Larry Ellison founded Oracle Corporation (NYSE:ORCL) in 1977 and served as the company’s CEO until September 2014. He’s currently ORCL’s chief technology officer, and ranks as the seventh wealthiest billionaire in the world, according to Forbes. Clearly, Ellison has immeasurable experience in the IT field, not to mention a boatload of respect and influence. Simply put, when he speaks people listen.
Ellison isn’t shy about touting his company’s advantages, nor does he shy away from competition. Earlier this week, he took to the stage for a second keynote address at this year’s Oracle OpenWorld event and “spent an hour trashing Amazon’s $10 billion cloud.”
For the past decade, Amazon.com, Inc. (NASDAQ:AMZN) has grown Amazon Web Services into its most profitable division. This past June, AWS CEO Andy Jassy described what’s been drawing customers away from longtime tech big dogs such as Oracle and Cisco Systems, Inc. (NASDAQ:CSCO). According to Business Insider, those three factors are: customer focus, innovation and long-term perspectives.
However, Ellison stood fast and defended ORCL, citing a number of benchmarks and other instances that apparently demonstrate Oracle’s cloud computing superiority over AWS.
Is ORCL Really That Much Better Than AWS?
According to Larry Ellison, yes. He even went so far as to state that Amazon Web Services is 20 years behind Oracle. Displaying a series of benchmarks, Ellison claimed that the Oracle Database cloud is 24 times faster than AWS.
Ellison also took aim at Redshift, which is AMZN’s proprietary analytic database, calling it thousands of times slower than ORCL and stating, “It’s analytics only and not very good at that.”
However, as PC World explains:
“It’s not clear how these benchmarks were designed, how much the particular workloads are skewed to benefit the features Oracle has in its database, and whether or not Oracle was using equivalent hardware for the tests in its cloud and the tests in Amazon’s cloud … So there’s clearly room for debate when it comes to how to interpret these benchmark numbers.”
For large businesses that require complex infrastructure and cloud computing services, the exact answer to these types of questions may be completely relevant. However, smaller companies with less intense needs may not even realize such differences exist, let alone experience a negative impact based on those varying internal performance benchmarks.
Bottom Line for ORCL, AWS, and AMZN Shareholders
The real question for shareholders of both ORCL and AMZN stock isn’t necessarily which of the two cloud services is technically better than the other. That’s a question for the IT professionals. Shareholders, on the other hand, are concerned with stock price movements and performance.
So, even if Ellison’s bashing of AWS had some merit, it’s unlikely that ORCL is going to poach a significant enough number of customers from AMZN to knock AWS off its pedestal. According to Statista, Amazon Web Services has more than 27% of the IaaS market share, which is more than 10 percentage points above second-place Microsoft Corporation (NASDAQ:MSFT) and nearly 25 percentage points above Oracle.
AMZN’s early presence in the cloud computing space has turned AWS into the go-to platform for companies of all sizes, a fact that generated nearly $8 billion in revenue last year. Statista predicts that upward of $38 billion will be spent this year on cloud services, and as much as $173 billion by 2026. All things considered, it’s no wonder that Ellison jumped at the chance to tout the benefits of Oracle’s cloud products and services while also bashing the current leader,
The bottom line is, unless Amazon suddenly lets AWS go to waste — which isn’t likely, considering it’s perhaps the company’s most valuable asset — the current status quo will probably remain much the same over the next decade. Sure, the market share figures are likely to shift a few percentage points here and there, but nobody is even close to topping Amazon Web Services, regardless of how much better a competing product might actually be.
As long as AWS customers are happy with the service they’re receiving and the price they’re paying, they’re not going to change vendors.
That being said, if the status quo remains and cloud services grow to a $173-billion-per-year industry, as Statista predicts, then AWS might possibly account for as much as $50 billion per year in revenue for Amazon.
As of this writing, Greg Gambone did not hold a position in any of the aforementioned securities.
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