Oracle had a successful Q3 FY2020, beating analysts’ expectations with its highest revenue growth in the past 2 years. In the earnings call, CEO Safra Catz stated that Autonomous Database revenues were up over 150%, but that is off a small base. Unfortunately, Oracle does not officially break out these numbers in their financial reporting so we will have to take their word on it. However, Oracle is staking a lot of its future on its Autonomous Database and related technology solutions that leverage it.
Autonomous Database was publicly launched over a year ago, with Larry Ellison trumpeting the huge technological advantage Oracle has in the database market and how this is the only autonomous database in the world. So, let’s take a look at some of its inherent advantages, according to Mr. Ellison.
Enhanced Security – No Human Labor / No Human Error
The Autonomous Database uses bots to detect threats and then immediately patch any identified vulnerabilities. Security is greatly increased by having bots do this work over humans as bots can work faster and continuously without any downtime or getting tired. Hackers use bots to do their dirty work, so it only makes sense to combat these threats using security methods with a similar level of technology and sophistication.
Additionally, the Autonomous Database will automatically configure itself to patch the vulnerabilities without any downtime, thereby eliminating the time it takes for humans to develop a patch and the need to then schedule releases for applying updates and patches. Since there is no human labor involved in detecting security vulnerabilities, developing patches, or releasing patches, as all the work is done by bots, the cost of human labor and the possibility of human error are removed. There is also no downtime to do this work, thereby eliminating business interruptions and improving value realization back to the business.
Oracle’s claim is that all of these features collectively provide customers with peace-of-mind knowing that their data is secure, with the Autonomous Database continuously monitoring and repairing any detected security flaws.
This technology is a big differentiator for Oracle as it directly addresses what keeps CEOs awake at night. Waking up to a huge data breach and finding themselves on the front page of every news publication and hearing about their data breach on every news outlet.
Serverless and Elastic
Oracle claims that customers are not required to purchase a dedicated CPU capacity every month for a fixed fee commitment. They only pay for what they actually use, so when a customer’s applications are not running they are not paying for server usage.
It’s also fully elastic. If a customer requires additional capacity for some business spike, the additional CPUs are instantaneously provided. Once the additional capacity is no longer needed, the additional CPUs are instantly removed, thereby reducing costs by only charging the customer for actual CPU usage and not re-baselining monthly fees to account for the highest usage water mark. Customer usage and associated fees spike up and down based on actual usage only, which was the original promise of the cloud. Kudos to Oracle!
Oracle Cloud Infrastructure (OCI – Gen 2)
Another key differentiator is that the Autonomous Database runs on OCI, which was specifically built for cloud security. OCI not only provides protection around the entire cloud perimeter, but it also contains barriers and customer zones behind it. In the event the security perimeter is breached, the various customer zones and partitioning barriers provided added layers of protection, preventing hackers from gaining access to all customer data and being able to compromise all the software code in the cloud.
OCI also has barriers that keep separate Oracle software code from customer software code and data. Customers are not permitted access to Oracle code or other customers’ data and code. Likewise, Oracle only has access to its code but not to customer code or data.
All of these layers and separation barriers are designed to provide maximum protection by minimizing the access hackers may have in the event they are even able to breach OCI by exploiting any vulnerabilities before the Autonomous Database bots are able to patch it. We have all seen the frontpage headlines when companies have had security breaches. CEOs do not want that type of publicity and are afraid of the damage it can do to their brands, businesses, and personal careers.
Growth Resulting from Value Differentiators
Oracle has a very compelling value proposition for organizations that strongly value this level of security along with the superior processing speed and lower cost that Oracle claims the Autonomous Database provides.
Oracle had a promising quarter that demonstrated the Autonomous Database is gaining market traction now in its second year. Oracle has claimed that their database business is growing rapidly due to their technological advantage, with previously stated expectations of doubling or tripling their current database business at some unspecified point in the future.
Inconsistencies Between Oracle’s Claims and Contracts
The only warranty Oracle provides is that during the services period Oracle will perform the services using commercially reasonable care and skill in all material respects as described in the service specifications. Further, Oracle limits its liability to the total amounts paid for the prior twelve months under the order form giving rise to such liability.
This extremely limited warranty and limitation of liability is inconsistent with the bold security claims Oracle has made. Oracle doesn’t even provide a warranty for viruses, trojan horses, or other harmful programming code, yet they require customers to provide such a warranty to Oracle as it relates to customer content. Customers actually provide more warranties to Oracle that Oracle provides to its customers, yet Oracle is the one providing the service.
Oracle also agrees to comply with some policies related to privacy and data processing. However, those policies are only referenced in the contract, with links to Oracle’s website, and Oracle reserves the right to change those policies at any time.
We believe that Oracle does have a technology advantage as it relates to Autonomous Database. This should come as no surprise as Oracle has always been a database technology company. This is what they do better than arguably any competitor and have done so for years. The value proposition of the Autonomous Database, provided all of Oracle’s claims are true, is also very compelling and this appears to be resulting in net new deals and an ever-growing sales opportunity pipeline.
But if Oracle is truly confident in the security offered by the Autonomous Database that they are loudly proclaiming and deliver a knock-out blow to its competition, then Oracle must provide customers with warranty and liability protections consistent with these claims.