Oracle's Mark Hurd: App complexity will drive customers to our cloud

So now we know. With the announcement of Oracle Public Cloud yesterday, the last of the big traditional IT vendors has weighed into the cloud.

This one could be a game-changer. The Oracle Cloud will offer over 100 SaaS (software as a service) enterprise applications, a PaaS (platform as a service) primarily intended to serve Java developers, and a cloud version of the Oracle database. The company also unveiled a new Platinum Services offering for Exadata and Exalogic systems, as well as for the Oracle Public Cloud.

Immediately after the announcement, I interviewed Oracle co-president Mark Hurd to get a better sense of the thinking behind the monster offering, particularly how he felt Oracle could justify the $35 billion investment behind it and why the company had chosen to deliver the application portfolio as single-tenanted applications, which shifts some of the burden of maintaining apps back to the customer.

According to Larry Ellison, who was at his bravado best on stage, Oracle has been investing in its cloud for seven years (I think he meant the Fusion project, which morphed into a cloud initiative at some point). I began by asking Hurd about his participation in the cloud endeavor; the following is an edited version of the interview. Abhay Paransis, senior vice president of Oracle Cloud development, also participated. 

Eric Knorr: What has been your role in Oracle Cloud?

Mark Hurd: Since I've come we've been in some form of preparation for this, whether it's in the development organization or the sales organization to go to market with it. That's the most important aspect of it, because we've got a go-to-market organization that has represented and sold things in a certain way. So both getting the quantity of people right, getting the specialization of those people right -- getting trained and prepared.

Then I would say the support organization, the stuff we talked about today, is just unique.

Knorr: To be clear, the Platinum Services offering doesn't apply just to the Oracle Cloud.

Hurd: True. But it really struck us that as we were working through the cloud, and when you look at the platform that is now underpinning our cloud, and when you start talking about the support and service levels of the cloud, and then you look at the components, and you look at the opportunity, it crystalized for us over the past year that we had not only an opportunity for differentiation in the core offers, but in the ability to support those offers unlike anybody else.

Knorr: In a way, the architecture you chose would push you in that direction, because if you're multitenanted, you have one huge instance of the software. You're talking about one instance per customer, correct?

Hurd: We are, And all of these decisions, to be clear, were specific decisions: The platform to host, being our engineered systems, whether it's an Exadata or Exalogic; the single tenant decision as opposed to a multitenant decision. Because somebody might argue to you: Hey I don't know if that's as efficient as multitenanted. But we made a decision that security for us is very important.

We made a series of decisions along this whole line. We wanted to use the best-of-breed parts in the whole industry. We made a very conscious decision to focus on security. We made a very conscious decision that we wanted all of our apps to be the best in the industry at what they do. We made a conscious decision to maximize the service and support experience.

I think the last piece would be the fact that this has to be communicated by us as a suite of capabilities. That there are so many examples -- the Taleo app, in isolation, is a great app. But when added and integrated with our core HCM app, is yet even more powerful. The opportunity to now integrate that in financials, etc.

Knorr: It seems like you've made a huge investment in the Oracle Cloud: $5 billion a year for seven years. How could you ever expect to get that back?

Hurd: Let me tell you a little about the industry, because I think we're at a point that's going to be a pretty dramatic change. First, the IT industry now is $1.8 trillion, something like that. A little less than half of that is enterprise. Inside the enterprise, a little more than half of that is services. The other half is product. I think this is going to change dramatically.

I think IT budgets will be 2 percent or 3 percent growth. I think you've got a very complicated infrastructure. What do you think is bigger, the R&D budget of Oracle ($5 billion) plus the R&D of IBM ($5.4 billion)  -- add them together for $10.4 billion -- or the IT budget of one of the top three banks in the U.S.?

Knorr: I have no idea.

Hurd: It's the IT budget of one of the three banks by over $3 billion. At its lunatic worst, this is nuts. The complexity...this bank has over 8,000 applications, 70,000 servers, 72 petabytes of storage, tens of thousands of humans coming together to cobble a server together with OS, with database, with middleware. All of which adds, at the end of the day, no economic value-add to the bank.

So this whole issue of the provisioning of IT, I think when you hear us talk about engineered systems and the cloud, I think they are phenomena that come out of the same issue: Eliminate complexity. Simplify IT.

I think what's going to happen is a standardization of IT that's going to be pushing the work to us. You, the customer, say: Stop, you do it! You engineer this stuff together.

So when you look at the world's apps, 25 percent of the world's apps are standard, packaged. Of the 75 percent that are not, half of those, less than half, started out as standard, but got messed around with by some customer so that the guy who is the originator of the app -- us guys -- can't recognize it. And the rest are home-grown.

Imagine if the apps that are "standard" include sales, accounting, supply chain, manufacturing, HR, across fundamentally every process. We think this is a renaissance that is occurring and it's driven by an economic dynamic -- we've got low IT budgets for one thing -- on top of that we have lots of appetite to do new and innovative things. So we've got to get money out, we've got to simplify IT to do new innovation. How do you simplify? You push the work back into the industry.

Knorr: There are a few components to what you're saying. One, if you're going to offer some integrated ecosystem, you've got to have best of breed across all those application categories, which is a pretty tall order. The other thing is that if you're using virtual machines rather than multitenancy, how much does the customer have to work on setting up and maintaining those environments? How much are you really taking out of the equation?

Abhay Parvansis: While it's certainly not a trivial task to bring that broad a suite of best-of-breed applications, there are three or four fundamental shifts that we believe are happening. One is at the hardware level where virtualization is at the core of everything, so it let's you decouple the workload from metal and create highly parallel scale-out architectures rather than scale out. Once you have applied that design point, one set of integrations becomes a lot easier, because you no longer have single points of failure.

The next one is service orientation, where you're inherently designing systems to be loosely coupled, but integrated for the user.

Knorr: It's pre-integrated?

Parvansis: No, it's designed from the get-go to be composed together. And the last piece is actually quite important, which is to enable this new class of innovative experience -- whether it's mobility, socially enabled apps. A lot of pressure on IT is about serving the edge, if you will. So everything in our cloud -- though as you noted it's a very difficult task for anyone else to match -- we actually feel extremely good about the foundational bets the company made six years ago. We happen to be extremely on target.

Architecturally and core product-wise, we actually feel that the portfolio is exceptional, but they are engineered to be delivered together. That's actually very difficult to do post-facto.

Knorr: Back to the bank with its multi-billion dollar infrastructure -- there's a ton of sunk cost in there. I'm sure they have some Oracle licenses as well. How do you move from that to a cloud or hosted infrastructure? Or do you?

Hurd: Complexity in IT is almost always driven by the app. So the disparity in apps - the lack of integration among apps, the number of apps -- creates tremendous difficulty underneath the infrastructure. So when you call your traditional IT guy and say "I think our IT cost is too high" and I want you as the CIO to fix all that, what are you going to do? You're going to run standard plays: You're going to virtualize servers, you're going to try and combine servers, you're going to try and get rid of data center, all that stuff.

The reality is the toughest part of your job is the stuff you don't control, which are the processes. Because businesses are run by: I've got a strategy. I then support that strategy with a business model. I then support that business model with processes. I then automate those processes with applications. If you're not involved in the processes, the apps by definition are not controlled by you. And so therefore this whole process of standardization and simplification of apps is what drives change.

So to your point: If you really want to transform an IT organization, the leadership to transform that more than likely has to come from outside IT. So it has to come from somewhere in the C-suite. It could be the CFO, it could be the CEO, it could be the president, but it's got to be somebody who has the chips in front of him who can align these processes.

If you do, monumental transformation is possible. I go back to the days when I was at HP. Our IT budget when I got there was bigger than our R&D budget. We had more IT people than we had salespeople. Why? Was it because a bunch of IT guys didn't know what they were doing? Maybe. But more importantly, the disparate nature of the processes had created this huge application swell that had created an unbelievable complexity.

Once you start to take the infrastructure from 7,000 apps to, in their case 1,500 apps, the entire infrastructure underneath transformed, and so did the cost structure. So I think it all starts with apps. So I think what you can find here is this innovation we're talking about is for businesses leaders to think about a new way to run their business.

By the way, I think whether you do it in the cloud or the private cloud using on-premise apps - that's a separate decision. But let's say I'm going to take these apps, I'm going to consolidate them, and I'm going to standardize them, And once I standardize them, the cloud becomes a really attractive delivery vehicle for me.

Because I'm now going to align my business model, and I'm going to align my processes around a standard application. And I can get rid of a capex and a lot of other good stuff. I think that transformation is going to occur.

(courtesy:infoworld.com)