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Oracle CEO Mark Hurd speaks during his keynote at the Oracle Open World 2016 in San Francisco attended by 60,000 IT industry personnel and media from 141 countries including Sri Lanka
By Nisthar Cassim in San Francisco
Oracle CEO Mark Hurd this week declared that Cloud computing is a generational shift and more companies will join it to achieve wider benefits, pouring in more investments.
During his keynote at the Oracle Open World 2016 in San Francisco, Mark said at present Cloud computing was still small in the overall IT market but it would grow exponentially.
According to him, the top Cloud providers generate about $30 billion in revenue out of the one trillion in overall IT.
This Mark said was “still small, but a big number to have a 44 to 50% growth rate going against”.
He said that firms globally will see a lot of total-cost-of-ownership analytics about Cloud including it being cheaper, less expensive. It also drives down capital expenditure, labour costs and creates certainty of expense environment for firms.
“It (the Cloud) isn't just a technical shift. This is a technical shift in a different economic model. An economic model that will change business models. So if CEOs and even CFOs begin to understand the economic impact in addition to the innovation impact this will not just be a linear move to Cloud,” said Oracle CEO. “It will be one of those that you'll see an exponential geometric move to Cloud,” he told the Oracle Open World 2016 attended by 60,000 IT industry personnel from 141 countries including Sri Lanka.
Key predictions of massive shift to the Cloud
In a bid to reinforce Oracle’s stance that trends towards Cloud computing is gathering momentum and dominate in the future, Mark shared several key predictions.
One is that by 2025, 80% of IT budgets will be spent on Cloud, not on traditional IT. At present 80% of the IT spending is on maintenance of existing IT systems and balance only on innovation. This Mark said explains why the IT spending has been stuck in the quandary as opposed to robust consumer spending on IT which has almost quadrupled in the last decade.
“So while companies are sort of flat, the consumer's innovating like crazy. You see all this with your devices and apps and so forth. The consumer is more sophisticated, more capable, more knowledgeable, expects better services than ever before,” Oracle CEO opined.
Oracle predicts that almost all of the new applications will be SaaS applications by 2025 and 100% of development test will move to the Cloud. The spending on Cloud infrastructure will continue to accelerate. It will not again be linear. It will be geometric in terms of the speed by which it will move.
Another prediction shared was the number of corporate-owned datacentres will drop by 80%. Mark said all that would be left would be datacentres that house legacy applications, and they would decline symmetrically as the workloads move to the Cloud. Such remaining data centres will be legacy applications with no commercial alternative except to be housed in a corporate-owned datacentre. Everything else, even new applications that can potentially be home-grown, will be run on platforms that sit in the Cloud. Third prediction is a dramatic flip in IT budgets as a result of drop in company-owned data centres.
“So instead of this crazy number today of over 80% of the budget being spent on maintenance, you will see 80% of the budget spent on innovation,” emphasised Oracle CEO. He said 20% on maintenance was because the maintenance would be a very large business model shift of that work going from an IT budget to the R&D budget of the Cloud providers.
“As CFOs and CEOs begin to understand not just the technical impact, not just the innovation that comes with it, but also the change in the business model, again you're going to see this geometric incline in the amount of speed that you see pick up as it relates to the business,” Mark added.
Another interesting revelation by Oracle CEO was about the age of computing infrastructure.
According to Oracle the average age of an application is about 21 years which are running on infrastructure that's about five-and-a-half years old. This phenomena of old infrastructure running old apps according to Mark signifies the desperate need of investment and innovation.
Oracle’s aggressive investment into R&D and roll out of Cloud
Given the momentum in the shift to the Cloud and its wide benefits, Oracle having sensed the future much earlier had made significant preparations and poured investments for it. It has increased investment in R&D by over $2 billion over the past six years from $ 3.1 billion FY10 to $ 5.1 billion in FY16.
Mark said the latter amounted to 13% of Oracle’s revenue and Mark said it was high because the company has rewritten all of its software, for the purpose of going all in on the Cloud.
This was done while maintaining Oracle’s existing capabilities on premise.
Mark said Oracle has opened over 19 worldwide, world-class datacentres to deliver Cloud and the company was in the middle of rolling out some additional datacentre capability.
The Oracle CEO said nearly all enterprise data would be stored in the Cloud, and that enterprise Clouds would be the most secure place for IT. He also said of the predictions the one that would happen the fastest was 80% of the IT budgets would be spent on Cloud, 80% of the datacentres would move to the public Cloud.
The Oracle Open World 2016 was also shared with how the shift towards the Cloud by global businesses have boosted Oracle’s prospects.
In the June 2016 quarter Oracle’s Cloud SaaS (Software as a Service)/PaaS (Platform as a Service) revenue grew by 83% to $ $815 million, making Oracle the fastest-growing Cloud company in the world.
“Our strategy is built on best-of-breed SaaS suite, meaning that each single application has to be the best, but it also, being built on standards, operates as a suite,” the CEO said.
“It is also important that the PaaS connects to the SaaS, ERP connects to HCM, HCM connects to marketing, etcetera, etcetera, and you can run it on our infrastructure,” he said, adding Oracle’s PaaSwas designed to be able to extend those applications.
“We are the only one in the market today with this complete, fully integrated stack – SaaS, PaaS and IaaS (Infrastructure as a Service). And we're the only company – mostof our competitors are either all Cloud or all on-prem. We can do precisely what we do in the Cloud on-prem, and precisely on-prem what we do in the Cloud, and we can make those workloads work together at the same time. And nobody else really has anything close to that capability in the industry,” pointed out the Oracle CEO.
Oracle has over 20,000 total Cloud customers. In the Enterprise Resource Planning (ERP) space, Oracle has 2,802 Cloud ERP customers as opposed to the second placed Workday which has only 225.
Mark also said via Oracle cloud 50 billion transactions a day are done, up from 34 billion transactions last year and its offerings are supported by 19 data centres around the world.
Additionally, organic growth rates for SaaS and PaaS have accelerated for seven straight quarters. In Q1, Oracle has added over 750 new SaaS customers and added 344 Cloud ERP customers. In Q1, Oracle Fusion HCM grew at 131% nearly four times the rate of Workday.
Oracle has also nearly doubled its global sales force over the past three years and has 10,000 Cloud engineers working on delivering new Cloud innovations every day.
Suite of new Oracle Cloud solutions debuts
Reinforcing its leadership in Cloud computing, Oracle at the 2016 San Francisco gathering unveiled new innovative technology and over 20 solutions to help firms boost their businesses with lower cost and greater efficiency.
It introduced the broadest array of Infrastructure-as-a-Service (IaaS) offerings in the industry, which include bare metal Cloud servers that are 11.5X faster and 20% cheaper than the fastest solution offered by the competition. Another key product was the introduction of Oracle Database 12c Release 2 and a new Database-as-a-Service (DBaaS) that is orders of magnitudes faster and more scalable than other Cloud database services and new Adaptive Intelligence Applications that use machine learning to power the next generation of Cloud applications.
Additional innovations unveiled across the Oracle Cloud include:
