Oracle Engineered Systems Strategy Pays Off - InformationWeek

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1/22/2015
03:09 PM
Doug Henschen
Doug Henschen
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Oracle Engineered Systems Strategy Pays Off

Oracle dodged declining server sales last year, and now it's going after Cisco and EMC. Is the software-meets-hardware strategy winning?

"You'll pay less, but you'll have to be willing to accept better performance."

That's the claim Oracle executive chairman and CTO Larry Ellison kept repeating throughout his unveiling of the fifth generation of Oracle Engineered Systems on Wednesday. It's the product line led by Exadata and other "Exa" products that feature software preintegrated with compute, storage, and networking hardware.

"We do the integration so you don't have to," said Ellison at the outset of a 45-minute keynote.

[Want more on hardware trends? Read IBM Slides, Dell Gains In Gartner Server Report.]

Oracle says it has shipped more than 10,000 Engineered Systems, and Ellison pointed to recent server shipment statistics as proof of success. Gartner's Q3 server revenue and unit shipment report from December actually shows that Oracle was flat on overall server revenue in Q3. But in the RISC/Itanium market, where Oracle offers M-series Sparc Servers and Supercluster engineered systems, Oracle had a 2% gain in Q3 revenue and whopping 6-point gain in market share. Rivals IBM (with Power servers) and HP (with Itanium servers) posted 29% and 10% declines, respectively.

Oracle executive chairman and CTO, Larry Ellison announces the company's X5 Engineered Systems.
Oracle executive chairman and CTO, Larry Ellison announces the company's X5 Engineered Systems.

Ellison clearly noticed that Cisco is growing much faster than Oracle in the server business. Gartner's numbers show Cisco grew 31% in revenue in Q3. No surprise, then, that Oracle is now targeting Cisco and storage partner EMC with new engineered systems in the market for standard two-socket servers that provide core data-center capacity. The Oracle Virtual Compute Appliance (VCA) X5 targets Cisco UCS servers. The VCA combines compute, networking, and multiple Oracle storage options with built-in operating system and virtualization software.

"We're right around half the cost of Cisco UCS ... and that's our list price compared to their discounted price," said Ellison dryly. "And we will negotiate and we will discount off of our list price."

Oracle's VCA price comparison versus Cisco UCS server capacity.
Oracle's VCA price comparison versus Cisco UCS server capacity.

Ellison also cited lower price and superior performance for the Oracle FS1 Series Flash Storage System, a storage area network device aimed at EMC. Ellison shared detailed prices showing the FS1 costing one-third the price of EMC's VNX 8000.

Beyond VCA and FS1, Oracle's entire lineup moved onto Intel's latest chips and new storage with the X5 series, so the Oracle Database Appliance, Oracle Big Data Appliance, and Oracle Exadata are all packing more processing power and greater storage capacity. Exadata also gained an Extreme flash storage server option for high-end performance.

The key point that Ellison kept returning to is that the "engineered" in engineered systems is about integrating and optimizing the software to work with the hardware. Oracle controls everything in this equation -- compute, networking selection (Infiniband), storage, and software (operating system and virtualization on the VCA) -- so it can integrate, optimize, and test everything in sync, eking out greater performance in the bargain.

Oracle didn't invent these preintegrated machines, Ellison granted, crediting Teradata for pioneering data warehousing appliances and Cisco with pioneering converged servers with UCS. But Oracle can beat these pioneers, he said, by delivering better performance at a lower cost. The lower-price claim is new to Oracle's strategy, Ellison said, and it's a tack it's taking because "we're tired of having the argument" that better performance translates into lower total cost of ownership.

Indeed, control over database, middleware, and plenty of applications does give Oracle huge advantages, and it's a key reason why IBM PureData systems have not matched the success of Oracle's Exa products. IBM lacks the applications and its databases are losing ground to Oracle and Microsoft SQL Server. (Warning: Would-be buyers should check the cost of licensing the software that comes with engineered systems, as that's not always included in Oracle price listings.)

Oracle, Gartner, and IDC don't really break out Oracle Engineered Systems with hard, public numbers, so we're left with squishy claims. Are those gains Oracle CEO Mark Hurd always trumpets tied to low-cost products, like the Oracle Database Appliance, or to high-end products like Exadata, Exalogic, and Supercluster? We can't really know for sure, but the move away from roll-your-own approaches and consulting and integration services is being validated by Cisco, HP, and others.

To Ellison's point, Oracle controls more software and, in many cases, more popular software, than its hardware competitors, so it's playing the right card in promoting engineered systems.

Just 30% of respondents to our new Big Data and Analytics Survey say their companies are very or extremely effective at identifying critical data and analyzing it to make decisions, down from 42% in 2013. What gives? Get the The Trouble With Big Data issue of InformationWeek Tech Digest today. (Free registration required.)

Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of ... View Full Bio
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PhilHD
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PhilHD,
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1/23/2015 | 5:00:06 AM
Engineered Systems represent 1/3rd of Oracle's hardware product sales, #1 in Integrated Platform Systems
Good article but I recommend a few corrections! Oracle's recent X5 Engineered Systems launch isn't about (just) servers, its about Engineered Systems, a whole lot more than just a server. 

And, according to Mark Hurd, looking at latest financial statements, Engineered Systems represent 1/3rd of Oracle's hardware product sales and is growing at double-digit rates.  So while Oracle still sells individual servers, for those, what I call "legacy" BIY IT customers, the clear focus @ Oracle today is selling the value proposition of Engineered Systems, and as you can see by the reaction, and the growth, it's a clear growth market.

And so you shouldn't be looking at the analysts server(alone) tracker figures, because they just don't capture the sales of Integrated Infrastructures and Platforms. That's why major analysts like IDC and Gartner have had to create new Marketshare trackers for this new category/trend, which for example, IDC calls "Worldwide Integrated Infrastructure and Platforms". And I don't believe Gartner nor IDC are double counting, so servers sold within an Integrated Infrastructure or Platform are not counted in the server trackers. 

Looking at the last several quarters of reported results, its evident that Oracle is the market leader and that Cisco and/or VCE are behind. So while Oracle is #1, its clearly focused on staying #1, and that means attacking #2 and #3.

18 Dec 2014 -Third Quarter Revenue for Worldwide Integrated Infrastructure and Platforms Increased 28.1% Year Over Year to $2.3 Billion, According to IDC 

IDC getdoc.jsp?containerId=prUS25347414

"During the third quarter of 2014, the Integrated Platforms market generated more than $763 million in sales, which represented a 7% year-over-year growth rate and 33.3% of the total market value. Oracle was the largest supplier of Integrated Platform Systems with $310 million in sales, or 40.7% share of the market segment."

25 Sep 2014 - Worldwide Integrated Infrastructure and Platforms Revenue Increased 33.8% Year Over Year to $2.4 Billion in the Second Quarter of 2014, According to IDC

idc getdoc.jsp?containerId=prUS25149514

"During the second quarter of 2014, the Integrated Platforms market generated more than $1 billion in sales, which represented an 11.1% year-over-year growth rate and 43.7% of the total market value. Oracle was the largest supplier of Integrated Platform Systems with $577 million in sales, or 55.0% share of the market segment"

26 Jun 2014 Worldwide Integrated Infrastructure and Platforms Revenue Increases 38.5% Year Over Year in the First Quarter of 2014, Surpassing $1.9 Billion in Value, According to IDC

idc getdoc.jsp?containerId=prUS24963914

"During the first quarter of 2014, the Integrated Platforms market generated revenues of $769.6 million, which represented an 8.3% year-over-year growth rate and 39.5% of the total market value. Oracle was the largest supplier of Integrated Platform systems with $369.0 million in sales, or 48.0% share of the market segment"

30 Apr 2014 Worldwide Integrated Infrastructure and Platforms Revenues Increase 45.6% Year Over Year in 2013, Approaching $7.6 Billion in Value, According to IDC 

idc getdoc.jsp?containerId=prUS24831714

 "The Integrated Platforms market generated nearly $3.6 billion in sales during 2013, which represented a 12.2% year-over-year growth rate and 47.3% of the total market value. Oracle was the largest supplier of Integrated Platform Systems with $1.4 billion in sales, or 39.1% share of the market segment"
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