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Oracle made a $300B bet on OpenAI. It's paying the price

136 points2 monthsfinance.yahoo.com
taylodl2 months ago

Oracle has bigger problems than OpenAI. They've been selling large enterprise contracts for the past 10 years and they're coming up for renewal. A lot of those enterprises don't feel they got a good value. If 10% to 20% of those enterprises fail to renew for another 10 years, then that could have a severe impact to Oracle. Their other issue is a lot of those enterprises are looking at migrating to PostgreSQL so they can migrate off of Oracle's RDBMS. Many have already deployed PostgreSQL for their department-level applications, so they can get the experience they need before tackling their enterprise-level applications.

thedougd2 months ago

In my organization we've worked hard for several years to insulate ourselves from Oracle.

We've implemented aggressive desktop monitoring and blocked downloads from Oracle to avoid the Java subscription. Where it's needed, an OpenJDK distribution is used.

Where we must still use Oracle database, in some small, bespoke legacy use cases (heavy PL/SQL), we've moved to RDS with license included to avoid the direct relationship with Oracle. I get it, a big RAC customer will have a harder time, but they'll also likely have alternatives (e.g. SAP implementation to HANA).

I know of at least one vendor (Hyland) who's dropping Oracle support and providing a migration path to MS SQL. Shame not a FOSS database, but still a trend away from Oracle.

panarky2 months ago

I watched from the sidelines with grim interest as my organization tried to decide between Oracle and SAP.

The team defined requirements, ran an RFP and demo process and did site visits to clients of each company. The SAP reference clients weren't exactly thrilled with SAP, the product was too complex and too expensive, but it was rock solid and SAP was a reliable partner. The Oracle reference clients had the usual complaints about features and flexibility, but their real beefs were that Oracle was a predatory and untrustworthy partner.

Oracle made claims in their RFP response that were proven false in the demos and site visits, confirming the claims from reference clients about the company's ethics. In contrast, SAP's RFP responses were validated by the team's due diligence.

So management decided to go with SAP. In response, a senior Oracle person tracked down all of the company's board members and made outrageous claims of incompetence against the company's executives, and alluded ominously about bad faith and conflicts of interest.

Oracle was completely hostile and off the rails when they figured out they lost the deal. I will never, ever do business with Oracle.

Unfortunately, while the SAP application seemed solid, the organization went with their HANA database which was astronomically expensive, and had a bad habit of returning different and provably incorrect results to the same deterministic SQL query every time it ran, and then the entire database would crash for all users.

thedougd2 months ago

It's wild dealing with Oracle. They are an adversary to their customers. They'll repeatedly try and setup meetings where they begin off-topic asking questions about how many cores/sockets you're deployed on (Answer: Fewer than we're paying for). When we declined their Java subscription (after thorough preparation on our part), they repeatedly threatened us with audits and ominous threats of download monitoring.

If anyone has to deal with this, I highly recommend Palisade Compliance for consulting. Ex-Oracle people who do not sell licenses, only consult on compliance and represent you during an audit.

ethbr12 months ago

> If anyone has to deal with this, I highly recommend Palisade Compliance for consulting. Ex-Oracle people who do not sell licenses, only consult on compliance and represent you during an audit.

Oof. That's a new standard for shitty company: when ex-employees build a business around protecting customers from their former employer.

scrubs2 months ago

Nvidia is adversarial too, and a giant pain to deal with. But then since the 1980s there's been a slow pendulum move to suppliers having more actual and self-perceived power over customers. I'm a big proponent of respectfully letting the supplier know when needed I tell them they don't me if I am satisfied or whether its worth the $ spent on them. Always have options. Without options there's no choice. Internal suppliers (in a corp) periodically need to be told the same thing. Mishandling one's customer power in the relationship is an error i don't like to make.

jiggawatts2 months ago

You’re going to have to elaborate on that last bit! SAP HANA is used by enormous organisations as the core database for their entire operations, so pervasive data corruption bugs would be rather… concerning.

+1
panarky2 months ago
senectus12 months ago

yup same thing here. their bullshit legal antics has made us allergic to oracle

otterley2 months ago

Aren’t contract expiration dates distributed over time? Why would now be a particularly vulnerable time? Granted, we’re coming up on the end of the calendar year, but 2025 doesn’t feel particularly special.

foobarian2 months ago

Also, how does one come upon these kinds of bits of industry lore? Asking for a daytrader friend. Ahem

cj2 months ago

I've found the only stocks where I can personally be successful stock picking are companies I have some sort of unique relationship or experience with that is uncommon or unavailable to sophisticated investors or analysts.

E.g. you're an IT admin at Big Co overseeing software contracts. You can often get interesting insights by looking at things like how aggressive their sales reps are with end of quarter discounts (how desperate are they to meet numbers that quarter?). Or if you see a company completely dropping the ball within your org, but on CNBC you constantly hear how great the company is by pundits and analysts -- maybe you know something the pundits don't.

Often times the consensus view of a stock trails reality by a few weeks to a month - there's a lot of non-public but also non-confidential information that isn't readily available to analysts, but exposed to employees of customers/vendors/partners/end-users.

TLDR: when stock picking or day trading, pick companies within the niche of the world where you're a SME.

+2
smallnix2 months ago
stronglikedan2 months ago

I also have to wonder how many customers actually signed a 10 year contract (which is extremely long for software of all things), unless I'm misunderstanding the comment.

financetechbro2 months ago

Yeah 10yr long contracts aren’t the norm. Typically 3-5 years if it’s not on annual basis

+1
apimade2 months ago
taylodl2 months ago

Not for Oracle's "everything but the kitchen sink" unlimited enterprise licenses for large (Fortune 200) organizations that, like a buffet, encourage you to "eat more" to get a "better value." Which works great until you true-up after 10 years and your annual license fee skyrockets. Which is of course Oracle's plan. But, what I've been seeing happen instead, and this is purely anecdotal, is these companies are getting tired of paying tens of millions of dollars per year to Oracle as CIOs are under ever-increasing pressure to cut costs. So they're wary of allowing themselves to fall further into Oracle's clutches and in fact they're looking at how to get themselves out of this situation.

TL;DR - these 10 year enterprise deals with Oracle allowed companies to save money in the short run and get predictable annual licensing fees. It also bought them time to get more of their application portfolio off of Oracle so when it comes time to re-up they'll negotiate those fees down.

OccamsMirror2 months ago

Can confirm. There is zero good will towards Oracle in my organization, and AWS have positioned themselves in a way to push the enterprise team to using PostgreSQL on RDS, and helping development teams make the move with training and proservices. Oracle's greed is finally coming back to haunt them.

cameldrv2 months ago

"Do not fall into the trap of anthropomorphizing Larry Ellison"

https://www.youtube.com/watch?v=-zRN7XLCRhc?t=2300

Malic2 months ago

Evergreen :)

adabyron2 months ago

But how hard is it for your companies to migrate?

Is it worth the risk/work to move everything over? For a lot of enterprises, their needs to be a huge cost savings or risk reduction. Risk usually being the most important factor the bigger the company.

hylaride2 months ago

I know of one largish bank moving away from Oracle middleware and RDMS. It's happening in pieces starting with low hanging fruit and for awhile the two will run in parallel (with the new data stores starting off as a comparison check to reconcile any bugs that crop up). Some early wins were account transaction logs that can go into better suited DBs, etc.

My understanding is that they were relatively lucky in that most of the hard parts are in the middleware layer and rarely the DB itself - the bank has been around since the 1800s, so has a huge mishmash of technologies that go from old IBM mainframes up to more modern cloud infra. So they're already kind of used to using middleware logic to stitch together various data sources.

The funny thing is that my contact there said the primary impetus is that they see the writing on the wall for a lot of their "legacy" Sun hardware, and figure if they're going to have to redo a lot of it, they may as well re-architect the rest. There'll still be oracle DBs running in the bank for a looong time, but there'll be less and less of it.

zamadatix2 months ago

If it's the same for others as it was for us recently then very difficult... but the cost savings were so massive in terms of margin the risk was worth it. What taylodl mentioned about growing institutional knowledge and experience with Postgres in other apps first rang true as well. We are not 100% Oracle free, but we have migrated much away already.

In the larger discussion, I also wonder what their new contract rate is for these solutions. Even if 0% were migrating off, if 0% were migrating on then the net rate would still be decently negative because of natural business/app attrition.

kev0092 months ago

Probably nobody here is an Oracle fan but the miss on sentiment like this is you could have written the same comment minus OpenAI 10 and maybe even 20 years ago.

jl62 months ago

Definitely true, but a lot of Oracle sites are that way because of decisions made decades ago. Opportunities to re-architect are rare. But when those opportunities do come along, nobody is choosing Oracle RDBMS for their future state.

What I do see is orgs choosing other Oracle apps like ERP which sneak the Oracle RDBMS in as part of the bundle.

Anyone using Oracle purely as a database is going to migrate to PostgreSQL eventually, but there are a lot of orgs where the database is just one part of a wider Oracle ecosystem with world-class vendor lock-in features.

kev0092 months ago

They have some funny accounting like Google and Microsoft where everything is "cloud" but the revenue streams are certainly diversified from straight Oracle DB such that PostgreSQL equivalence or superiority does not affect the viability of the company or the stock price. Communities like this often over index technical and personal opinion with reality.

I worked at a midsize that was core internet infra, where we had an in house OS and ODM hardware and FOSS DBAs. The one Oracle DB and Oracle HW was slipped in the door through finance for ERP as you say. Although I suspect that would be cloud hosted these days.

lateforwork2 months ago

> If 10% to 20% of those enterprises fail to renew for another 10 years

Think about how hard it would be for you to switch from iPhone to Android. Now multiply that by 10000. That's how hard it is to switch enterprise software.

collingreen2 months ago

Now imagine you save $10M a year doing it

chasd002 months ago

> Now imagine you save $10M a year doing it

only after the move is complete and assuming it's as successful as you think it would be. What usually happens is the migration takes on a life of its own and is a multi-year if not multi-decade project. It sucks up so much money and effort that a business could be using to actually build their business vs migration to a different database. Meanwhile, the account execs of the old system know you're moving off of it so say good bye to any kind of contract discounts or special treatment during emergencies.

There's entire graveyards of failed enterprise system migrations. The most likely outcome is eventually a compromise has to be made and now you have two systems to maintain and license, the legacy one, and the new one. With the promise of eventually getting off the old one but it never happens.

I'm on a project with a client that has 24 ERPs across their enterprise around the globe from acquisitions. Half of them are ERPs that were meant to replace another one but the transition was never completed. A big part of this project is integrating all of their sales pipelines, analytics, and history into, yet another, enterprise system.

collingreen2 months ago

That's absolutely true. Is also true for most projects in general though so pretty standard.

0cf8612b2e1e2 months ago

It’s rarely that clean. Sure, there is the immediate sticker price, but you have to factor in the migration costs as well. Depending on how deep the integration goes, it could take years of effort. All of which is going to take political capital to get people to migrate perfectly working systems without any operational gain. Plus you have the old guard who actively fight you-maybe they have spent their career in Oracle and that is all they know.

Even if you do move mountains and make it happen, suddenly any outages after the transition become your fault. “This never happened on the old system.”

mystifyingpoi2 months ago

True words. I've seen this technique used to force people to think realistically. It goes like this (example):

- Is it possible for a 3 person team to manage 1000 distinct Kubernetes clusters?

- No way in hell!

- What if we hypothetically pay you $2M salary each?

- Well, let me think about it, we could figure this out...

+2
0cf8612b2e1e2 months ago
sharpy2 months ago

Once upon a time, our team was paying Oracle $6 million a year in DB licenses alone. We ended up building our own bespoke storage solution.

Invictus02 months ago

Now imagine the switch is going to cost you $100M in downtime and change consultants, if it succeeds at all, and your new provider will up the price in a few years time anyway.

+2
PunchyHamster2 months ago
crackez2 months ago

That's about how much it cost my company to move the flagship off of z/OS. That kept the language (Cobol) and DB2 intact (moved to DB2LUW); just a new build target basically.

It took like 5 or 6 years and that $10M represents the cost of only 10 months of operations on Z.

mystifyingpoi2 months ago

It's not really going to benefit ME anything. It will benefit my employer this amount. I might get an extra bonus for successful migration, but it's peanuts compared to the savings.

So in such situation, I'd be tempted to actively oppose this initiative.

prepend2 months ago

Now imagine you risk breaking $100M in order to save $10M.

pfortuny2 months ago

Imagine you think you save… You only save after you have paid…

jt21902 months ago

Why would any Enterprise Software vendor leave $10M on the table?

+1
arjie2 months ago
esafak2 months ago

Because vendors are not fungible in the eyes of the buyer.

boringg2 months ago

Lack of capability, mismanagement, misinformation to name a few

anal_reactor2 months ago

Once technologies mature enough, they converge to roughly the same set of features. Case in point: I was an avid Windows user, but then decided to switch to Linux. While it was problematic, it was much less so than I had anticipated.

Imagine switching between Firefox and Chrome. Between Ford and Toyota. Between Seagate and Western Digital. Between USB-C and Lightning.

mbesto2 months ago

Oracle's growth and value is in SaaS apps (NetSuite) and their cloud offering, not DB licensing. The economic impact of enterprises moving off Oracle DB is massively overstated here.

justapassenger2 months ago

Oracle has been selling large enterprise contracts for many decades and those enterprises were looking to migrate off Oracle since then too (I've been working on a project like that almost 20 years ago, at my first real job).

bdangubic2 months ago

I read very similar comments … 10-15 years ago

websiteapi2 months ago

Sources for any of these claims?

moralestapia2 months ago

>In business since 1977.

>Market cap of half a trillion.

>Somehow they're "in trouble".

Mega LMAO.

SvenL2 months ago

There are enough examples which one might mention here: Nokia, MySpace, Yahoo, Kodac, AOL, Blockbuster, toys‘r‘us … all ones big. Yes, oracle might not vanish, but it definitely needs some change.

moralestapia2 months ago

???

None of those were in business since 1977 (w/ the exception of Nokia, which I would argue is still a successful company today. I wouldn't put it on that list).

None of those were ever valued (even close to) half a trillion, even adjusting for inflation.

taylodl2 months ago

Kodak was founded in 1892. I think Oracle is going to go the way of HP. Look at HP over the past 10 years and what it had been in the 10 year period leading up to that. Sure, HP is still a company with $50+ billion in revenue, which actually matches where Oracle is today, but they had been a company with $100+ billion in revenue - and that's before adjusting for inflation.

So while it's hard to call a company with $50+ billion in revenue a failure, they're not nearly what they once were. That's the direction I see Oracle going.

https://stockanalysis.com/stocks/hpq/revenue/

+1
SvenL2 months ago
rachr2 months ago

It seems fitting. They destroyed Sun, destroyed Java, destroyed any developer or customer goodwill...and now they are destroying themselves.

orochimaaru2 months ago

Java is one thing they did right. Most enterprises are looking to move away from Oracle. I think there will be niche cases where rewrites don’t make sense. But for one of the big telecom providers I work for - the decision was made in 2020 to move off of Oracle. It’s not a flash cut but we’ve significantly reduced reliance. There are some critical apps that are still on it, but those are capped in maintenance mode until their replacements are ready.

vips7L2 months ago

Java is in the best shape it's ever been in. Jdk development and performance are through the roof and the developer experiences gets better with every release.

davey480162 months ago

Java's in great shape now, but the period between when Oracle bought Sun (~2010) and about 2017 wasn't great, and there was a lot of concern about Java's future. I think most people who moved away from Java then haven't looked back.

vips7L2 months ago

I believe that is mostly due to Sun's stagnation and lack of funding. Oracle released Java 7 in 2011 and Java 8 in 2014, which is arguably the start of modernizing Java.

+1
0cf8612b2e1e2 months ago
jeffbee2 months ago

The idea that Java has been destroyed is pretty wild. I don't see how that belief could survive contact with the real world.

bigmutant2 months ago

Pretty common attitude from folks who have never worked in one of the BigTech companies where Java rules (Amazon being a prime example). Since they never encounter Java in the "SF-style Startup" world, they assume that it must be dead. Meanwhile hundreds-of-thousands of Engineers deal with hundreds-of-millions (billions?) of lines of Java every day

collingreen2 months ago

My assumption is the poster wants to imply Oracle destroyed the good will and interest for people to start new Java projects after the licensing changes and subsequent shakedown. Java clearly still runs all over the place and will for a while (although plenty of people trying to keep java but get away from oracle).

manphone2 months ago

The Java goodwill is mostly gone and I see zero new orgs trying it so while Java is still alive and well the mindshare has definitely been squandered given the capability that Java has.

+4
jeffbee2 months ago
+1
stronglikedan2 months ago
snarf212 months ago

To be fair, Oracle acquired Java (via Sun) specifically so they could sue Google for billions. They may not have killed Java but it wasn't altruism.

swarnie2 months ago

I still have Java on just over 1k enterprise devices, its dead?

vkou2 months ago

Java's not gone anywhere, but it's been years since I've interviewed anyone who has made it their language of choice. Developer sentiment for it isn't exactly great.

A decade ago, a good ~80% of applicants chose to use it or C#.

I personally don't have any issues with working with it, but nobody's learning it outside of work.

On the other hand, it is quite easy to learn, so there's that going for it.

voakbasda2 months ago

More like a zombie. It is still shuffling along, but the life left it long ago.

swarnie2 months ago

I'm going to take this as the HN effect, if something isn't doing 500% a year its dead.

wiseowise2 months ago

Destroyed Java? What are you even on, lol? Oracle resurrected Java.

koolba2 months ago

If I'm reading the chart correctly, the current stock price of ORCL is 15% below the price before they announced the OpenAI deal in September. 40% down from the peak is one thing, but I see the net v.s. before the craziness as a better indicator of what's going on.

wrathofmonads2 months ago

Oracle’s massive bet on OpenAI might be financially risky, but its investments in AI farms could accelerate Java’s evolution for AI. While Python dominates training, inference is where the money is. Projects like OpenJDK Babylon hint at a future where the JVM becomes a serious player in AI inference.

https://openjdk.org/projects/babylon/articles/auto-diff

deepriverfish2 months ago

I've never heard good things about Oracle, I don't understand how people keep using their products.

0cf8612b2e1e2 months ago

It is legacy decisions going back decades. Thirty years ago, you did not have a wealth of database alternatives. You picked Oracle and built the business around it. More and more business processes accumulate around the data store, all using some proprietary Oracle extensions. Eventually, the thought of disentangling the dependency is so daunting you are locked in forever until an existential risk materializes.

prepend2 months ago

In 1998 I worked for a small nasdaq company that had a successful software as a service product that was growing quickly.

We used Clarion and MSSQL7 on windows because it was cheap. Since we started making real money, some figured we could finally afford Oracle and Sun (back when they were different).

I was a junior so my job was to evaluate the migration of one of our sql servers to oracle to test it out. I talks with the Oracle team who helps people plan purchases. They took my transaction level (~100M/year) and size (1-2GB/year) and came back with $1M for the system. This replaced a functioning $10k server. And we had maybe a dozen that would have to eventually move.

When I told them the current server was $10k, they revised their estimate to $100k. I recommended we not move.

I left the company a little while later and I think they ended up buying lots of Oracle.

Companies have money and don’t mind spending on useless stuff.

grandiego2 months ago

In my experience, it is from technical management in medium/big companies you'll listen some good things about Oracle as a database product (regardless of its actual merits), like stability, scalability, compliance checks, and other "enterprisy" features (like database encryption). Also, it is offered as a default database option for many enterprise applications from their vendors. While many people points to Postgresql as "the alternative", in many places outside USA its commercial support is not available, or too limited. Other commercial alternatives (like MSSQL) have the (more or less) the same bad reputation regarding licensing costs.

rurp2 months ago

A few years ago I had the head of a devops team at a large company say that the project I was working on should switch from postgres to a "real" enterprise database like oracle. This happened while we were having zero issues with postgres, it was a perfect fit for our case, and it wasn't even relevant to the conversation. He just saw that's what we were using and reflexively thought that of course we should use Oracle.

It blew my mind at the time. Oracle is so widely hated among developers, entirely justifiably, that this guy's take really shocked me. I've literally never heard another glowing recommendation for that company before or since.

on_the_train2 months ago

My old boss literally said they don't trust other databases. I tried to push for postgres. But they insisted only oracle is professional. Our software only worked with an oracle backend. I no longer work there.

ElectricalUnion2 months ago

Isn't the whole "thing" about JPA (and all other ORMs ever) that you're supposed to "use it" instead of directly doing well optimized native queries on your database so that you can jump ship if the database provider turns out to be shit?

on_the_train2 months ago

Nah everything we did was hand crafted for their specific db.

It was particularly bad because it was a very small family business with equally small customers. And they all had to buy oracle licenses first, which made us insanely expensive without making money lol.

Fun in hindsight

redox992 months ago

Oracle Cloud has really good price and many locations. That's why I use it.

ElectricalUnion2 months ago

On Oracle Cloud Infrastructure, on my region, "Oracle Database - Base Database Service" (single node database) costs the same as a much more powerful cluster of managed "Database with PostgreSQL", or a managed cluster of "MySQL HeatWave".

Under most circumstances, you should still pick non-oracle-DB on Oracle Cloud Infrastructure.

redox992 months ago

I just use instances, nothing proprietary from them

knallfrosch2 months ago

Then it's probably business requirements.

Single-sign on, in-person support, certificated software, offering training courses to onboard people, undeletable logs, help with upgrading major versions..

All from a single vendor so you can pick up the phone, yell "fix it" and go on with your day.

cyanydeez2 months ago

>go on with your day

Unless they decide to ~~extort~~audit you.

snarfy2 months ago

government contracts

cmiles82 months ago

Oracle bet the farm on AI, and that’s starting to look like a really bad idea. Commentary about delaying new data center buildouts for AI is freaking out the markets today that the bubble burst is starting. Credit default swap values are also now heavily leaning towards a bunch of AI investments going bust.

cyanydeez2 months ago

Well, lets be fair here. Oracle is a predatory company that extorts its customers for the highest price. Adopters of AI in the enterprise are going to be building such shitty and shoddy products using AI that they'll need huge support contracts just to keep these poorly made AI products alive.

Adding AI to the oracle infrastructure cancer will certainly a boon to it's business model. Sure it might kill 10-20% of it's customers, but if it can become a pure AI parasitic play and spread it's seed, it's going to grow.

People dont realize that capitalism is size agnostic: As long as you can sell 1 boner pill for $1 million, you only need one customer rather than say 1 million pills for 1$. And, isn't it easier to keep one customer happier if they pay your bills?

PeterStuer2 months ago

EU contracts for SAP over Oracle would be so much easier if SAP would wean themselves of US cloud dependency.

lousken2 months ago

is sap that much better as a product?

PeterStuer2 months ago

Not at all. But in terms of EU sovereignty it could be.

antoniuschan992 months ago

Will be interesting. Also the Paramount Skydance takeover bid is still pending. Paramount is ~15 billion market cap and the deal for Warner is ~77 billion.

chickensong2 months ago

This particular flavor of schadenfreude is scrumptious.

jauntywundrkind2 months ago

I wonder if Oracle is going to be the only ARM less hyperscaler, after pulling out of their Ampere investment.

1970-01-012 months ago

Tip: Ask your AI to design their DCs so that they can be easily converted into low income apartments. When you hear the bubble popping sound, it just means you're ready to pivot into the rental business.

paulpauper2 months ago

This is such fake news. Oracle was paid $300 billion by Open Ai to develop server infrastructure, not that it's betting $300 billion on Open AI. The headline gets it 180 degrees backwards. That is why Oracle stock surged so much a few months ago. Oracle stock is still up 15% this year.

robocat2 months ago

Debt markets are indicating that the OpenAI contracts are high risk. Debt markets analyse the risks carefully and mostly ignore fake news. Oracle is borrowing and betting billions, and the markets are saying that their bets are risky.

https://www.msn.com/en-us/money/topstocks/oracle-stock-slump...

tim3332 months ago

1.44% to insure the bonds for five years looks quite modestly risky. You read Ed Zitron or many skeptics here and you get the impression that it's all definitely going to crash within five years, not a 1.44% chance.

Lapsa2 months ago

and it's up infinite% since the inception!