Oracle showed some very good numbers in its latest earnings announcement. As it begins its second year of aggressive cloud promotion, the company overall is showing significant year-over-year improvements, thanks to its turn to cloud infrastructure, applications and platforms. Yet when read right, the numbers announce the end of the beginning of the end as much as they announce the end of the beginning.
Oracle is the last major software vendor to adopt the cloud as its primary medium, and while it will support its legacy customers as long as necessary — it has a good history of loyalty to customers in this regard — there’s no doubt about its direction. With a legacy installed base, moving to the cloud has been difficult for Oracle. Competitors Salesforce and NetSuite, on the other hand, were cloud natives from day one.
To make its pivot, Oracle has had to spin up three “as a Service” businesses: one for infrastructure, IaaS; one for software, SaaS; and one for platform, PaaS.
AI, ML, IoT – and What Else?
Infrastructure is a low-margin business, because there’s a lot of low-priced competition. Yet it’s essential to the company’s strategy, because there will be a fraction of its 425,000-plus customers that get to the cloud simply by moving the locations of their data centers. Without an IaaS business, those customers could go anywhere, and keeping them in the software fold would become more difficult.
Oracle’s transition to the cloud removes the last legitimate holdout — the last objection to cloud computing almost anywhere — and with that we can call a top to an age of computing that began with mainframes more than 50 years ago.
The logical question now is what’s next? The rest of the industry is not standing still. Along with transitioning its customers to the cloud, Oracle is continuing to invest in advanced technologies like artificial intelligence, machine learning and the Internet of Things, where it competes with most other vendors.
At the same time that Oracle is competing, it is leading in database — and some of its competitors are also customers. During last week’s earnings call with press and analysts, former CEO and founder and now CTO Larry Ellison offered a preview of Oracle OpenWorld, which will run during the first week of October in San Francisco.
Ellison announced that the next version of the Oracle database would be automated so that better than 99 percent of setup and tuning could be done by the system itself using AI and ML.
So I’m calling another top, in another part of Oracle’s business: database. Most of the competition from the early days of relational databases either has departed or been absorbed by larger entities, and Oracle may be the only fully independent vendor left (I can’t think of another).
Never-Ending Quest for Profits
The database industry, along with satellite industries in various forms of hardware, software and services, once formed the backbone of a major economic driver, the tech industry. In its heyday, the industry employed — and still employs — a huge number of people.
However, with the introduction of an automated database, coupled with an already strong cloud sector, there has been a good deal of automation. The industry has been cannibalizing itself, erasing jobs, and commoditizing products based on databases.
There’s nothing to be done about it. Business runs on information, but it also runs on efficiency. Cloud computing and automation are part of a never-ending quest to keep overhead low and profits high.
The more important question for now is, what’s next? What will be the next disruptive innovation — the thing that drives the economy and that hires lots of people and deploys new infrastructure?
Many people figure the next shift will look a lot like today, and think IoT and things derived from it might be next in line. I don’t know. Viewed in a certain light, the IoT looks more like a further commoditization and automation of traditional technology than it looks like the next big thing.
After all, the IoT is supposed to be about automation — using the Internet for communications between remote devices with sensors. The IoT is supposed to be the mothership for the purpose of dispatching services and supplies, among other things. It’s hard to see how this would lead to a great expansion in employment, though it certainly looks like a way to improve capital efficiency and profits.
For the moment, it’s enough to understand that the next major economic move will stand on the shoulders of the current paradigm and that it will be steeped in technology. Iron and stationary steam engines gave way to steel and mobile steam engines. The next decades are likely to look like the cutover from iron to steel. It will be an interesting time, as the Chinese say.