Oracle Plots Massive International Data Center Expansion

The software company announced it will be building 12 cloud-based data centers around the world to better compete with the likes of Amazon, Microsoft and Google.

by Rex Crum, The Mercury News / February 13, 2018

(TNS) — Oracle has announced plans to build out 12 new cloud-based data centers in a move that will pit the software titan squarely against cloud-infrastructure leaders Amazon, Google and Microsoft.

Oracle made the announcement at its Oracle CloudWorld New York event Monday, saying it will build six new data centers in Asia, with locations in China, India, Japan, Saudi Arabia, Singapore, and South Korea; two in Europe, that will be set up in Amsterdam and Switzerland; two in Canada; and two in the United States that will support Department of Defense workloads.

The expansion is one of the largest infrastructure building projects Oracle has ever taken on, and will quadruple the current total of three cloud data centers the company operates.

Oracle, which still makes most of its sales and earnings from software databases, hardware and recurring revenue from software and product licenses, has spent the past few years building up its arsenal in the cloud. The company offers a slate of cloud-based applications including tools for analytics, management and software-as-a-service, or SaaS. When Oracle reported its most recent quarterly results, in December 2017, the company said its total cloud revenue rose 44 percent from the prior year, to $1.52 billion. That amount made up 16 percent of Oracle’s overall quarterly sales of $9.62 billion.

But when it comes to the actual data centers — the buildings where cloud-based infrastructure and equipment are housed — Oracle is playing a game of catch-up.

“Companies like Amazon, Google, and Microsoft are already at scale, are well penetrated with developers and have reasonably high satisfaction scores, so getting them to even consider moving to Oracle will be problematic,” said Rob Enderle, president of technology research firm the Enderle Group. “Oracle (also) has a reputation for being very expensive, using teasers like artificially low prices to get you in, and then locking you in so you can’t move while mining you for increased charges.”

Amazon, with its Amazon Web Services, remains the industry leader, with 44 percent of the infrastructure market, according to technology research firm Gartner. Amazon’s lead is so great that Gartner says the No. 2 company in the space, Microsoft, has just 7.1 percent of the cloud-infrastructure market.

Oracle’s position among the cloud data-center players is almost non-existent, as Gartner pegs the company’s market share at just 0.3 percent.

And if it wants to grow that share, Oracle is going to have to boost its capital expenses. Data centers, and the equipment inside them, can come with astronomical building costs. According to a report in the Wall Street Journal, Amazon, Microsoft and Google spent a combined total of $41.6 billion on capital expenses last year, with a large percentage of that estimated to go toward data-center construction. Oracle, meanwhile, had total capital expenses of $2.04 billion during the 12 months ending in November 2017, according to the Journal.

©2018 the San Jose Mercury News (San Jose, Calif.) Distributed by Tribune Content Agency, LLC.