Oracle (ORCL)

Q2 Results

We first wrote about Oracle on Mar 15 2024. This report can be found here. We produced two subsequent reports which can be found here and here.

Introduction

Oracle (ORCL) is the largest global provider of database software and the second largest supplier of enterprise software. Oracle offers ~1,000 software products and has acquired over 140+ companies over the years. In general, apart from their database software and ecosystem, which was developed in-house, most of their offerings were developed by companies acquired by Oracle.

ORCL used the vast cashflows from its very profitable database businesses to acquire many other companies including Peoplesoft, BEA Systems and Sun Microsystems among others.

Today’s Oracle has three main segments, Oracle Cloud Infrastructure (OCI), Strategic software as a service (SaaS) and Oracle Database

Oracle Cloud Infrastructure (OCI) which is its cloud-hosting business. It provides and manages infrastructure services (virtual machines, storage, datacentres).

Although Oracle was late to the cloud business, they have been investing heavily in recent years to build up Cloud capability.

ORCL describe OCI as follows:

“Oracle Cloud is the first public cloud built from the ground up to be a better cloud for every application. By rethinking core engineering and systems design for cloud computing, we created innovations that solve problems that customers have with existing public clouds. We accelerate migrations of existing enterprise workloads, deliver better reliability and performance for all applications, and offer the complete services customers need to build innovative cloud applications.”

Oracle describe the OCI offering as Infrastructure as a service (IaaS). In IaaS, ORCL equips and operates datacentres for clients such as enterprises, service providers, government agencies and countries.

Strategic software as a service (SaaS)

Oracle also offers a very large number software applications serving a wide range of business functions. As much of these are offered and serviced over the internet, the offering can be characterized as Software as a Service (SaaS).

SaaS includes large number of products including Oracle NetSuite. This is a set of applications for enterprise resource planning (ERP), customer relationship management (CRM), human capital management (HCM), e-commerce and more. There is a more customizable, feature-rich version of this product suite called Oracle Fusion geared towards larger customers

Oracle Database (OD)

The third segment is the long-standing segment called Oracle Database (OD). Most companies of any size established before, say the year 2000, will be running Oracle Databases on on-premises infrastructure. While many workloads may have moved to the Cloud, for most established companies, moving core database infrastructure was too difficult to contemplate. Companies kept running them on their premises, locked-in to Oracle’s system and hostage to their frequent and aggressive price increases.

However, Oracle now closely integrates with the 3 big Cloud Hyperscalers so that its database products can run from all cloud-based. Customers can migrate their on-premise databases to the cloud via OCI or through any of these Hyperscalers. Oracle believes that this data cloud interoperability provides inherent cost advantages with data transferring.

Creating valuable apps from GenAI infrastructure requires great models and great data products to properly season those models. That’s where its Oracle Database (OD) product comes in. It provides a not only structured query language (NoSQL) database for unstructured data, which is highly important for Generative AI.

Oracle and the Hybrid cloud

Oracle has always argued the big Hyperscalers, especially AWS, are trying to impose a closed garden. That is, they want all the clients’ data and workloads just on their Cloud. Oracle argued clients prefer a hybrid cloud approach and want to use more than one provider. About two-thirds of companies use multiple clouds, according to a May 2021 report by Boston Consulting Group.

Fast forward to today, Oracle has established close partnership with all three large Cloud Hyperscalers and therefore can offer the hybrid cloud to their clients.

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