[paragpatelone]

Oracle is not going to win, not matter what they do. Oracle is built on selling costly products and services versus operating in a low margin environment.

1.) Amazon has a much higher bar for hiring talent, than Oracle does.

2.) Amazon is internally use to being frugal, and so pricing wars are not going to hurt them. Oracle is use to charging a arm and a leg for their products.

3.) Amazon shareholders are already use to the company not being profitable, where as Oracle shareholders are not.

[kabdib]

What customers are actually actively seeking to have a closer relationship with Oracle?

I knew some Oracle engineers back in the day. They were sharp. I hope they made their millions and got the heck out of that place.

[davidgerard]

> What customers are actually actively seeking to have a closer relationship with Oracle?

The people who sign the cheques and listen to their salespeople.

[coredog64]

My favorite memory from a former employer was eavesdropping on a call between our CIO and our Oracle representative. Oracle had told us we only needed to pay for production environments. Then, during a license audit, they claimed never to have said that and wanted to charge for all environments.

I never got to hear the Oracle rep's side of the phone conversation, but everyone within 50 feet of the CIO's office got to hear his.

"Fine! You want to fuck me on these licenses! Go right ahead! And then I'll turn around and fuck you by throwing you out of our datacenter!"

[geodel]

Good that it was possible for CIO throw away Oracle dependency just like that. Normally Oracle replacement with alternatives in big companies would be in order of decade not months or years. In those kind of places Oracle people would treat these threats as routine business discussion.

[ismail]

The reason for this is the way in which the db is embedded throughout the organisation. Many years of dev being done on oracle specific technologies with business logic tied up in things like plsql procs.

Organisations do not realise the risk they face with closed source software. You are basically at the mercy of your vendor.

I believe any a CTO/CIO worth their salt would require motivation on why to use proprietary software vs open source. Is there absolutely no alternative?

[devonkim]

There's a trade-off being made by picking proprietary software vs. open source and it's entirely about control, strange as it might sound. A good CTO/CIO has some measure of power over their vendors and can boss them around a bit like they're an employee. If the primary account manager is golf buddies with him, endangering the relationship with arm-twisting on either part isn't just business it's personal and can be viewed in some respects as stable. With open source software, you don't really have anyone you can hang over a fire that holds the kind of political weight - you don't want to have to talk to every single open source project lead or something as a super busy F500 C-level, you want less throats to choke and that your hands are big enough to wrap around them. For open source, the trend has somewhat shifted into each major open source product having a corresponding company offering the full support cycle like any other closed source vendor (Red Hat, Chef, Cloudera, Sqrrl, Puppet, etc.) so things are looking better for hybridized open source efforts today as they grow, but without some consolidation they're not going to be a full enterprise "solution" due to most of them being too specific in applications for their technologies.

As an engineer, I like to think of this primarily social problem like trying to focus a huge, distributed system architecture upon as few languages and platforms as possible. With most enterprises having grown through dozens, maybe hundreds of mergers they have a huge zoo of different stuff to support culturally. You could try integration approaches like message buses and such, but there's a lot of people overhead involved there and it gets really ugly when everyone disagrees upon the message bus (and in sufficiently large groups, conflict is inevitable).

[serge2k]

> Amazon has a much higher bar for hiring talent, than Oracle does.

Do they? Isn't it all just rolling the dice on algorithm trivia at this point?

> Amazon is internally use to being frugal, and so pricing wars are not going to hurt them.

eye roll.

> Oracle is use to charging a arm and a leg for their products.

Doesn't mean they don't know how to price a product like this.

> Amazon shareholders are already use to the company not being profitable, where as Oracle shareholders are not

Who says oracle is going to blow all their profits?

[jdcarter]

On 3) have you looked at the profitability of AWS? It's ridiculously profitable. I just checked their latest 10K, and I see for 2015 their total AWS numbers were $1.9B operating income on $7.9B revenue with 70% year over year revenue growth.

[vidarh]

> 2.) Amazon is internally use to being frugal, and so pricing wars are not going to hurt them. Oracle is use to charging a arm and a leg for their products.

They may be used to being frugal, but that is not at all reflected in AWS pricing, which is ridiculously high across the board.

[gaius]

Operating infrastructure costs what it costs. Amazon are paying the same per Watt of electricity as anyone else. They are paying the same per sq foot of DC. They are famous for lowballing salaries but they do need to remain in in the ballpark at least. I don't mean this as a criticism necessarily but it is what it is and folks need to understand it.

[vidarh]

Operating infrastructure costs what it costs, and it is a tiny fraction of what Amazon prices it at.

I make a lot of my income cutting peoples infrastructure costs by optimising their setups, and a lot of it involves moving people off AWS (I also move people onto AWS when they have needs that are actually best met there - there are lots of AWS services I love, but they are expensive) to save money. I can generally price my services at a few months worth of their savings.

Competing with AWS on price isn't the hard part. The challenge is the amount of people that either don't care, or think that AWS is cheap without having done realistic comparisons.

But for Oracle, those are exactly the type of customers they have built their entire business around selling to.

[bashtoni]

Did you consider AWS have to keep prices high to constrain demand?

[vidarh]

It's an interesting question. In my experience people often have this idea that AWS can scale infinitely, and get shocked when they are faced with the AWS limits ("but I thought we could just spin up 200 instances, what do you mean we have to ask them to increase limits?"), and I've actually had errors from the EC2 api telling us there were no instances of a given instance type available (one of the larger/more unusual instance types, in one of the smaller regions).

But their margins should be large enough, and have been for so many years, that they should have been able to take that into account and adjust expansion accordingly.

I'm more inclined to think that they have simply decided to milk it while they can. I rarely meet people who have any clue what their infrastructure choices actually cost them and what they would pay elsewhere, and I regularly have conversations about how much people believe they'd save by moving to/from provider X where it transpires that said person hasn't even tried costing it out but are certain they'll save money. I also regularly talk to IT departments that have no kind of budget or forecasting in place for their hosting requirements. The state of budgeting for server infrastructure is simply shocking. In that kind of environment, if you price based on actual cost, rather than based on whether or not people believe you're expensive, you're leaving money on the table.

[dredmorbius]

Interesting observation, though it raises the obvious responses:

1. What's constraining AWS's growth capacity? Isn't it simply a matter of stamping out AZs and DCs?

2. Why would Amazone create a pricing structure which encourages new entrants into the field? Contrast local retail in which defunct firms continue to sit on, and extend, real-estate leases, strictly to prevent other companies from growing into the market they've abandoned. See Dominicks / Anderson grocery stores in the Chicago area, in which seventy-two stores are being leased, at a cost of ~$1m/year, each, to prevent competitors from occupying the space:

http://www.chicagotribune.com/business/ct-vacant-dominicks-s...

(This works in part because rent is only a small part of the operational cost of a grocery store: electric power, labour, maintenance, and of course, groceries, are required if you're actually utilising the space.)

[adventured]

> Why would Amazone create a pricing structure which encourages new entrants into the field?

Because the primary entrant threats were not going to be dissuaded by low price competition. Specifically Microsoft and Google. Both are hyper cash and income rich and under no circumstances did they want to cede the cloud computing universe to Amazon. Fundamentally it's the exact same reason AWS stopped trying to compete so intensely on price cuts quite a while back now.

Put another way, if you're going up against Google, Microsoft, IBM, Oracle - speaking hypothetically it's better to own 1/3 of the market and print significant operating income, than to own 1/2 of the market and barely make money. That operating income is responsible for roughly doubling the value of Amazon's share price (the stock took off like a rocket after it became clear AWS was going to be a cash-cow).

[dredmorbius]

Good answer. That's pretty sound strategy, and clarifies the market for me.