Cloud Subdues Oracle’s Dominance in Database Space

Cloud revolution takes on RDBMS

On June 17, 2015, Oracle (ORCL) announced its fiscal 4Q15 earnings, which continued to fall short of shareholders’ expectations. Despite its claims that it recorded 200% growth in SaaS (software-as-a-service) and PaaS (platform-as-a-service), in reality its revenue growth remained flat in fiscal 2015. On a quarter-over-quarter basis, revenue growth declined by 5%. This is an important factor to consider, as cloud and big data are rapidly changing the IT environment.

Cloud Subdues Oracle’s Dominance in Database Space

Cloud infrastructure grows

According to the International Data Corporation (or IDC), cloud infrastructure is expected to be the fastest-growing subsegment of the big data market, with a potential to grow annually at a rate of 50% during 2013–2017.

The above chart shows Oracle’s cloud offerings contribution toward its overall revenues. Also, the chart shows that cloud revenues make up less than 10% of Oracle’s overall revenues.

RDBMS inadequate big data capabilities boost open-source database adoption

Growth in data volumes owing to the SMAC (social, mobile analytics, and cloud) revolution is difficult to manage with RDBMS. Also, RDBMS, being a relational database, cannot categorize unstructured data.

Also, big data is generated at a high velocity. RDBMS lacks that high velocity because it is designed for steady data retention rather than rapid growth. Even if RDBMS is used to handle and store big data, it becomes prohibitively expensive. As a result, Oracle has taken initiatives to enhance its presence in the cloud space, as RDBMS isn’t equipped to deal with big data.

Hadoop and NoSQL are open source, possess high speed, and have a high degree of fault tolerance. They are cost efficient because they store data in small chunks across several servers. They can process queries rapidly by sending several queries to multiple machines at the same time. Due to these advantages, Microsoft (MSFT), Oracle, IBM (IBM), EMC (EMC), Teradata (TDC), and other leading players in the traditional database space have incorporated them into their own platforms.

Investors who want exposure to Oracle can invest in the PowerShares QQQ Trust ETF (QQQ), which invests about 3.08% of its holdings in Oracle.