Oracle announces IaaS Generation2. What is it and can it compete with AWS?

At Oracle OpenWorld 2016 conference in San Francisco , Larry Ellison,  Oracle’s executive chairman, made some interesting announcements on Oracle’s cloud ambitions. One of them was that Oracle will soon offer a Generation 2 IaaS cloud with some unique features.

The other statement: “the lead of Amazon is over”

Oracle is now full power on cloud. There were at least 18 new product announcements during the 1,5 hour keynote talk by Ellison.

A recording of the keynote can be seen here.

This post will give you:

  • an overview of the statements by Oracle on their new IaaS Generation2 service;
  • an overview of the current Oracle IaaS offering compared to other offerings  like of AWS;
  • a detailed  technical overview of the IaaS Generation 2 services;
  • my view on the ambitions of Oracle Generation2 IaaS;

This blogpost will focus on IaaS  as offered by Oracle. Oracle offers Saas, a bit of PaaS and currently a somewhat limited IaaS. While SaaS and PaaS shows good revenue, revenue of Oracle IaaS is very small compared to Amazon AWS and Azure.

TL;DR

The new Oracle cloud is a defensive reaction and another failure of the IaaS platform can have a major impact on Oracle revenue.

Oracle redesigned their IaaS platform and the primary use case will be heavy duty applications in use by enterprises. The mission critical type of application using Oracle databases which are not running yet on IaaS.

Oracle claims the Generation2 IaaS offering is better than Amazon and the lead of Amazon is over. In reality Oracle will at best be for the foreseeable future a leader in niche workloads on IaaS like mission critical, high performance applications.

Maybe the message of Ellison was incorrectly covered by the media. Ellison spoke a lot about database performance on Oracle cloud being much better than on AWS databases. See this Constellation Research blog for details. 

Generation2 IaaS has some nice features like Software Defined Networking. And live migration of instances between datacenters part of the same region is part of the road map.

Cloud@customer, positioned as a differentiator,  promises to deliver Oracle public cloud services on-prem. However this will likely be of interest to a very small number of customers.

Bare Metal Cloud Service allows customers to deploy heavy duty enterprise applications, the ones the CEO sits next to, to the cloud. Combined with high speed networking and replication of data this type of application is an interesting niche market Oracle wants to grab. Bare Metal avoids the performance issues created by  noisy neighbors, instances running on shared hosts consuming all of available resources.

However Generation2 is not yet available and we have to wait and see how well Oracle is able to execute. Even the name of Generation 2 IaaS is not publicly known.

Lydia Leong, analyst at Gartner, wrote a nice blogpost about the next-gen Oracle cloud. A quote from her blog:

 I would characterize this early offering as minimum viable product; it is the foundation of a future competitive offering, rather than a competitive offering today.

Introduction

Oracle has been very late in the cloud IaaS business. Only in October 2015 Oracle announced it’s IaaS offering called ‘Oracle Elastic Compute Cloud’. That is nine years after Amazon  launched EC2.

Holger Mueller, VP & Principal Analyst at Constellation Research, stated this second try of Oracle on IaaS is the last chance for Oracle to get IaaS going. And it is the second try. Engineers completely redesigned the IaaS platform.

According PCMag.com, Lydia Leong, one of the co-authors of the Gartner Magic Quadrant for IaaS report, said Oracle’s new next-gen cloud IaaS offering is a substantial improvement over the existing Oracle Compute Cloud.

For the moment, she said Amazon has nothing to worry about but that challengers in the space may see serious competition from Oracle.

Oracle’s co-CEO Mark Hurd stated at OpenWorld Oracle has roughly 10,000 cloud engineers. 6,000 of them working on SaaS solutions. Oracle has more than 20,000 cloud customers.

So why is Oracle spending a massive amount of money and energy on developing a new generation of IaaS? This in a  low-margin business of  IaaS which also is getting close to being a commodity. Prices of Amazon and Azure virtual machines hardly drop anymore. Google tries to gain a bit of marketshare by lower pricing.

There are drie  main reasons;

  1. declining revenue for on-prem licenses
  2. prevent customers using Oracle databases to move away to other databases offered by AWS
  3. prevent Oracle customers from using competing cloud offerings and running away from using Oracle solutions.

First lets explain revenue.

The revenue of Oracle licenses is declining. That is not something unexpected. Software consumed from cloud is rapidly growing while on-premises license sales are going down. In Q1 2016 Oracle new license sales fell 10.5% to $1.03 billion! Also sales of Oracle hardware (x86 servers, storage and engineered systems) goes down.

The second important reason for Oracle to offer IaaS is to prevent Oracle customers moving to other databases on Amazon. Amazon is designed for running cloud native applications. These applications mainly uses other databases than the expensive Oracle databases.

Another reason for Oracle to put a lot of energy in IaaS is because Oracle customers are moving workloads to IaaS of vendors like Amazon and Microsoft. If Oracle does not offer a mature IaaS, customers will not likely consume PaaS and SaaS either. And SaaS and to a lesser extent PaaS are the money making services for Oracle!

So IaaS is all about keeping customers with Oracle. And maybe that explains why Oracle is offering lower costs for IaaS with better capabilities compared to Amazon AWS. But for how long will those prices be lower ?

I hope  this background information will help you to understand why Oracle is now fully focusing on IaaS cloud!

Claims on the Oracle IaaS offering made by Larry Ellison at OpenWorld

At the September 18 keynote of Oracle OpenWorld Larry Ellison made a lot of interesting claims .

The claims are published in this  interesting blogpost by SiliconAngle.

  • “Amazon’s lead is over”
  • “Amazon’s going to have serious competition going forward”
  • “Oracle has second generation datacenters leapfrogging the competition”
  • “This coming year, you’ll see us aggressively moving into Infrastructure-as-a-Service”
  • “When Oracle’s data centers were to go offline the underlying infrastructure is so reliant that customers shouldn’t “even know about it” (source)
  • The second-generation IaaS will offer “twice the compute, twice the memory, four times the storage and 10 times more I/O [data transfer speed] at a 20 percent lower price than Amazon Web Services,”

Chuck Hollis, SVP for Infrastructure at Oracle, made an interesting remark   around 15:00 in this theCube video.

  • “Amazon is legacy cloud. Anything older than 10 years is legacy”.

Slide via Holger Mueller ‏@holgermu

Ellison also announced a couple of interesting new services:

  • Cloud@Customer which basically enables customers to run Oracle public Cloud  services on-premises behind the customer firewall. My guess Cloud@Customer is very similar to Microsoft Azure Stack. Both are turnkey systems managed by the vendor which enable a hybrid cloud.
  • Oracle Cloud will have regions with three fault independant availability domains.
  • Oracle will roll out Generation2 IaaS services
  • A new VM size:  Dense IO Shape which  offers 28.8TB, 512GB, and 36 cores, at a price of $5.40 per hour. This product offers more than 10 times the input-output capacity of Amazon Web Services (AWS), specifically the i2.8xlarge instance
  • new service: Oracle Bare Metal Cloud Services

Slides via Holger Mueller ‏@holgermu

Okay, so far the marketing, now back to reality.

In September 2009 the same Larry Ellison stated “All the cloud is, is computers on a network” and “It’s complete gibberish. It’s insane. When is this idiocy going to stop?” (source)

Fast forward 5 years and now all of a sudden Oracle believes it will compete with marketleader Amazon.

Summary of current Oracle cloud offerings

Oracle says it differentiates from vendors like Amazon because Oracle offers all three models of cloud computing: SaaS, PaaS and IaaS.

Oracle has traditionaly been very strong at offering SaaS solutions. Examples are Oracle Enterprise Performance Management, Human Capital Management, Customer Experience and Enterprise Resource Planning.

Oracle Elastic Compute Cloud is an IaaS service offered in around 19 datacenters worldwide. It is likely a best effort cloud which means the cloud platform is not designed to offer redundancy to the application. Elastic Cloud Compute does not offer for instance vMotion-like technology to move worksloads to other hosts when hosts are rebooted for maintenance. Currently Oracle IaaS is offered on an OpenStack platform. 

 

Current position on IaaS

Oracle Cloud IaaS offering is not listed in the Gartner Maqic Quadrant for cloud IaaS 2016 edition. The reason for that according Gartner is  low market share of Oracle.

According Oracle the reason for exclusion of Oracle IaaS in the MQ is :

“At the time of this evaluation, the Oracle Compute Cloud Service was not in general availability, and Oracle did not have another cloud IaaS offering in general availability that meets Gartner’s definition of IaaS.” ‒ It typically takes Gartner about 6 months or more between the time they solicit input from the vendors and the time they publish a report. When Gartner started this process late last year, Oracle Public Cloud IaaS was not in general availability.”

Revenue according Wall Street Journal 

Oracle said last week that in the three months ended Aug. 31, it generated $171 million in revenue from what it calls cloud infrastructure as a service. In its most recent quarter,Amazon reported revenue of $2.9 billion for its comparable Amazon Web Services unit. Neither Microsoft nor Google break out revenue figures for the market.

Oracle total cloud revenue (Iaas, PaaS and SaaS combined) soared 59% to $969 million for its first fiscal quarter ended Aug. 31.

While the growth percentage reads well, that leaves cloud computing – in its various forms – accounting for 11% of total revenues, albeit up from 7% this time last year. SaaS and PaaS combined make for 9% of total cloud revenue, up 77% year-on-year, but IaaS still isn’t making an impact, up only 7% and accounting for 2% of the total. (source : Diginomica)

A recent Gartner report said that Amazon’s S3 cloud storage service holds more than double the amount of customer data than the next seven cloud service providers in total.

Amazon Web Services is the dominant cloud infrastructure business, with $2.89 billion up 58% year-on-year in its second quarter ended June 30

According to figures told by CEO Mark Hurd, in Q1 2016 Oracle gained 1,671 new IaaS customers.

 

Oracle cloud offerings compared to Amazon AWS

So Oracle wants to compete with AWS? If we look closer at the current and announced cloud offerings both companies are totally different!

Amazon AWS is very mature on IaaS, does a bit on PaaS and offers few services in a SaaS model.

Oracle is very lightweight in IaaS, does a bit on PaaS and is very strong at SaaS.

How is Oracle going to do the battle ?

Oracle claiming the lead of Amazon is over is like a mouse attacking an elephant. Will Oracle be able to compete with Amazon AWS?

Well, for sure Oracle has the cash to invest in developers, sales, datacenters, technology, marketing and so on. According to Chuck Hollis (around 3:40 in the interview), SVP Infrastructure at Oracle, about 400 engineers are working on developing the Generation 2 IaaS. Many of whom helped build AWS, Azure and Google Cloud Platform.  So they have a lot of  experience to build cloud.

Also Oracle will not invest in building their own datacenters. Most of current datacenters offering Oracle cloud are c0-locations.

Oracle CEO Mark Hurd stated Oracle spent $5.2bn on R&D in the past year. Unknown is what percentage was spent on Google Cloud.

So how much does Amazon spent on AWS? That is hard to find out! Amazon spent a lot on R&D but that is obviously not all on cloud! Some examples of products which R&D is spent on are: drones, Amazon Fire Phone, Amazon Fire TV Stick, Amazon Dash button.

Total R&D in 2013 was 6,5 billion Dollar. In 2014 it grew to 9,1 billion US Dollar. But how much did Amazon spent on AWS? Amazon does not tell us. Ujjwal Sinha of IBM did a rough estimate and came to $ 525M for AWS R&D in 2013. If R&D of AWS has the same growth as Amazon overall, R&D on AWS in 2014 is roughly $800-900M.

Oracle builds their own hardware and software. Think about the Sparc, Oracle databases, mySQL. Oracle has Software Defined Networking by the acquisition of Xsigo. These are used in the new cloud platform saving some money.

Oracle will focus on bringing the though stuff info cloud. The heavy duty enterprise applications. The easy applications are mostly already offered by other vendors. Desktop applications are offered by Office 365. Big databases, in memory analytics is the marketshare Oracle is after. Oracle is not focused on bringing generic workloads to the cloud.

So Oracle might compete AWS on niche solutions, but on general purpose IaaS Oracle will never beat AWS.

What cloud services is  Oracle offering ?

Lets see whath Oracle has to offer. The Gartner Maqic Quadrant for Cloud IaaS is a good indication for the position of a vendor relative to the competition. Oracle Cloud is not even mentioned by Gartner. “Oracle  does not have enough market share to qualify for inclusion,” the authors of the Gartner report wrote. (Venturebeat)

Oracle started offering PaaS and SaaS services many years ago. IaaS is a relative new offering.

Oracle Cloud is offered in 20+ datacenters worldwide. I could not find information what services (IaaS, PaaS, SaaS) are offered in which datacenter. In many datacenters if not all, SaaS is offered. I doubt if in all datacenters IaaS is offered.

Below a listing of the Oracle cloud datacenter locations worldwide:

  • US Utah (Oracle owned DC) , Phoenix. Salt Lake , Rocky Mountain, Austin, Santa Clara ,  Oklahoma City,   Chicago (Digital Realty datacenter in Franklin Park),  Washington DC (colocation for e-commerce offering)
  • US Northern Virginia will have two datacenters likely owned by Oracle. The datacenters are located in  Ashburn and Sterling.
  • UK London Thames River Valley (Slough)  and Linlithgow (Oraclew owned) (Scotland)
  • The Netherlands Amsterdam
  • Japan
  • Singapore
  • Sydney and Melbourne (Equinix colocation facility)
  • United Arab Emirates Abu Dhabi
  • Canada Toronto
  • Germany. Two datacenters. Oracle  uses an Interxion data center in Frankfurt as the primary site and an Equinix one in Munich as the secondary facility
  • São Paulo (first datacenter in Latin America)

I am not sure about the status of a datacenter offering Oracle services in China. Also the status of a datacenter in India is not clear.

The slide below was shown during the Oracle CloudSummit in 2o15 (taken from this site)

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Generation 2 Infrastructure for IaaS

At OpenWorld 2016 Oracle announced its Generation2 infrastructure. This is a completely redesigned IaaS platform.

It has the following components:

  • Bare Metal
  • Elastic Compute (virtual machines on shared hosts )
  • Container Service
  • Ravello
  • Dedicated Compute (virtual machines on single tenant hosts)
  • Engineered Sytems (high compute Sparc systems)

 

Oracle-IaaS

Slide via Holger Mueller ‏@holgermu

Cloud Generation 2 IaaS  has the following new features

  • regions and availability domains (AD)
  • SDN (capable of both Layer 2 and Layer 3 networking)
  • fast network connections
  • Bare Metal Cloud Service
  • Cloud@Customer

The virtual machine service will be available later in 2016.

Slide via Holger Mueller ‏@holgermu

A single region has three availability domains. Basically an availability domain is a datacenter facility. Availability domains are network connected by 1Tb/s < 5ms connections. Hosts inside the availability domain have 10 Gb/s with 100 microsecond latency network connections.

Oracle will not make available the three availability domains per a region worldwide at once. The first regions to have three availability domains will be the western US Region in Phoenix. Virginia is the next region scheduled to offer Generation 2 by December or January. Regions in Germany and England are expected to follow by the middle of next year, and expansion to Asia is slated for the end of 2017. (source Techtarget and cio.com)

More regions will get three AD’s in the near future.

On the roadmap is the ability to live migrate virtual machines from one availability domain to another in the same region or to another host in same availability domain. This can be useful when hosts are rebooted for maintenance.

Azure and AWS does not offer live migration. Google Compute Engine is the only hyperscale cloud provider offering live migration. The feature is called transparent maintenance.

Between regions the bandwidth is 100s of Gb/s with a latency of less than 100 ms. The slide mentions Catastrophic Disaster Recovery. The three availability domains are connected using a Fiber ring. All data is triplicated to two other availability domains. Ellison stated: “if we lose the datacenter, you would not even know about it”.

The architecture will allow database sharding. Basically sharding allows to horizonatally scale out a database over multiple database servers for load and redundancy reasons.

One of the use cases for this high speed network is mission critical applications running on the Oracle Bare Metal Cloud Service.

Oracle wants to differentiate from the well known cloud providers. It does so by for example the Oracle Ravello Cloud Service and the Bare Metal Cloud Service.

The network virtualization (Software Defined Networking)  offered by Oracle cloud is a unique selling point. More on SDN here. 

 Compute offerings

Oracle Cloud provides three compute offerings. Choose between a multi-tenant environment, your own dedicated resources or Sparc offering on Oracle Public Cloud.

General Purpose Compute is the multi-tenant offering. A host is shared by virtual machines managed by multiple tenants.

Dedicated Compute means the host is only used by a single tenant. This model is usefull for license, security, compliancy and performance reasons.

Dedicated Compute – SPARC Model 300 is a host dedicated for the customer which needs lots of compute power.

Storage options

Oracle Gen 2 will have block storage and object storage.

storage-performance

Networking

There is no network or CPU over-subscription.

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Cloud@Customer

Oracle is on hybrid cloud as well. Cloud@customer is a turnkey infrastructure delivering private cloud runing behind the customer firewall which duplicates Oracle’s public cloud services , fully installed and managed by Oracle (and offered by subscription, like the public cloud)

Cloud@customer will be available by end of year.

Oracle Ravello Cloud Service

Ravello Systems was acquired by Oracle in February 2016. It allows VMware and KVM virtual machines to run on Oracle, Google and AWS cloud without any modification to the networking and storage configuration. While this may sound a nice way to lift and shift applications to the cloud, there is a penalty in performance. Ravello runs as a cloud hypervisor. So customers are using nested virtual machines. Performance penalty is about 6-8 % on average but can be up to 20% for CPU intensive applications.

As stated on Ravello website, typical use cases are test/dev, Proof of Concept, demo and study.

Bare Metal Cloud Service

A unique offer is to consume bare metal servers from Oracle Generation2 cloud. A typical use case would be applications requiring lots of IOPS, CPU and high availability. Think about large databases,analytics jobs, grid computing.  The consumption of bare metal servers is a  true cloud model with full API control, provisioning in five minutes, and by-the-hour pricing.

Another cloud vendor offering bare metal servers is Packet. It has 4 datacenters worldwide.  Other vendors offering bare metal are CenturyLink and Rackspace (OnMetal).

More on Bare Metal Cloud Service in this press release.

Service Level Agreement

I was wondering what service commitment Oracle offers on virtual machines running on IaaS Generation2. However I was not able to find a percentage of availability offered by Oracle. Will  Oracle offer a SLA on a single virtual machine like VMware based clouds offer? Or does Oracle offer a SLA when at least two VM’s are part of an availability set like Microsoft Azure does?

The answer is important to understand what type of cloud platform  Oracle Gen2 IaaS is. Will it support the legacy, pets type of applications?

This is the SLA document for Oracle cloud services.

Machine sizes

Oracle Iaas v1 has t-shirt sized instances/virtual machines. This model is like the model offered by AWS and Azure which means the ratio between cores, storage and internal memory cannot be set by the customer. Oracle names the instances as Compute Shapes and High Memory Shapes. There are 7 Compute Shapes available and 5 high memory shapes. This page has an overview.

This is likely to change once Generation2 is available.

What hypervisor Oracle is using?

The Generation 2 IaaS platform will use KVM as hypervisor.

My point of view. Will Oracle take the lead from AWS?

By now you will understand the words of Larry Ellison a bit better. Yes, Generation 2 has some interesting innovations. No, Amazon has nothing to worry about (yet). Blockbuster and Nokia once also had nothing to worry about. However these were active in completely different markets.

Holger Mueller of Constellation Research tells in this interview about econony of scale. One a cloud provider has enough customers, it is able to drop prices. Amazon has hit the sweet spot, but Oracle is far from that. For how long will Oracle be able to spent a lot of money on IaaS?

Many vendors tried to compete with Amazon and Azure. For example VMware did an attempt to become a global IaaS vendor with vCloud Air. VMware decided to stop further development of the IaaS platform and partner with IBM instead. HP tried public cloud with Helion. They stopped as well. Verizon terminated the Public Cloud offering for IaaS. While the exact reason is not made public, it is safe to assume the service could not be made profitable in an acceptable timeframe.

Oracle Generation 2 will have a hard time to become a  leader in IaaS for general purpose workloads. It will be next to impossible to catch up with Amazon and Azure on technology and marketshare. More likely  Oracle will become a niche player for high performance compute.

 

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