While Larry Ellison’s accomplishments across the worlds of technology, sailing, tennis, and philanthropy are legion, the greatest achievement in his legendary Oracle career might be the recent transformation of Microsoft from one of Oracle’s fiercest competitors into its largest customer.
The latest stunning evidence for this transformation came recently when the Oracle founder and chairman disclosed that “we are building 20 data centers for Microsoft inside Azure” data centers to help Microsoft meet “pent-up demand” for — and you might want to sit down for this one — the Oracle Database!
Yes indeed — not only is Microsoft facing intense “pent-up demand” to provide its customers with the Oracle Database — the Oracle Database! — but Microsoft is paying Oracle at least hundreds of millions of dollars for the privilege!
As you wrap your coconut around the notion that Microsoft has begun paying Oracle what will surely become billions of dollars for advanced cloud services, bear in mind that the company undergoing this hyperevolution into Oracle’s biggest customer is not some big but bumbling outfit desperately trying to remain relevant in today’s disruptive and fast-changing world. Rather, here’s a quick snapshot of the extraordinary capabilities and resources that Oracle’s new #1 customer —and again, believe it or not, that would be Microsoft — has at its disposal:
- a market cap (about $2.8 trillion) that’s equal to 90% of the combined market caps of Amazon and Google, which happen to be two of the world’s most-powerful and successful corporations;
- calendar-2024 cloud revenue of about $130 billion or more (my projection), plus commercial RPO of $212 billion (not a typo), with 45% of that slated to be recognized as revenue before the end of 2024;
- a global cohort of cloud developers and engineers that is probably the largest such technology team in the world;
- perhaps the largest team of artificial intelligence (AI) engineers and data scientists of any company in the world; and
- a CEO, Satya Nadella, who over the past decade has outperformed every other CEO in every industry in the world.
On top of that, Microsoft has had a huge head-start over Oracle in cloud infrastructure, probably totaling seven to eight years.
But despite all that — despite all that! — Ellison and Oracle have still figured out ways to demonstrate to Nadella that Microsoft will be better off if it spends billions and billions of dollars with Oracle to exploit its unique cloud-infrastructure capabilities for generative AI (GenAI) and give Microsoft customers seamless access through Azure to the unrivaled Oracle Database.
Asked to comment on my speculation that Microsoft has become Oracle’s largest customer, an Oracle spokeswoman declined to comment.
Ellison’s conversion of Microsoft from purely an archrival to its new status of archrival-plus-largest-customer-and-major-reseller has come about in a few stunning revelations over the past several months:
- Oracle Database@Azure: Ellison makes his first visit ever to Microsoft headquarters to do a video interview with Nadella outlining their greatly expanded multi-cloud partnership that will enable customers to gain full access to and use of the Oracle Database via Azure. You can check out that amazing development in “The Larry and Satya Show: Oracle and Microsoft Rewire the Business World.”
- Oracle Database Boosts Azure Growth: In yet another head-spinner, here’s an excerpt from my analysis headlined “Microsoft Cloud Shocker: Oracle Major Driver Behind Blowout Q1 Numbers!“: “As Microsoft reported that cloud revenue for the quarter was up a stunning 24% to $31.8 billion, CEO Satya Nadella disclosed that partner/rival Oracle was a major factor in his company’s blowout fiscal-Q1 performance as customers boosted spending on Azure in order to gain multi-cloud access to the Oracle Database.”
- Oracle Does AI Training for Bing: From my early-November analysis headlined “Larry Ellison Teased $1.5-Billion AI-Training Deal with Hyperscaler: Is It for Microsoft Bing?“: “It’s a multi-year agreement in which Microsoft is using Oracle Cloud Infrastructure (OCI) AI infrastructure as well as its own Microsoft Azure AI infrastructure to do ‘inferencing of AI models that are being optimized to power Microsoft Bing conversational searches,’ the companies said in a press release.”
- Microsoft Orders 20 Oracle Multicloud Data Centers: In announcing Oracle’s fiscal-Q2 earnings, a press release quoted Ellison as saying, “In the next few months, we are turning on 20 new Oracle cloud data centers collocated with and connected to Microsoft Azure.”
Ellison expanded on that blockbuster announcement of the 20 new multi-cloud data centers for Microsoft during the subsequent earnings call on Dec. 11. That expanded level of detail from Ellison reveals the magnitude of the multi-cloud deal with Microsoft, and here are the most-compelling excerpts from Ellison.
Microsoft Buying 2,000 Top-of-the-Line Exadata Database Machines
“Customers don’t want clouds to be walled gardens,” Ellison said during his prepared remarks. “In the next few months we will turn on 20 new Oracle Cloud data centers co-located with and connected to Microsoft Azure as a part of our joint multi-cloud initiative. These 20 new multi-cloud data centers will house over 2,000 full racks of Exadata Database Machines, designed to meet pent-up demand for the Oracle Cloud database.”
Giving Customers More Choice in the Cloud
“In the cloud, customers are very happy to see that they cannot only get the Oracle database at OCI — they can also get the identical capability from Microsoft,” Ellison said during the Q&A portion of the call. “We are building data centers for Microsoft inside Azure and it was Microsoft — it wasn’t us — that decided 2,000 was the right number of Exadata machines to install in those 20 data centers. That was Microsoft. The demand is enormous, and our customers want the same flexibility they’ve always had with Oracle. They want to use Oracle in the cloud and they want to transition, but if they’re already using the Microsoft Cloud, then they want to run the best and latest and greatest version of Oracle in the Microsoft Cloud. And they want to do that in other clouds as well.”
‘Room for Tens of Thousands of Customers‘
Ellison and CEO Safra Catz have forecast bullish growth for Oracle’s cloud business based in part on the massive number of customers still running Oracle Database on-premises. So Oracle is looking to make it as easy as possible for those customers to plan out their migrations to the cloud, and the multi-cloud partnership with Microsoft will very likely be the largest manifestation of that effort. Ellison offered this perspective on the magnitude of the opportunity as more and more customers realize the time has come for them to move their data estates into the cloud: “Let me close with this: 2,000 Exadata racks! That’s a stunning number in terms of how many customers you can put on that. That’s tens of thousands of customers you can put on our hardware. And that’s Microsoft alone!”
Building 100 Additional Cloud Data Centers
As one analyst on the call seemed to doubt Oracle’s ability to build out 100 new cloud data centers in a relatively short period of time, Ellison offered this in reply. “How about Microsoft puts in an order for 20 Oracle cloud data centers? That’s what we’re seeing,” Ellison said. “When someone comes along and orders 20, then that creates a lot of opportunity for us to build more data centers and get more OCI customers because we’re building OCI data centers inside of the Azure Cloud.”
Final Thought
History has shown that attemping to put a ceiling on Larry Ellison’s vision and ambition is not a terribly bright thing to do. But since I’m not terribly bright that’s not a problem, and I’m going to go out on a limb and state that I believe this coup by Ellison to turn bitter rival Microsoft into Oracle’s largest customer — and devoted business partner! — will be regarded as the crowning achievement in Ellison’s extraordinary career.
In August of 2024, Ellison will celebrate his 80th trip around the sun. While his track record shows that he could very well continue to disrupt the technology, sailboat-racing, and tennis-tournament worlds for many years to come, I suspect that the combination of (a) the bounds of space and time along with (b) the magnitude of his Microsoft conversion make it safe to say that when Larry Ellison’s abundant achievements are ultimately stacked up, his totally counterintuitive and utterly brilliant evolution of the Microsoft relationship will sit at or very close to the top.
Because it does what Ellison has always loved to do: change everything.
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