Microsoft Web-based computing service will start offering Oracle database as an option as the companies cast aside a longstanding rivalry to attract businesses moving their software online

June 25, 2013 Leave a comment

Microsoft Joins Oracle in Cloud-Computing, Rivalry Thaws

Microsoft Corp. (MSFT)’s Web-based computing service will start offering Oracle Corp. (ORCL)’s database as an option as the companies cast aside a longstanding rivalry to attract businesses moving their software online.

Microsoft will offer businesses using its Windows Azure cloud-computing service the ability to run Oracle’s widely used database software, application-connecting middleware and Java programming tools, Microsoft Chief Executive Officer Steve Ballmer and Oracle co-President Mark Hurd said in a statement.Both companies are facing competition from nimbler rivals delivering computing over the Internet, including Google Inc. (GOOG), Amazon.com Inc. (AMZN) and Salesforce.com Inc. (CRM) Microsoft is seeking new sources of revenue from online services as demand for personal computers slumps, and Oracle is shifting its focus to business software sold through online subscriptions rather than installed on customers’ own computer servers.

“Now our customers will be able to take advantage of the flexibility our unique hybrid cloud solutions offer for their Oracle applications, middleware and databases, just like they have been able to do on Windows Server for years,” Ballmer said in the statement. Ballmer and Hurd are hosting a conference call today to unveil the alliance.

The executives said the collaboration would lure customers seeking more technical compatibility between Microsoft and Oracle products. Oracle’s database, which will be upgraded later this year as a new version called 12c, competes with Microsoft’s own SQL Server. Companies using Microsoft’s Azure cloud service, which lets companies build and run programs online, will be able to put information into Oracle’s database.

Online Software

Oracle controlled 45 percent of the $28.2 billion worldwide database market in 2012, compared with 20 percent for Microsoft and 18 percent for International Business Machines Corp. (IBM), according to IDC.

Azure’s main competitor is Amazon Web Services, in a growing area called infrastructure as a service, which lets companies rent computing power, storage and database software via the Internet. That’s the fastest-growing part of the cloud market, according to Gartner Inc., which estimates sales in the market segment to surge by an average of 38 percent annually to $30.6 billion by 2017, from $6.17 billion last year.

Microsoft, which said in April that revenue from Azure and related software sales topped $1 billion annually, has pledged to match Amazon Web Services’ prices.

Oracle plans to support the software sold through Microsoft’s service and also will make its version of the open-source Linux operating system available through Azure.

Trash Talk

The alliance with Microsoft lets Oracle offer its customers the option of sticking with its database and application-connecting middleware at a time when businesses are moving more of their software to cloud-computing services. Oracle reported on June 20 that fiscal fourth-quarter software license and subscription sales grew just 1 percent, less than analysts had projected.

The two companies have a long history of competition stretching back to the dawn of personal computers in the 1970s. Oracle CEO Larry Ellison, who first publicized the alliance on his company’s earnings conference call last week, used to deride Redmond, Washington-based Microsoft as a “convicted monopolist” after it was found guilty in federal court of illegally defending its Windows monopoly to squelch competition.

In 2000, Redwood City, California- based Oracle said it hired detectives to comb the trash of two organizations supporting Microsoft in its antitrust trial. Ellison added that he’d be happy to ship his garbage to Redmond for inspection.

Mending Fences

Still, Microsoft and Oracle have cooperated before. Oracle’s database also runs on Windows, and developers using Microsoft’s Web services software can build applications using Oracle’s software tools.

Ellison is mending fences with other rivals too. He said last week that Oracle would also announce deals with Salesforce.com and NetSuite Inc. (N) — of which he’s a partial owner — to use the 12c database. Salesforce and NetSuite already run Oracle’s database to power their applications.

Oracle’s deal with Salesforce that Ellison mentioned last week comes after CEO Marc Benioff was scratched from a speaking spot at Oracle’s OpenWorld conference in 2011, leading Benioff to stage a mock protest before speaking at a nearby hotel.

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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