Oracle and Microsoft Announce Partnership!

Author: Eric Guyer

As apocalyptic as that headline may sound, pigs aren’t readying their flight gear just yet.  Rather, Oracle and Microsoft simply agree that the cloud can save you money on hardware and data-center operations.  Unfortunately, they also agree that those savings should go directly into their pockets at the same offensively high rate margins as always.

In fact, depending on your definition of cloud, neither Oracle nor Microsoft is in the cloud business whatsoever and all the announcements in the world mean nothing.  Even Oracle’s own cloud offering is the 15 year-old On Demand service (out of Austin, TX) re-marketed in fashionable terminology.  It’s noteworthy that On Demand has averaged about 3.5% of total annual revenue over the last few years.  The hubbub about cloud means that Oracle needs to shift revenues away from traditionally marketed license agreements, as they lose favor among IT executives.  At most, the Oracle-Microsoft announcement means that Azure can be considered a viable (certified and supported) platform for Oracle.

Case in point: despite Wall Street’s reaction, Oracle’s FY12 earnings were better than ever, especially within its cash-cow maintenance business.  And here is where the reality of Oracle running in Amazon, Microsoft or its own “cloud” comes home to roost and makes the partnership announcement a bust — the terms around the Azure and EC2 deployments are no different from the standard Technical Support Policies that have been ensnaring customers for decades.  In short, virtual cores are counted as physical cores and then all the same licensing practices that Oracle perpetrates on its customers remain the same.

What hasn’t happened is a licensing model from Oracle that both accommodates pay-less-as-you-shrink as well as pay-as-you-grow.  Otherwise, Oracle remains the Hotel California of software suppliers.  Oracle isn’t in the cloud business until its technical support policies lose that pesky paragraph about pricing after the reduction of licenses or support levels.  Rest assured, Oracle remains in the maintenance renewal business, but is now slightly more focused on shifting spend from hardware to software and capital to operational.

For Microsoft’s part, it’s clearly a “win” to have arch-rival Oracle coming on board the Azure bandwagon.  The announcement brings credibility to the Azure service, which many enterprises have been viewing as experimental only, while Amazon’s cloud has been running high volume production work for years now.

Oracle, Microsoft or any other traditional software supplier won’t do anything except put lipstick on the hopelessly ugly pig of traditional licensing models.  Any “cloud” agreement must be scrutinized for policies that secure long-term revenues to the supplier whether the agreement seems perpetual or not.  The market will drag these traditional players to truly adopt the cloud and stop defending anti-customer behaviors for the benefit of their investors.  NET(net) is increasingly helping its clients source true cloud solution providers that will deliver solutions to mission critical needs, needs which previously would have been supported by tools from traditional software providers.

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