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BLOG: Oracle's aversion to cloud computing takes its toll

David Linthicum | July 3, 2013
Oracle's late scramble to the cloud is a cautionary tale for all traditional enterprise software providers.

Everyone loves to bash Oracle. Why? Because it is big, its stuff is expensive, and most enterprises are wholly dependent on its technology.

I always understood why Oracle was the brunt of jokes, but each quarter it was able to post substantial numbers. Then came cloud computing.

Although enterprise software companies miss their financial numbers for many reasons, not just new technology, the recent announcement that Oracle missed its Q2 projection has many analysts worrying and wondering about the impact of cloud computing on Oracle. Many also question if Oracle can take advantage of the growing cloud computing space.

In a response to the lagging numbers, Oracle signed three significant alliance agreements withSalesforce.comMicrosoft, and NetSuite, focused on providing database technology and software integration. The idea is simple: If you can't build the cloud computing technology fast enough, push it into companies that do, and let everyone know about it.

Oracle has a cloud strategy. However, it's been focused on selling more enterprise software and not on-demand computing. Indeed, the new model for consuming technology on demand flies in the face of how Oracle currently sells its products. The model also doesn't support Oracle's historically high margins and, thus, its profitability.

Oracle is the first of many enterprise software companies that will find cloud computing is, at best, a distraction that lower sales or, at worst, a technology usage shift that leaves them without market demand. The reaction should be to go with the flow and create cloud offerings that nail the market. However, most enterprise software providers are busy writing press releases rather than actually building cloud technology.

The result will be sheer panic in a few years as enterprise software providers finally realize they can't spin or purchase their way out of trouble. We've seen this pattern before, such as when Microsoft focused on the PC in its early days while the established companies ignored PCs and stuck to their mainframes and minicomputers. Those companies are not around today.

 

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