Oracle CEO Urges Enterprises to Ditch Data Centers and Move to Cloud

SAN JOSE, Calif. —When it comes to the enterprise, all roads lead to cloud computing—or at least they should, according to Oracle CEO Mark Hurd.

In a keynote here at Oracle’s Modern Supply Chain Experience conference Jan. 30, Hurd said innovation and adoption of new technology in the enterprise is stifled because a huge portion of IT budgets is spent maintaining older systems.

“Most of IT is spent on the status quo and keeping old systems running. The average age of apps is 20 years old and they weren’t built for mobile or the web,” said Hurd.

Hurd, formerly CEO of HP, recalled the days when big IT companies such as HP and IBM controlled much of the market for hardware and software because computer systems were vertically integrated. He blamed Silicon Valley companies for giving customers too many choices.

“The Valley beat the hell out of IBM. It was great for customers; buy a server from this guy and that guy and make those companies compete for my business,” said Hurd. “You had Intel chips from four or five different server vendors and middleware from five or more companies. Applications were mostly home grown with help from the services companies.”

While Silicon Valley is usually lauded for its innovation and driving down prices, Hurd said all the new companies and products helped spawn what today is a $200 billion industry of system integrators that enterprises need to help their disparate systems work together.

“You now have IT staffs trying to put all this together and that’s why there is no money; it’s been built as a kludge of independent systems that don’t work together,” said Hurd. 

Now cloud computing promises to free IT to innovate and better address other issues like security, said Hurd.

“CEOs and CFOs have to get out of the data center business. The $200 billion system integrator industry is non-sustainable,” said Hurd.

With the Oracle Cloud and other cloud systems, customers don’t update their systems, the updates come to them automatically. The same is true for the latest security updates and patches keeping systems more current at a cost that Hurd said will always be much cheaper than maintaining your own data center.

“The likelihood you’re more secure than if you used an enterprise cloud provider is zero,” said Hurd. “Oracle Cloud will be more secure than any individual customer could hope to be.”

Software development and testing is also a big IT expense, consuming as much as one third of IT budgets. But as cloud computing is more widely adopted, Hurd predicts virtually none of it will be done on premises.

Wrapping up his pitch for cloud computing, Hurd said companies should start experimenting if they haven’t already. “The good news is that you can do this modularly; you don’t have to rip and replace everything.”

Speakers at a customer panel underscored the benefits of moving to the cloud.Jason Schwartz, the chief operating officer at Incipio Group, said his company has been managing three different ERP systems because of acquisitions, but now plans to consolidate those to a single ERP system on the Oracle Cloud.

Among other products, Incipio sells a variety of smartphone and device cases under the Griffin brand name and others. Schwartz said moving to the cloud is crucial to helping the company respond quicker to changes in the market. 

“We’ve had tremendous growth over the past five years including acquisitions, which has increased the complexity of the supply chain,” said Schwartz. One of the company’s biggest sellers is cases for the iPhone. But when Apple’s delivery of the iPhone X was delayed until November it disrupted Incipio’s plans. “It was like Christmas had been moved to February,” said Schwartz. 

As a third-party supplier, Incipio finds out what the new iPhone specifications are about the same time as consumers do. “We have to build a predictive model and also respond to changes in demand,” said Schwartz. “We also don’t know how many Apple will make or make available to mass market retailers.” 

Schwartz has experience working at other companies with on-premises systems that required patching and updates. “We just don’t have the staff to do all that work anymore. We looked at Oracle Cloud as a lower cost, but still powerful solution,” said Schwartz. “It’s also has a faster implementation than any on-premise solution and doesn’t require a large IT staff. Running three ERPs is painful and costly for us. 

Results of an online survey released Jan. 31 indicate growing enterprise adoption of the hybrid cloud model that maintains some on-premises capabilities. 

Almost half (46 percent) of those who responded to a survey by data virtualization provider Denodo said they are leveraging a hybrid cloud model. The survey also found that 56 percent of respondents reported they are planning a cloud initiative in 2018.