison used those words in Oracle's first-quarter earnings announcement in September. But what Oracle means by "infrastructure technology" is actually "database."

Oracle is betting that it can overtake today's cloud leaders by taking advantage of its flagship Oracle Database platform. Oracle believes that it has the best database technology and that companies will want to use Oracle databases in the cloud. Therefore, it thinks it has an inside track to get such users to move to Oracle Cloud -- if not right away, then over time.

For Oracle, it's not the end of the world that the AWS and Microsoft Azure platforms both have huge leads in the cloud market now. A lot of their customers still use Oracle technology -- i.e., the database -- and Oracle is counting on many of those organizations to eventually move to its cloud.

The Oracle cloud strategy includes three prongs for using the database software to convince customers to make that move:

• Oracle database contracts. Oracle has been putting terms and conditions into some of its database contracts, particularly large Unlimited License Agreements, that severely restrict a customer's ability to use Oracle Database in a non-Oracle cloud. These unlimited-use agreements tend to be the largest Oracle contracts, where most of the revenue is.
• Noncontractual policies. If Oracle doesn't prevent you from using other clouds through its contracts, it will put things in policy documents and try to use those policies against customers. We call this the MSU, or Make Stuff Up, approach. I know that sounds harsh, but it's really what Oracle does -- as do almost all other tech companies, to be fair. Oracle attempts to force policies that aren't part of contracts on customers, even though you spent considerable time and effort negotiating a contract that says noncontract materials aren't part of your agreement with Oracle. Two examples of this are Oracle's policy documents on server partitioning and Oracle software licensing in the cloud. It gets even more confusing when you read those policies because the documents say they are for educational purposes only and not part of contracts.
• Database functionality on Oracle Cloud only, or first. If Oracle can't get you with the contracts or policies, there's one last arrow in its Oracle cloud strategy quiver: limiting database functionality to Oracle Cloud. Oracle started doing so in 2016, when it announced that new releases of Oracle Database would be distributed first on its cloud and then to on-premises customers later. Oracle went even further last year and said that some database functionality, in particular its Autonomous Database technology, will only be available on Oracle Cloud or through the Oracle Cloud at Customer managed service that runs at user sites.

This three-pronged, database-driven approach is how Oracle will win -- or lose -- the war for the cloud. If the likes of AWS and Microsoft want to really put Oracle out of the cloud business, they'll have to come up with ways to eliminate Oracle databases from IT environments. As long as companies base their core business applications on Oracle Database, Oracle still has a chance to move them to its cloud. Don't count out Oracle just yet.