In a recent interview with Kara Swisher, it has become clear that Oracle CEO Larry Ellison has reversed course in his thinking and jumped on the cloud computing bandwagon. “I like the word ‘cloud’ because it’s a charismatic brand,” Ellison said. Obviously, his comments are part of his “shock and awe” rant as Oracle launches new cloud-based products this month.  

Ellison’s sudden love for cloud computing did not surprise me – but what did surprise me was his claim that the word itself is compelling.  Hmmm, that is just silly and ducking the real issue.  Although dominant in the market, the fact Oracle is now jumping in head first with cloud offerings indeed shows how far cloud computing has come.  Companies like Oracle should deliver economies of scale and give their customers the ability to enjoy business benefits without them having to coble all the pieces together themselves.  The need to deliver economies of scale is nothing new, but remains as important as ever.

I had a conversation with a customer a few years ago regarding what is “cloud computing” really should deliver – economy of scale.  This customer was on the application side and had to request compute resources from the mainframe team.  In fact, he was annually charged a fee for the number of flops (floating point operations per second) that he needed on annual basis.  His gripe was that his costs were going up, not because he had more work, but because the compute team kept raising their internal costs for their services (cost per flop in this case).

Where is the economy of scale?  Cloud is not gaining momentum because of charisma, but because it delivers economies of scale.   The promise of better utilization based on needs from the business and the idea of sharing common infrastructure should deliver better economics.

I think Ellison sees that their customers are now striving to cut costs, gain economies of scale from mission-critical applications like ERP cloud services.   So charisma aside, it’s clear that Oracle’s customers are asking for cloud solutions – and if they do not deliver their competitors will!