Oracle’s TikTok and Zoom deals won’t move cloud market share needle significantly

While the overall cloud infrastructure market is booming having reached $30 billion last quarter worldwide, Oracle is struggling with market share in the low single digits. It is hoping that the Zoom and TikTok deals can jump start those numbers, but trying to catch the market leaders Amazon, Microsoft and Google, never mind several other companies ahead of it, is going to take a lot more than a couple of brand name customers.

By now, you know Oracle and TikTok were joined together in unholy acquisition matrimony last month in the acquisition equivalent of a shotgun wedding. In spite of that, Oracle founder and chief technology officer Larry Ellison gushed in a September 19th press release about how TikTok had “chosen” his company’s cloud infrastructure service. The statement also indicated that this “choice” was influenced by Zoom’s decision to move some percentage of its workloads to Oracle’s infrastructure cloud earlier this year.

The mechanics of the TikTok deal aside, the question is how big an effect will these two customers have on the company’s overall cloud infrastructure market share. We asked a couple of firms who closely watches all things cloud.

John Dinsdale, chief analyst at Synergy Research Group, wasn’t terribly optimistic that they would have much material impact on moving the market share needle for the database giant. “Oracle’s cloud infrastructure services growth has been consistently below overall IaaS and PaaS market growth rates so its market share has [actually] been nudging downwards. Zoom may be a good win but it is unlikely to move the needle too much — and remember Zoom also buys cloud services from AWS,” Dinsdale told TechCrunch.

As for TikTok, Dinsdale like the rest of us wasn’t clear how that deal would ultimately play out, but he says even with both companies in the fold, it wasn’t going to shift market share as much as Oracle might hope. “Hypothetically, even if Zoom/TikTok helped Oracle increase its cloud infrastructure service revenues 50% over 12 months, which would be a real stretch, its market share would still be nearer to 2% than 3%. This compares with Google at 9%, Microsoft 18% and AWS 33%,” Dinsdale said.

He did point out that the company’s SaaS business is much stronger. “Broadening the scope a little to other cloud services, Oracle’s SaaS growth is running roughly in line with overall market SaaS market growth so market share is steady. Oracle’s share of the total enterprise SaaS market is running at around 6%, though if you drill down to the ERP segment it is obviously doing much better than that,” he said.

Canalys, another firm that follows the cloud infrastructure market says their numbers tell a similar story for Oracle. While it’s doing well in Saas with 7.8% market share, it’s struggling in IaaS/PaaS.

“For IaaS/PaaS, Oracle Cloud is at 1.9% for Q2 2020 and that isn’t moving much. The top 3 providers are AWS, Azure and Google Cloud, who have 30.8%, 20.2% and 6.2% respectively,” Blake Murray from Canalys told TechCrunch.

It’s worth keeping in mind that Google hired Diane Greene five years ago with the hope of accelerating its cloud infrastructure business. Former Oracle exec Thomas Kurian replaced her two years ago and the company’s market share still hasn’t reached double digits in spite of a period of big overall market growth, showing how much of a challenge it is to move the needle in a significant way.

Another big company, IBM bought Red Hat two years ago for $34 billion with an eye towards improving its cloud business, and while Red Hat has continued to do well, It does not seem to have much impact on the company’s overall cloud infrastructure market share, which has been superseded by Alibaba in fourth place, according to Synergy’s numbers. Both companies are in the single digits.

Synergy Research Q2 2020 cloud infrastructure market share graphs

Image Credits: Synergy Research

All that means, even with these two clients, the company still has a long way to go to be relevant in the cloud infrastructure arena in the near term. What’s unknown is if this new business will help act as lures for other new business over time, but for now it’s going to take a lot more than a couple of good deals to be relevant — and as Google and IBM have demonstrated, it’s extremely challenging to gain chunks of market share.


By Ron Miller

The $10B JEDI contract is locked, loaded, and still completely stuck

The other day I took a moment to count the number of stories we’ve done on TechCrunch on the DoD’s $10 billion, decade-long, winner-take-all, JEDI cloud contract. This marks the 30th time we’ve written about this deal over the last two years, and it comes after a busy week last week in JEDI cloud contract news.

That we’re still writing about this is fairly odd if you consider the winner was announced last October when the DoD chose Microsoft, but there is no end in sight to the on-going drama that is this procurement process.

Government contracts don’t typically catch our attention at TechCrunch, but this one felt different early on. There was the size and scope of the deal of course. There was the cute play on the Star Wars theme. There was Oracle acting like a batter complaining to the umpire before the first pitch was thrown. There was the fact that everyone thought Amazon would win until it didn’t.

There was a lot going on. In fact, there’s still a lot going on with this story.

Oracle doth protest too much

Let’s start with Oracle, which dispatched CEO Safra Catz to the White House in April 2018 even before the RFP had been written. She was setting the stage to complain that the deal was going to be set up to favor Amazon, something that Oracle alleged until the day Microsoft was picked the winner.

Catz had been on the Trump transition team and so had the ear of the president. While the president certainly interjected himself in this process, it’s not known how much influence that particular meeting might have had. Suffice to say that it was only the first volley in Oracle’s long war against the JEDI contract procurement process.

It would include official complaints with the Government Accountability Office and a federal lawsuit worth not coincidentally $10 billion. It would claim the contract favored Amazon. It would argue that the one-vendor approach wasn’t proper. It would suggest that because the DoD had some former Amazon employees helping write the RFP, that it somehow favored Amazon. The GAO and two court cases found otherwise, ruling against Oracle every single time.

It’s worth noting that the Court of Appeals ruling last week indicated that Oracle didn’t even meet some of the basic contractual requirements, all the while complaining about the process itself from the start.

Amazon continues to press protests

Nobody was more surprised that Amazon lost the deal than Amazon itself. It still believes to this day that it is technically superior to Microsoft and that it can offer the DoD the best approach. The DoD doesn’t agree. On Friday, it reaffirmed its choice of Microsoft. But that is not the end of this, not by a long shot.

Amazon has maintained since the decision was made last October that the decision-making process had been tainted by presidential interference in the process. They believe that because of the president’s personal dislike of Amazon CEO Jeff Bezos, who also owns the Washington Post, he inserted himself in the process to prevent Bezos’ company from winning that deal.

In January, Amazon filed a motion to stop work on the project until this could all be sorted out. In February, a judge halted work on the project until Amazon’s complaints could be heard by the court. It is September and that order is still in place.

In a blog post on Friday, Amazon reiterated its case, which is based on presidential interference and what it believes is technical superiority. “In February, the Court of Federal Claims stopped performance on JEDI. The Court determined AWS’s protest had merit, and that Microsoft’s proposal likely failed to meet a key solicitation requirement and was likely deficient and ineligible for award. Our protest detailed how pervasive these errors were (impacting all six technical evaluation factors), and the Judge stopped the DoD from moving forward because the very first issue she reviewed demonstrated serious flaws,” Amazon wrote in the post.

Microsoft for the win?

Microsoft on the other hand went quietly about its business throughout this process. It announced Azure Stack, a kind of portable cloud that would work well as a field operations computer system. It beefed up its government security credentials.

Even though Microsoft didn’t agree with the one-vendor approach indicating that the government would benefit more from the multi-vendor approach many of its customers were taking, it made clear if those were the rules, it was in it to win it — and win it did, much to the surprise of everyone, especially Amazon.

Yet here we are, almost a year later and in spite of the fact that the DoD found once again, after further review, that Microsoft is still the winner, the contract remains in limbo. Until that pending court case is resolved, we will continue to watch and wait and wonder if this will ever be truly over, and the JEDI cloud contract will actually be implemented.


By Ron Miller

Oracle loses $10B JEDI cloud contract appeal yet again

Oracle was never fond of the JEDI cloud contract process, that massive $10 billion, decade-long Department of Defense cloud contract that went to a single vendor. It was forever arguing to anyone who would listen that that process was faulty and favored Amazon.

Yesterday it lost another round in court when the U.S. Court of Appeals rejected the database giant’s argument that the procurement process was flawed because it went to a single vendor. It also didn’t buy that there was a conflict of interest because a former Amazon employee was involved in writing the DoD’s request for proposal criteria.

On the latter point, the court wrote, “The court addressed the question whether the contracting officer had properly assessed the impact of the conflicts on the procurement and found that she had.”

Further, the court found that Oracle’s case didn’t have merit in some cases because it failed to meet certain basic contractual criteria. In other cases, it didn’t find that the DoD violated any specific procurement rules with this bidding process.

This represents the third time the company has tried to appeal the process in some way, four if you include direct executive intervention with the president. In fact, even before the RFP had been released in April 2018, CEO Safra Catz brought complaints to the president that the bid favored Amazon.

In November 2018, the Government Accountability Office (GAO) denied Oracle’s protest that it favored Amazon or any of the other points in their complaint. The following month, the company filed a $10 billion lawsuit in federal court, which was denied last August. Yesterday’s ruling is on the appeal of that decision.

It’s worth noting that for all its complaints that the deal favored Amazon, Microsoft actually won the bid. Even with that determination, the deal remains tied up in litigation as Amazon has filed multiple complaints, alleging that the president interfered with the deal and that they should have won on merit.

As with all things related to this contract, the drama has never stopped.


By Ron Miller

Just what would an enterprise company like Microsoft or Oracle do with TikTok?

By now you’ve probably heard that under pressure from the current administration, TikTok owner ByteDance is putting the viral video service up for sale, and surprisingly a couple of big name enterprise companies are interested. These organizations are better known for the kind of tech that would bore the average TikTok user to tears. Yet, stories have persisted that Microsoft and even Oracle are sniffing around the video social network.

As TechCrunch’s Danny Crichton pointed out last week, bankers involved in the sale have a lot of motivation to leak rumors to the press to drive up the price of TikTok. That means none of this might be true, yet the rumors aren’t going away. It begs the question why would a company like Oracle or Microsoft be interested in a property like TikTok?

For starters, Oracle is a lot more than the database company it was known for in the past. These days, it has its fingers in many, many pies including marketing automation and cloud infrastructure services. In April, as the pandemic was just beginning to heat up, Zoom surprised just about everyone when it announced a partnership with Oracle’s cloud arm.

Oracle isn’t really even on the board when it comes to cloud infrastructure market share, where it is well behind rivals AWS, Microsoft, Google, Alibaba and IBM, wallowing somewhere in single digit market share. Oracle wants to be a bigger player.

Meanwhile, Microsoft has successfully transitioned to the cloud as well as any company, but still remains far behind AWS in the cloud infrastructure market. It wants to close the gap with AWS and owning TikTok could get it closer to that goal faster.

Simply put, says Holger Mueller, an analyst at Constellation Research, if Oracle combined Zoom and TikTok, it could have itself a couple of nice anchor clients. Yes, like the proverbial mall trying to attract Target and Nordstrom, apparently Oracle wants to do the same with its cloud service, and if it has to buy the tenant, so be it.

“TikTok will add plenty of load to their infrastructure service. That’s what matters to them with viral loads preferred. If Microsoft gets TikTok it could boost their usage by between 2% and 5%, while for Oracle it could be as much 10%,” he said. He says the difference is that Oracle has a much smaller user base now, so it would relatively boost its usage all the more.

As Mueller points out with the government helping push TikTok’s owner to make the sale, it’s a huge opportunity for a company like Oracle or Microsoft, and why the rumors have weight. “It’s very plausible from a cloud business perspective, and plausible from a business opportunity perspective created by the US government,” he said.

While it could make sense to attract a large user base to your systems to drive up usage and market share in that way, Brent Leary, founder and principal analyst at CRM Essentials, says that just by having a large U.S. tech company buy the video app, it could make it less attractive to the very users Microsoft or Oracle is hoping to capture.

“An old guard enterprise tech company buying Tiktok would likely lessen the appeal of current users. Younger people are already leaving Facebook because the old folks have taken it over,” Leary said. And that could mean young users, who are boosting the platform’s stats today could jump ship to whatever is the next big social phenomenon.

It’s worth pointing out that just today, the president indicated support for Oracle, according to a Wall Street Journal report. The publication also reported that Oracle’s billionaire owner Larry Ellison is a big supporter of the president, having thrown him a fundraiser for his reelection bid at his house earlier this year. Oracle CEO Safra Catz also has ties to the administration, having served on the transition team in 2016.

It’s unclear whether these companies have a genuine interest, but the general feeling is someone is going to buy the service, and whoever does could get a big boost in users simply by using some percentage of their cash hordes to get there. By the way, another company with reported interest is Twitter. Certainly putting the two social platforms together could create a mega platform to compete more directly with Facebook.

You might see other big names trying to boost cloud infrastructure usage like IBM or Google enter the fray.  Perhaps even Amazon could make an offer to cement its lead, although if the deal has to go through the federal government, that makes it less likely given the tense relationship between Amazon CEO Jeff Bezos and the president that surfaced during the Pentagon JEDI cloud contract drama.

Apple has already indicated that in spite of having the largest cash on hand of any company with over $193 billion, give or take, it apparently isn’t interested.  Apple may not be, but somebody surely is, even some companies you couldn’t imagine owning a property like this.


By Ron Miller

In surprise choice, Zoom hitches wagon to Oracle for growing infrastructure needs

With the company growing in leaps and bounds, Zoom went shopping for a cloud infrastructure vendor to help it with its growing scale problem. In a surprising choice, the company went with Oracle Cloud Infrastructure.

Zoom has become the go-to video conferencing service as much of the world has shut down due to the pandemic, and life needs to go on somehow. It has gone on via video conferencing with Zoom growing from 200 million active users in February to 300 million in March. That kind of growth puts a wee bit of pressure on your infrastructure, and Zoom clearly needed to beef up its game.

What’s surprising is that it chose Oracle, a company whose infrastructure market share registers as a strong niche player in Synergy Research’s latest survey in February. It is well behind market leaders including Amazon, Microsoft, Google, and even IBM (and that’s saying something).

Brent Leary, who is founder at CRM Essentials, says he sees this as a move to show that Zoom can move beyond the SMB market to power enterprise customers, no matter what they demand.

“I think Zoom went with Oracle because they are proven in the enterprise in terms of mission critical apps built on Oracle databases running on Oracle hardware in the cloud. Zoom needs to prove to enterprises that they are able to handle scale and data security needed to beyond what SMBs typically require,” Leary told TechCrunch.

In addition, Leary speculated that Oracle might have given Zoom a good deal to get a hot company into the fold and beat rivals like Amazon and Microsoft.

Others have speculated that it might have to do with keeping business away from a potential rival given that Amazon with Chime, Google with Hangouts and Microsoft with Teams all have competing products. However, none of them have become synonymous with online meetings as Zoom has during this crisis.

Zoom went public last year and has become the darling of the video conference market since in spite of a set of security issues that have developed as the company scaled, which they have been working to address.

The stock market is apparently not impressed with the choice. As we went to publish, the stock was down 3.38% or $5.56.


By Ron Miller

Want to survive the downturn? Better build a platform

When you look at the most successful companies in the world, they are almost never just one simple service. Instead, they offer a platform with a range of services and an ability to connect to it to allow external partners and developers to extend the base functionality that the company provides.

Aspiring to be a platform and actually succeeding at building one are not the same. While every startup probably sees themselves as becoming a platform play eventually, the fact is it’s hard to build one. But if you can succeed and your set of services become an integral part of a given business workflow, your company could become bigger and more successful than even the most optimistic founder ever imagined.

Look at the biggest tech companies in the world, from Microsoft to Oracle to Facebook to Google and Amazon. All of them offer a rich complex platform of services. All of them provide a way for third parties to plug in and take advantage of them in some way, even if it’s by using the company’s sheer popularity to advertise.

Michael A. Cusumano, David B. Yoffie and Annabelle Gawer, who wrote the book The Business of Platforms, wrote an article recently in MIT Sloan Review on The Future of Platforms, saying that simply becoming a platform doesn’t guarantee success for a startup.

“Because, like all companies, platforms must ultimately perform better than their competitors. In addition, to survive long-term, platforms must also be politically and socially viable, or they risk being crushed by government regulation or social opposition, as well as potentially massive debt obligations,” they wrote.

In other words, it’s not cheap or easy to build a successful platform, but the rewards are vast. As Cusumano, Yoffie and Gawer point out their studies have found, “…Platform companies achieved their sales with half the number of employees [of successful non-platform companies]. Moreover, platform companies were twice as profitable, were growing twice as fast, and were more than twice as valuable as their conventional counterparts.”

From an enterprise perspective, look at a company like Salesforce . The company learned long ago that it couldn’t possibly build every permutation of customer requirements with a relatively small team of engineers (especially early on), so it started to build hooks into the platform it had built to allow customers and consultants to customize it to meet the needs of individual organizations.

Eventually Salesforce built APIs, then it built a whole set of development tools, and built a marketplace to share these add-ons. Some startups like FinancialForce, Vlocity and Veeva have built whole companies on top of Salesforce.

Rory O’Driscoll, a partner at Scale Venture Partners, speaking at a venture capitalist panel at BoxWorks in 2014 said that many startups aspire to be platforms, but it’s harder than it looks. “You don’t make a platform. Third party developers only engage when you achieve a critical mass of users. You have to do something else and then become a platform. You don’t come fully formed as a platform,” he said at the time.

If you’re thinking, how you could possibly start a company like that in the middle of a massive economic crisis, consider that Microsoft launched in 1975 in the middle of recession. Google and Salesforce both launched in the late 1990s, just ahead of the dot-com crash and Facebook launched in 2004, four years before the massive downturn in 2008. All went on to become tremendously successful companies

That success often requires massive spending and sales and marketing burn, but when it works the rewards are enormous. Just don’t expect that it’s an easy path to success.


By Ron Miller

Salesforce co-CEO Keith Block steps down

Salesforce today announced that Keith Block, the company’s co-CEO, is stepping down. This leaves company founder Marc Benioff as the sole CEO and chair of the CRM juggernaut. Block’s bio has already been wiped from Salesforce’s leadership page.

Block stepped into the co-CEO role in 2018, after a long career at the company that saw him become vice chairman, president and director before he took this position. Block spent the early years of his career at Oracle . He left there in 2012 after the release of a number of documents in which he criticized then-Oracle CEO Mark Hurd, who passed away last year.

Industry pundits saw his elevation to the co-CEO role as a sign that Block was next in line as the company’s sole CEO in the future (assuming Benioff would ever step down). After this short tenure as co-CEO, it doesn’t look like that will be the case, but for the time being, Block will stay on as an advisor to Benioff.

“It’s been my greatest honor to lead the team with Marc [Benioff] that has more than quadrupled Salesforce from $4 billion of revenue when I joined in 2013 to over $17 billion last year,” said Block in a canned statement that was surely not written by the Salesforce PR team. “We are now a global enterprise company, focused on industries, and have an ecosystem that is the envy of the industry, and I’m so grateful to our employees, customers, and partners. After a fantastic run I am ready for my next chapter and will stay close to the company as an advisor. Being side-by-side with Marc has been amazing and I’m forever grateful for our friendship and proud of the trajectory the company is on.”

In related news, the company also today announced that it has named former BT Group CEO Gavin Patterson as its president and CEO of Salesforce International.


By Frederic Lardinois

Thomas Kurian on his first year as Google Cloud CEO

“Yes.”

That was Google Cloud CEO Thomas Kurian’s simple answer when I asked if he thought he’d achieved what he set out to do in his first year.

A year ago, he took the helm of Google’s cloud operations — which includes G Suite — and set about giving the organization a sharpened focus by expanding on a strategy his predecessor Diane Greene first set during her tenure.

It’s no secret that Kurian, with his background at Oracle, immediately put the entire Google Cloud operation on a course to focus on enterprise customers, with an emphasis on a number of key verticals.

So it’s no surprise, then, that the first highlight Kurian cited is that Google Cloud expanded its feature lineup with important capabilities that were previously missing. “When we look at what we’ve done this last year, first is maturing our products,” he said. “We’ve opened up many markets for our products because we’ve matured the core capabilities in the product. We’ve added things like compliance requirements. We’ve added support for many enterprise things like SAP and VMware and Oracle and a number of enterprise solutions.” Thanks to this, he stressed, analyst firms like Gartner and Forrester now rank Google Cloud “neck-and-neck with the other two players that everybody compares us to.”

If Google Cloud’s previous record made anything clear, though, it’s that technical know-how and great features aren’t enough. One of the first actions Kurian took was to expand the company’s sales team to resemble an organization that looked a bit more like that of a traditional enterprise company. “We were able to specialize our sales teams by industry — added talent into the sales organization and scaled up the sales force very, very significantly — and I think you’re starting to see those results. Not only did we increase the number of people, but our productivity improved as well as the sales organization, so all of that was good.”

He also cited Google’s partner business as a reason for its overall growth. Partner influence revenue increased by about 200% in 2019, and its partners brought in 13 times more new customers in 2019 when compared to the previous year.


By Frederic Lardinois

Google brings IBM Power Systems to its cloud

As Google Cloud looks to convince more enterprises to move to its platform, it needs to be able to give businesses an onramp for their existing legacy infrastructure and workloads that they can’t easily replace or move to the cloud. A lot of those workloads run on IBM Power Systems with their Power processors and until now, IBM was essentially the only vendor that offered cloud-based Power systems. Now, however, Google is also getting into this game by partnering with IBM to launch IBM Power Systems on Google Cloud.

“Enterprises looking to the cloud to modernize their existing infrastructure and streamline their business processes have many options,” writes Kevin Ichhpurani, Google Cloud’s corporate VP for its global ecosystem in today’s announcement. “At one end of the spectrum, some organizations are re-platforming entire legacy systems to adopt the cloud. Many others, however, want to continue leveraging their existing infrastructure while still benefiting from the cloud’s flexible consumption model, scalability, and new advancements in areas like artificial intelligence, machine learning, and analytics.”

Power Systems support obviously fits in well here, given that many companies use them for mission-critical workloads based on SAP and Oracle applications and databases. With this, they can take those workloads and slowly move them to the cloud, without having to re-engineer their applications and infrastructure. Power Systems on Google Cloud is obviously integrated with Google’s services and billing tools.

This is very much an enterprise offering, without a published pricing sheet. Chances are, given the cost of a Power-based server, you’re not looking at a bargain, per-minute price here.

Since IBM has its own cloud offering, it’s a bit odd to see it work with Google to bring its servers to a competing cloud — though it surely wants to sell more Power servers. The move makes perfect sense for Google Cloud, though, which is on a mission to bring more enterprise workloads to its platform. Any roadblock the company can remove works in its favor and as enterprises get comfortable with its platform, they’ll likely bring other workloads to it over time.


By Frederic Lardinois

Even after Microsoft wins, JEDI saga could drag on

The DoD JEDI contract saga came to a thrilling conclusion on Friday afternoon, appropriately enough, with one final plot twist. The presumptive favorite, Amazon did not win, stunning many, including likely the company itself. In the end, Microsoft took home the $10 billion prize.

This contract was filled with drama from the beginning, given the amount of money involved, the length of the contract, the winner-take-all nature of the deal — and the politics. We can’t forget the politics. This was Washington after all and Jeff Bezos does own the Washington Post.

Then there was Oracle’s fury throughout the procurement process. The president got involved in August. The current defense secretary recused himself on Wednesday, two days before the decision came down. It was all just so much drama, even the final decision itself, handed down late Friday afternoon, but it’s unclear if this is the end or just another twist in this ongoing tale.

Some perspective on $10 billion

Before we get too crazy about Microsoft getting a $10 billion, 10 year contract, consider that Amazon earned $9 billion last quarter alone in cloud revenue. Microsoft reported $33 billion last quarter in total revenue. It reported around $11 billion in cloud revenue. Synergy Research pegs the current cloud infrastructure market at well over $100 billion annually (and growing).

What we have here is a contract that’s worth a billion a year. What’s more, it’s possible it might not even be worth that much if the government uses one of its out clauses. The deal is actually initially guaranteed for just two years. Then there are a couple of three-year options, with a final two-year option at the end if gets that far.

The DOD recognized that with the unique nature of this contract, going with a single vendor, it wanted to keep its options open should the tech world shift suddenly under its feet. It didn’t want to be inextricably tied to one company for a decade if that company was suddenly disrupted by someone else. Given the shifting sands of technology, that part of the strategy was a wise one.

Where the value lies

If value of this deal was not the contract itself, it begs the question, why did everyone want it so badly? The $10 billion JEDI deal was simply a point of entree. If you could modernize the DoD’s infrastructure, the argument goes, chances are you could do the same for other areas of the government. It could open the door for Microsoft for a much more lucrative government cloud business.

But it’s not as though Microsoft didn’t already have a lucrative cloud business. In 2016, for example, the company signed a deal worth almost a billion dollars to help move the entire department to Windows 10. Amazon too, has had its share of government contracts, famously landing the $600 million to build the CIA’s private cloud.

But given all the attention to this deal, it always felt a little different from your standard government contract. Just the fact the DoD used a Star Wars reference for the project acronym drew more attention to the project from the start. Therefore, there was some prestige for the winner of this deal, and Microsoft gets bragging rights this morning, while Amazon is left to ponder what the heck happened. As for other companies like Oracle, who knows how they’re feeling about this outcome.

Hell hath no fury like Oracle scorned

Ah yes Oracle; this tale would not be complete without discussing the rage of Oracle throughout the JEDI RFP process. Even before the RFP process started, they were complaining about the procurement process. Co-CEO Safra Catz had dinner with the president to complain that contract process wasn’t fair (not fair!). Then it tried complaining to the Government Accountability Office. They found no issue with the process.

They went to court. The judge dismissed their claims that involved both the procurement process and that a former Amazon employee, who was hired by DoD, was involved in the process of creating the RFP. They claimed that the former employee was proof that the deal was tilted toward Amazon. The judge disagreed and dismissed their complaints.

What Oracle could never admit, was that it simply didn’t have the same cloud chops that Microsoft and Amazon, the two finalists, had. It couldn’t be that they were late to the cloud or had a fraction of the market share that Amazon and Microsoft had. It had to be the process or that someone was boxing them out.

What Microsoft brings to the table

Outside of the politics of this decision (which we will get to shortly), Microsoft brought some experience and tooling the table that certainly gave it some advantage in the selection process. Until we see the reasons for the selections, it’s hard to know exactly why DoD chose Microsoft, but we know a few things.

First of all there are the existing contracts with DoD, including the aforementioned Windows 10 contract and a five year $1.76 billion contract with DoD Intelligence to provide “innovative enterprise services” to the DoD.

Then there is Azure Stack, a portable private cloud stack that the military could stand up anywhere. It could have great utility for missions in the field when communicating with a cloud server could be problematic.

Fool if you think it’s over

So that’s that right? The decision has been made and it’s time to move on. Amazon will go home and lick its wounds. Microsoft gets bragging rights and we’re good. Actually, this might not be where it ends at all.

Amazon for instance could point to Jim Mattis’ book where he wrote that the president told the then Defense Secretary to “screw Bezos out of that $10 billion contract.” Mattis says he refused saying he would go by the book, but it certainly leaves the door open to a conflict question.

It’s also worth pointing out that Jeff Bezos owns the Washington Post and the president isn’t exactly in love with that particular publication. In fact, this week, the White House canceled its subscription and encouraged other government agencies to do so as well.

Then there is the matter of current Defense Secretary Mark Espers suddenly recusing himself last Wednesday afternoon based on a minor point that one of his adult children works at IBM (in a non-cloud consulting job). He claimed he wanted to remove any hint of conflict of interest, but at this point in the process, it was down to Microsoft and Amazon. IBM wasn’t even involved.

If Amazon wanted to protest this decision, it seems it would have much more solid ground to do so than Oracle ever had.

The bottom line is a decision has been made, at least for now, but this process has been rife with controversy from the start, just by the design of the project, so it wouldn’t be surprising to see Amazon take some protest action of its own. It seems oddly appropriate.


By Ron Miller

In latest $10B JEDI contract twist, Defense Secretary recuses himself

The JEDI drama never stops. The $10 billion, decade long cloud contract has produced a series of twists and turns since the project was announced in 2018. These include everything from court challenges to the president getting involved to accusations of bias and conflict of interest. It has had all this and more. Today, in the latest plot twist, the Secretary of Defense Mark Esper recused himself from the selection process because one of his kids works at a company that was involved earlier in the process.

Several reports name his son, Luke Esper, who has worked at IBM since February. The RFP closed in April and Esper is a Digital Strategy Consultant, according to his LinkedIn page, but given the persistent controversy around this deal, his dad apparently wanted to remove even a hint of impropriety in the selection and review process.

Chief Pentagon Spokesperson Jonathan Rath Hoffman issued an official DoD Cloud update earlier today:

“As you all know, soon after becoming Secretary of Defense in July, Secretary Esper initiated a review of the Department’s cloud computing plans and to the JEDI procurement program. As part of this review process he attended informational briefings to ensure he had a full understanding of the JEDI program and the universe of options available to DoD to meet its cloud computing needs. Although not legally required to, he has removed himself from participating in any decision making following the information meetings, due to his adult son’s employment with one of the original contract applicants. Out of an abundance of caution to avoid any concerns regarding his impartiality, Secretary Esper has delegated decision making concerning the JEDI Cloud program to Deputy Secretary Norquist. The JEDI procurement will continue to move to selection through the normal acquisition process run by career acquisition professionals.”

Perhaps the biggest beef around this contract, which was supposed to be decided in August, has been the winner-take-all nature of the deal. Only one company will eventually walk away a winner, and there was a persistent belief in some quarters that the deal was designed specifically with Amazon in mind. Oracle’s Co-CEO Safra Catz took that concern directly to the president in 2018.

The DoD has repeatedly denied there was any vendor in mind when it created the RFP, and internal Pentagon reviews, courts and a government watchdog agency repeatedly found the procurement process was fair, but the complaints continue. The president got involved in August when he named his then newly appointed defense secretary to look into the JEDI contract procurement process. Now Espers is withdrawing from leading that investigation, and it will be up to others including his Deputy Secretary to finally bring this project over the finish line.

Last April, the DoD named Microsoft and Amazon as the two finalists. It’s worth pointing out that both are leaders in Infrastructure as a Service marketshare with around 16% and 33% respectively.

It’s also worth noting that while $10 billion feels like a lot of money, it’s spread out over a 10-year period with lots of possible out clauses built into the deal. To put this deal size into perspective, a September report from Synergy Research found that worldwide combined infrastructure and software service spending in the cloud had already reached $150 billion, a number that is only expected to continue to rise over the next several years as more companies and government agencies like the DoD move more of their workloads to the cloud.

For complete TechCrunch JEDI coverage, see the Pentagon JEDI Contract.


By Ron Miller

Amazon migrates more than 100 consumer services from Oracle to AWS databases

AWS and Oracle love to take shots at each other, but as much as Amazon has knocked Oracle over the years, it was forced to admit that it was in fact a customer. Today in a company blog post, the company announced it was shedding Oracle for AWS databases, and had effectively turned off its final Oracle database.

The move involved 75 petabytes of internal data stored in nearly 7,500 Oracle databases, according to the company. “I am happy to report that this database migration effort is now complete. Amazon’s Consumer business just turned off its final Oracle database (some third-party applications are tightly bound to Oracle and were not migrated),” AWS’s Jeff Barr wrote in the company blog post announcing the migration.

Over the last several years, the company has been working to move off of Oracle databases, but it’s not an easy task to move projects on Amazon scale. Barr wrote there were lots of reasons the company wanted to make the move. “Over the years we realized that we were spending too much time managing and scaling thousands of legacy Oracle databases. Instead of focusing on high-value differentiated work, our database administrators (DBAs) spent a lot of time simply keeping the lights on while transaction rates climbed and the overall amount of stored data mounted,” he wrote.

More than 100 consumer services have been moved to AWS databases including customer-facing tools like Alexa, Amazon Prime and Twitch among others. It also moved internal tools like AdTech, its fulfillment system, external payments and ordering. These are not minor matters. They are the heart and soul of Amazon’s operations.

Each team moved the Oracle database to an AWS database service like Amazon DynamoDB, Amazon Aurora, Amazon Relational Database Service (RDS), and Amazon Redshift. Each group was allowed to choose the service they wanted, based on its individual needs and requirements.

 


By Ron Miller

India’s Darwinbox raises $15M to bring its HR tech platform to more Asian markets

An Indian SaaS startup, which is increasingly courting clients from outside of the country, just raised a significant amount of capital to expand its business.

Hyderabad-based Darwinbox, which operates a cloud-based human resource management platform, said on Thursday it has raised $15 million in a new financing round. The Series B round — which moves the firm’s total raise to $19.7 million — was led by Sequoia India and saw participation from existing investors Lightspeed India Partners, Endiya Partners, and 3one4 Capital.

More than 200 firms including giants such as adtech firm InMobi, fintech startup Paytm, drink conglomerate Bisleri, automobile maker Mahindra, Kotak group, and delivery firms Swiggy and Milkbasket use Darwinbox’s HR platform to serve half a million of their employees in 50 nations, Rohit Chennamaneni, cofounder of Darwinbox, told TechCrunch in an interview.

The startup, which competes with giants such as SAP and Oracle, said its platform enables high level of configurability, ease of use, and understands the needs of modern employees. “The employees today who have grown accustomed to using consumer-focused services such as Uber and Amazon are left disappointed in their experience with their own firm’s HR offerings,” said Gowthami Kanumuru, VP Marketing at Darwinbox, in an interview.

Darwinbox’s HR platform offers a range of features including the ability for firms to offer their employees insurance and early salary as loans. Its platform also features social networks for employees within a company to connect and talk, as well as an AI assistant that allows them to apply for a leave or set up meetings with quick voice commands from their phone.

“The AI system is not just looking for certain keywords. If an employee tells the system he or she is not feeling well today, it automatically applies a leave for them,” she said.

Darwinbox’s platform is built to handle onboarding new employees, keeping a tab on their performance, monitor attrition rate, and maintain an ongoing feedback loop. Or as Kanumuru puts it, the entire “hiring to retiring” cycle.

One of Darwinbox’s clients is L&T, which is tasked with setting up subway in many Indian cities. L&T is using geo-fencing feature of Darwin to log the attendance of employees. “They are not using biometric punch machine that is typically used by other firms. Instead, they just require their 1,200 employees to check-in from the workplace using their phones,” said Kanumuru.

darwinbox event

Additionally, Darwinbox is largely focusing on serving companies based in Asia as it believes Western companies’ solutions are not a great fit for people here, said Kanumuru. The startup began courting clients in Southeast Asian markets last year.

“Our growth is a huge validation for our vision,” she said. “Within six months of operations, we had the delivery giant Delhivery with over 23,000 employees use our platform.”

In a statement to TechCrunch, Dev Khare, a partner at Lightspeed Venture, said, “there is a new trend of SaaS companies targeting the India/SE Asia markets. This trend is gathering steam and is disproving the conventional wisdom that Asia-focused SaaS companies cannot get to be big companies. We firmly believe that Asia-focused SaaS companies can get to large impact value and become large and profitable. Darwinbox is one of these companies.”

Darwinbox’s Chennamaneni said the startup will use the fresh capital to expand its footprints in Indonesia, Malaysia, Thailand, and other Southeast Asian markets. Darwinbox will also expand its product offerings to address more of employees’ needs. The startup is also looking to make its platform enable tasks such as booking of flights and hotels.

Chennamaneni, an alum of Google and McKinsey, said Darwinbox aims to double the number of clients it has in the next six to nine months.


By Manish Singh

New investment firm wants to change the way we fund early stage companies — from New Hampshire

The three founders of York IE have a vision about how to change the way early stage startups get funding. They have experience shattering norms, having built a successful startup, Dyn, in Manchester, New Hampshire, which is not exactly a hot-bed of startup activity.

The founders want to take that same spirit and apply it to investing, while maintaining its headquarters in New Hampshire (and Boston). In fact, the three founders — Kyle York, Joe Raczka and Adam Coughlin — launched Dyn and built it to $30 million in ARR before taking a dime in venture funding. They went onto raise $88 million before being acquired by Oracle in 2016. They believe they can apply the lessons that they learned to other early stage startups.

“We think, especially in B2B and SaaS, there is a way to build a scalable, effective and efficient business without chasing massive fund raises, diluting your company, bringing on traditional venture investors and chasing those kind of on-paper vanity metrics,” company CEO and co-founder Kyle York told TechCrunch.

For the past five years, while working at Oracle after the acquisition, the founders have been testing their theories while advising startups and acting as angel investors. They believed it was time to take all of those learnings and apply it to their own firm.

“I started thinking about how to transition out of Oracle, and what I wanted to do from a career perspective and we wanted to build a modern investment firm less focused on how to deploy as much capital as possible for the limited partners, and more on working with the entrepreneurs to help coach them on a path to success,” York said.

The company still wants to act as investors, and to make money along the way, but they want to help build more solid, grounded companies. York says that they want the founders truly understand that they are selling a part of their company in exchange for those dollars, and that it makes sense to have a strong foundation before taking on money.

York wants to change this culture of fund raising for fund raising’s sake. He acknowledges that some companies with deep tech or deep infrastructure require that kind of substantial up-front investment to get off the ground, but SaaS companies are supposed to be able to take advantage of modern technology to build companies more easily, and he wants to see them build solid companies first and foremost.

“The goal shouldn’t be to raise more capital. The goal should be to build a healthy successful, scalable company,” he said.

To put their money where their mouth is, the new firm will not take management fees. “We are investing like a normal investor and coming through with an equity position, but we are betting on the future. In essence, if the startup wins, then we win.”


By Ron Miller

Oracle files new appeal over Pentagon’s $10B JEDI cloud contract RFP process

You really have to give Oracle a lot of points for persistence, especially where the $10 billion JEDI cloud contract procurement process is concerned. For more than a year, the company has been complaining  across every legal and government channel it can think of. In spite of every attempt to find some issue with the process, it has failed every time. That did not stop it today from filing a fresh appeal of last month’s federal court decision that found against the company.

Oracle refuses to go quietly into that good night, not when there are $10 billion federal dollars on the line, and today the company announced it was appealing Federal Claims Court Senior Judge Eric Bruggink’s decision. This time they are going back to that old chestnut that the single-award nature of the JEDI procurement process is illegal:

“The Court of Federal Claims opinion in the JEDI bid protest describes the JEDI procurement as unlawful, notwithstanding dismissal of the protest solely on the legal technicality of Oracle’s purported lack of standing. Federal procurement laws specifically bar single award procurements such as JEDI absent satisfying specific, mandatory requirements, and the Court in its opinion clearly found DoD did not satisfy these requirements. The opinion also acknowledges that the procurement suffers from many significant conflicts of interest. These conflicts violate the law and undermine the public trust. As a threshold matter, we believe that the determination of no standing is wrong as a matter of law, and the very analysis in the opinion compels a determination that the procurement was unlawful on several grounds,” Oracle’s General Counsel Dorian Daley said in a statement.

In December, Oracle sued the government for $10 billion, at the time focusing mostly on a perceived conflict of interest involving a former Amazon employee named Deap Ubhi. He worked for Amazon prior to joining the DOD, where he worked on a committee of people writing the RFP requirements, and then returned to Amazon later. The DOD investigated this issue twice, and found no evidence he violated federal conflict of interest of laws.

The court ultimately agreed with the DOD’s finding last month, ruling that Oracle had failed to provide evidence of a conflict, or that it had impact on the procurement process. Judge Bruggink wrote at the time:

We conclude as well that the contracting officer’s findings that an organizational conflict of interest does not exist and that individual conflicts of interest did not impact the procurement, were not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Plaintiff’s motion for judgment on the administrative record is therefore denied.

The company started complaining and cajoling even before the JEDI RFP process started. The Washington Post reported that Oracle’s Safra Catz met with the president in April, 2018 to complain that the process was unfairly stacked in favor of Amazon, which happens to be the cloud market share leader by a significant margin, with more than double that of its next closest rival, Microsoft.

Later, the company filed an appeal with the Government Accountability Office, which found no issue with the RFP process. The DOD, which has insisted all along there was no conflict in the process, also did in an internal investigation and found no wrong-doing.

The president got involved last month when he ordered Defense Secretary Mark T. Esper to look into the idea that, once again, the process has favored Amazon. That investigation is ongoing. The DOD did name two finalists, Amazon and Microsoft, in April, but has yet to name the winner as the protests, court cases and investigations continue.

The controversy in part involves the nature of the contract itself. It is potentially a decade-long undertaking to build the cloud infrastructure for the DOD, involves the award of a single vendor (although there are several opt-out clauses throughout the term of the contract) and involves $10 billion and the potential for much more government work. That every tech company is salivating for that contract is hardly surprising, but Oracle alone continues to protest at every turn.

The winner was supposed to be announced this month, but with the Pentagon investigation in progress, and another court case underway, it could be some time before we hear who the winner is.


By Ron Miller