Competition is what drives any industry to the next level.
Without it there is no quest factor to make things better, and everyone connected with that industry will be stuck in “yesterday mode” in perpetuity. But every once in awhile one finds a company that suddenly jumps into an industry and disrupts it to such a great extent that even industry stalwarts are shaken to the core. Amazon (AMZN, Financial) is that company, and cloud is that industry.
To say that Amazon has been giving the tech giants a huge run for their money in the cloud game is so last decade. The retailer is so ruthless it not only dominates the space against the relatively weak onslaught of the giants but also keeps expanding the moat between itself and them.
I’ve written extensively about how Amazon Web Services fares against IBM (IBM, Financial) and Microsoft (MSFT, Financial), not to mention Google, but I’d like to explore what it's now doing to keep Oracle (ORCL, Financial) in its place.
The late bloomer in cloud faces a very real threat from AWS
Oracle was initially slow to jump into the cloud industry because it contradicted what it was doing, which was offering businesses the hardware and software solutions to manage their own IT infrastructures. Cloud is essentially antithetical to that business model – even antagonistic, one might say. But after it realized its mistake it quickly ramped up its cloud business and is now strongly in the SaaS and PaaS segment, although not as much in the infrastructure game where Amazon is the undisputed leader.
But Amazon was having none of that. Consequently, it launched Amazon Aurora in late 2014, also known as the Oracle Killer. Aurora is a relational database engine that directly competes with Oracle’s database products. If Oracle is the king of databases, then Aurora is the mysterious assassin whose only job is to take the king’s life.
To make Aurora’s job easier, Amazon structured the service so no upfront license fee needs to be paid. In effect, it made it a pay as-you-go service.
“On-Demand Instances let you pay for your database by the hour with no long-term commitments or upfront fees. This frees you from the cost and complexity of planning and purchasing database capacity ahead of your needs. On-Demand pricing lets you pay as you go and is ideal for development, test and other short-lived workloads.” –Â AWS
Beyond Aurora
As if that wasn’t enough, Amazon also offers something called "serverless computing" where you build and run applications without owning any infrastructure at all. There is no need for you to worry about provisioning, scaling, maintaining servers, databases and storage because Amazon takes care of all that. You just write your software and run it; Amazon takes care of everything that happens behind the scenes.
It’s a radical concept that would have been something of a sci-fi dream 10 years ago, but the rise of cloud computing has brought us to a stage where this is now possible. Amazon is saying, “Forget infrastructure; just write your code and that's it. No need to think about storage, servers and databases.”
But Amazon is not alone in pushing the serverless computing concept. Microsoft and Google are also in that space. Revolutionary as it might seem, the idea is merely an extension of cloud services into a managed cloud model where the cloud provider takes care of all the infrastructure needs and leaves you to take care of software development.
Though I don’t think big enterprises will be jumping up and down in joy to embrace the serverless architecture, small IT teams and startups could end up jumping on the bandwagon in droves. And if they get used to it, tomorrow’s billion-dollar companies may well be built on serverless computing, only focusing on software teams and never thinking about hiring anyone to manage their IT infrastructures.
It’s a huge threat to Oracle’s core database business, but thankfully the company is already a part of the cloud race and serverless architecture will take many more years to reach maturity, giving Oracle ample time to build its future revenue streams on the back of its SaaS and PaaS capabilities.
Disclosure: I have no positions in any of the stocks mentioned above and no intention to initiate a position in the next 72 hours.
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