Oracle’s Transformation into a Cloud Infrastructure Provider

Oracle Corporation (NYSE: ORCL) is currently going through a major transition to being a cloud infrastructure provider.

When it comes to the revenues of Oracle, the numbers have been nearly flat around $37 billion for the last 5 years due to the emergence of the cloud industry. As clients opted for the cloud, the potential market of the company becomes smaller and smaller.

With this, Oracle has decided to enter the Infrastructure-as-a-Service market and try to go against the current cloud leader—Amazon.

The major cloud players Amazon and Microsoft have already surpassed the $2 billion mark in quarterly revenue from its cloud operations. In the latest quarter, Oracle obtained $171 million from the IaaS division. With this, even if the company manages to obtain double-digit growth rates from here, Oracle still has a long way to go before it hits the present revenue levels of Microsoft and Amazon.

Despite the slow growth of the company in the cloud segment, it is still the leader in databases and no other company was able to come close.

According to research firm Gartner, “Overall, the DBMS space continued to grow in high single digits, coming in at $35.9 Billion in constant currency – an 8.7% growth over the prior year’s $33.1 Billion, which itself represented growth of 8.9% over 2013. over the past 5 years, the megavendors have collectively lost share – the top 5 hold 89% but have dropped from 91.4% in 2011. Still, some shifts among the top 3 are occurring. Oracle has dropped 1.5 points since 2011 to 41.6%, and IBM 5.6 points to 16.5%, surrendering second place to Microsoft, who gained 0.8 to 19.4%.”

This strong grasp of Oracle on the database market has given it a significant amount of space to breathe. The majority of the clients of Oracle are huge enterprises which have massive amounts of data and a lot of software running their processes.

All of these companies make use of the databases of Oracle as they are more powerful than others. Changing databases is not something that they would decide to do out on a whim, and it is more likely that they would rather stick with their current databases.

With this, one can expect that Oracle can hold onto revenue from its database segment until its IaaS offerings gain traction.

The decision of Oracle to shift into being a cloud infrastructure provider is a huge move and now the challenge that it has to face is proving that it can move faster compared to other cloud industry players. Ultimately, we expect that it would take at least another year before we can see the progress of Oracle in terms of solidifying its position in the Infrastructure-as-a-Service market.

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