Oracle Looks to AI and Microsoft Partnership to Lift Cloud Business
The tech company hopes an AI update to its flagship database software and the recent expansion of its Microsoft collaboration will boost cloud sales
By Belle Lin
May 2, 2024 11:57 am ET
Oracle said it is adding artificial-intelligence features to its flagship database software, a move aimed at boosting its sales pitch for its cloud-computing platform.
Using Oracle’s Database 23ai service, businesses can search their private data by asking questions in plain English rather than writing specialized code. Developers also can use the generative AI search-and-answer capability with other applications that are stored in Oracle’s database in the cloud, the company said Thursday.
For Oracle, whose cloud platform remains a nascent offering compared with Amazon’s and Microsoft’s, more usage of its database software with the new AI services can turn into increased usage of its cloud.
Amazon and Microsoft are the top players in what market research and consulting firm Gartner said was a $120.3 billion global public cloud market in 2022. Together they made up 61.5% of the market. Analysts peg Oracle’s cloud business at 2% of total cloud revenue.
The company’s databases, increasingly run on its cloud rather than customers’ data centers, are part of how it competes against those rival cloud platforms, said Karan Batta, Oracle’s senior vice president of cloud infrastructure.
Oracle has positioned its cloud as easy to use alongside other cloud platforms—especially that of longtime partner Microsoft—and cheaper than the competition. The company said its cloud revenue surpassed traditional software licensing revenue for the first time in its most recent quarter, which ended Feb. 28.
Microsoft and Oracle have a revenue-share partnership in the form of Oracle Database@Azure, a service that allows Azure customers to use Oracle databases inside Microsoft’s cloud.
Since late last year, Oracle has been putting its own hardware inside of Microsoft data centers, aiming to give Azure customers faster access to data they have in Oracle without leaving Microsoft’s platform. The new setup improves on an integration introduced in 2019, known as Oracle Interconnect for Microsoft Azure, which required customers to have technical expertise.
Mark Prout, chief technology and information officer of Conduent, a business solutions and services firm spun out of Xerox in 2016, said the service—made available for customers using Microsoft’s East Coast data centers last week—speeds up processing for its tolling service. The service runs on Oracle databases and Microsoft’s cloud, while the company’s primary cloud provider is Azure, he said.
Conduent helps manage tolling operations for the Metropolitan Transportation Authority and other New York tolling authorities, supporting the transponder-based toll-collection system known as E-ZPass and the license plate identification service used to collect tolls known as Tolls by Mail. It processes nearly 13 million tolling transactions a day, the company said.
“We’re moving license plate imaging, we’re moving transponder images,” Prout said. “You don’t really want high transaction systems running across multiple data centers.”
With so many vendors offering AI services, it isn’t a given that customers will use Oracle’s new AI database offering—especially because Microsoft has AI services of its own. The companies have previously said their joint offering makes it easier for Oracle users to run Microsoft Azure’s AI on top of the Oracle database.
It doesn’t make a difference to Oracle, because any use of its products increases usage and awareness of its underlying cloud platform, Batta said.
Clients using the Oracle Database@Azure service automatically open an Oracle cloud account, Batta said. If they find they need AI computing power and graphics processing units, or GPUs, that Azure doesn’t have, they can start using Oracle’s cloud without initiating a new contract. “This is our play to really show that the technology is good,” he said.
Oracle reported that sales grew 7% to $13.28 billion in its February quarter, in line with analyst expectations. Cloud services and license support revenue climbed 12% to $9.96 billion, and the company said it has been rapidly expanding data center capacity to meet demand.
The tech giant has been offering data center services in a new region roughly every 22 days, Batta said, with a combination of smaller, modular data centers, and large-scale investments in AI supercomputers. Last month, it announced plans to invest more than $8 billion in cloud infrastructure in Japan over the next decade, and plans to move its headquarters from Austin, Texas, to Nashville, Tenn.
“We will buy more servers, more GPUs, more power and space, because our customers are very, very hungry for more,” he said.
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