Editor’s note: At “Cloud World” in the nation’s capital, Oracle demonstrates its appeal to own-and-control buyers how its Oracle Cloud Machine can run customer-controlled data centers, says Technology Business Research Analyst Evan Woollacott.

HAMPTON, N.H. – The Oracle Cloud Machine is not the first “behind your firewall” cloud machine to reach the market. However, TBR believes Oracle’s approach with Oracle Cloud Machine, building a fully integrated stack from hardware to software offered completely as a subscription service, differentiates the company from first-to-market vendors, IBM and Microsoft.

Furthermore, Oracle Cloud Machine’s greatest appeal will be for organizations in highly regulated industries or geographies that face multiple barriers to public cloud adoption (especially within Oracle’s install base). To address key adoption barriers, Oracle built the Cloud Machine with identical software to its public cloud to enhance workload portability, providing organizations with the ability to move applications between Oracle Public Cloud and Oracle Cloud Machine.

During CloudWorld Thomas Kurian, president of Oracle product development, and Shawn Price, senior vice president of Oracle cloud and product business groups, reaffirmed Oracle’s desire to become the leading cloud vendor. TBR believes the continued optimization of traditional software and hardware offerings with the launch of Oracle Cloud Machine further supports Oracle’s all-in-on-cloud mentality.

It should be noted Oracle Cloud Machine is not just about IaaS. It lays a foundation for customers to consume the entire portfolio of Oracle’s IaaS and PaaS services. Use cases range from modernizing application platforms to creating polyglot application development environments and span the entire application life cycle from development and testing to preproduction and production.

TBR believes Oracle Cloud Machine will be well-received by its large install base of infrastructure, platform and application customers that prefer to maintain full control of their IT operations. While the cost and operational benefits of cloud are undeniable, customers continue to opt for traditional on premises suites to run mission-critical workloads, particularly applications interacting with employee data.

Customers migrate the least data-invasive workloads to cloud first, such as development test functions, followed by fringe applications such as CRM and productivity. This is evidenced by TBR’s 4Q15 public cloud customer survey, where SaaS workloads for business intelligence and analytics and ERP had adoption rates of sub-30%, compared to CRM, which had an adoption rate of 40%.

Oracle Cloud Machine’s workload portability aligns with customer tendencies to systematically transition workloads to the cloud TBR believes workload portability is an essential component of Oracle Cloud Machine, strengthening its appeal to two primary factions of Oracle’s existing customer base. The first being those that lack the ability to deploy workloads in the public cloud due to regulatory constraints by industry or geography; the second includes customers that grapple with varying capacity needs resulting from seasonal traffic spikes, such as those in the e-commerce industry.

By providing customers with portable workloads, users can now seamlessly transition from on-premises to cloud as needed, maintaining a better grip on IT costs as they move intensive workloads to the cloud, or abide by regulations stemming from data sovereignty laws by keeping sensitive data on-premises.

CloudWorld overview

At CloudWorld Oracle reinforced its core strategic message by touting an all-in-on-cloud product road map. The event featured keynotes from Kurian and Price. The Cloud Machine resonated as the centerpiece of Oracle CloudWorld as Kurian stressed the Cloud Machine’s building blocks come directly from the software coding of its public cloud and the “trusted Oracle infrastructure used by customers today,” and is available on-premises behind the customer’s firewall. Oracle made a well-timed decision to hold CloudWorld in Washington, D.C., following its public sector conference, as Oracle Cloud Machine targets highly regulated industries where customers face multiple barriers to adoption for cloud-based workloads. In addition to industries facing stringent regulations, Oracle Cloud Machine will appeal to geographies such as EMEA where data sovereignty laws plague businesses operating in multiple European nations.

A targeted approach

Amazon Web Services (AWS) dominates the IaaS and PaaS markets to a lesser degree; however, Oracle’s broad SaaS portfolio combined with a differentiated approach of bringing the cloud to its customers’ data centers creates an opportunity to lead with private cloud and extend customer deployments into public cloud, carving out its own piece of the public and hybrid cloud segments. Oracle’s ability to message seamless integration of the Cloud Machine with existing customer deployments will elevate its product stack compared to peers using similar strategies to approach the hybrid cloud market.

The difficulties customers face regarding data regulation and sovereignty laws is not a new dynamic in the cloud market. While Oracle Cloud Machine addresses these concerns, the product also appeals to geographies lacking a strong data center presence. Kurian particularly noted South America, where even public cloud heavyweights such as AWS lack a strong presence due to the region’s limited availability of data centers and nonexistent hardware background.

While Oracle Cloud Machine is differentiated, it is not the first of its kind Oracle is not the first to launch a cloud appliance, but its integrated approach to building the entire system, from hardware to software, will differentiate it from peers and wall-off its existing install base of customers from competitor poaching. With the Cloud Machine Oracle provides customers with virtualized servers, storage and networking components to power the cloud appliance. This approach means customers will receive 24/7 support on the Cloud Machine from Oracle personnel while maintaining internal control of applications and machines being used.

Beating Oracle to market with a behind your firewall cloud appliance was IBM with its 4Q15 release of Bluemix Local, which is intended more for development and testing environments, and Microsoft, which launched Azure Stack in January 2016 and was built using hardware and support services from Dell and Hewlett Packard Enterprise. TBR believes existing cloud appliances in the market similar to Oracle Cloud Machine do not offer the same appeal that the Cloud Machine immediately provides to Oracle’s existing install base, specifically with customers that demand single-vendor stacks (across private and public cloud) and tightly integrated and easy-to-use technologies from applications to database functions.

These strengths coupled with the Cloud Machine’s natural fit in highly regulated industries and geographies will make Oracle a prominent contender in the hybrid cloud market. Additionally, as install base adoption rises, Oracle will generate market use cases for its fully integrated cloud suite to attract net-new customers to the Oracle Cloud Platform.

Note: Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client specific issues further or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996.

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