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Bits Blog: Oracle Will Not Build a Giant Cloud System Like A.W.S.

SAN FRANCISCO — Counter to the expectations of many industry watchers, Oracle, the world’s largest maker of software for businesses, is not planning a global computing system to rival Amazon Web Services or Microsoft Azure, the other big global cloud companies.

While it has built out a network of 20 data centers, largely filled with Oracle equipment, it now plans to go after customers by offering faster updates of its core products, new ways of customizing applications and a much younger, retooled sales force.

“We’ve made our investments,” Mark Hurd, co-chief executive of Oracle, said in an interview. Compared with A.W.S., he said, “the place we like is one of higher profit margins.”

Besides applications, Amazon sells raw computing and data storage, which are generally lower-margin businesses. Oracle is expected Tuesday to announce better security inside its cloud because of changes from its proprietary hardware, but won’t sell access to the machines on their own.

Oracle’s better margins, Mr. Hurd said, will come from selling large-scale software that can be customized by its buyers to suit local markets and products. He hopes to lower his sales costs and bring in younger companies with salespeople recruited straight from college and given crash courses in selling Oracle cloud products.

In the last four years, he said, the company has hired 1,000 graduates a year. “We train them in products, sales skills and processes,” said Mr. Hurd. “They’re selling within a year, with a much lower cost of sales.”

Oracle’s sales force, some 30,000 people globally, is considered among the most aggressive and highly compensated in the tech business. Now, Mr. Hurd said, “we have to do some branding” to entice the kind of smaller companies and start-ups the new sales team is chasing.

The ease of modification and the faster sales force illustrate how, while still far apart, Oracle and A.W.S. are becoming more like each other as cloud computing goes mainstream.

For its part, a few weeks ago A.W.S. dropped all pretense and made a direct bid for Oracle’s customers. A.W.S. even put up a thinly disguised picture of Oracle founder and executive chairman Lawrence J. Ellison.

Mr. Ellison, by contrast, was unusually low-key in his presentation on Sunday, when he kicked off Oracle’s annual customer event. He said Oracle no longer paid attention to IBM or SAP in cloud computing, and compared unfavorably to Oracle both Salesforce and Workday, two leading cloud applications companies. For him that was pallid fare.

What he did say was that virtually all of Oracle’s applications have been updated to the cloud — a minimum to go after A.W.S. on cloud applications — and cloud systems for running global manufacturing systems and doing e-commerce.

A.W.S. has some of those commerce capabilities, but can’t match that complex manufacturing application. It probably doesn’t want to – yet. While Amazon’s cloud origins are in helping start-ups that want to do things cheaply, Oracle’s cloud strategy is to enable the biggest companies in the world to move into the cloud.

“We don’t have anybody chasing us,” Mr. Hurd said. “We don’t have anybody doing what we’re doing.”

That may not be completely the case. SAP, Oracle’s top competitor for business applications, has its own offerings and is also has products running on A.W.S.

Oracle does have a way for its legacy customers to gain the flexibility, and possibly cost savings, of cloud computing, however. Amazon may offer to take their data and compute for less, but most companies are conservative and will likely stick with what they know if they get most of the new capabilities.

There may also be harsher pragmatism in the decision not to compete with A.W.S. or Microsoft with a bigger cloud: It’s prohibitively expensive.

If Oracle were to go after A.W.S. and Azure, something IBM is pursuing, it would probably cost more than $ 1 billion a year just to keep pace with the leaders. And that is if they could find the talent to build such facilities.

Safra Catz, the other chief executive at Oracle, recently said cloud margins at the company would soon double. The big costs are behind them and wouldn’t be if Oracle kept in the chase.

“We’ve crossed the chasm” from the old world to the new, Mr. Hurd said. But with Oracle’s stock off about 15 percent this year, investors seem unsure if the new world is so profitable. Still, the historically feisty company does seem willing to join in today’s fray.


NYT > Technology

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