Kèjīn · Hard Technology | Fifteen years have passed, and no one can be separated from Oracle.

Author | Geng Chenfei

Editor | Song Wanxin

In June 2021, Postal Savings Bank of China announced a procurement transaction announcement worth 145 million yuan. It is worth noting that there is only one bidder and one winning bidder, Oracle.

"Currently, multiple core production systems use Oracle databases for data storage and processing, and they cannot be replaced." Postal Savings Bank of China appears rather helpless in the announcement.

After years of promoting the localization of databases, Oracle's influence in China has not yet been eliminated.

Among a group of technology stocks, Oracle's presence is not very high, but its stock price performance is not low-key. Since the beginning of this year, Oracle's stock price has accumulated a nearly 70% increase, outperforming Microsoft and Google, becoming the large technology stock second only to NVIDIA. If the time line is further extended, it can be found that Oracle's stock price has reached its historical high.

Chart: Changes in Oracle's stock price since its listing; Image source: Wind

Melius Research analysts wrote: "For a company whose growth rate will exceed that of Salesforce and Adobe, it is difficult for us not to give a 25 times valuation."

01 Who is driving Oracle's soaring?

Oracle started in the relational database business.

A database is a software product used for storing and managing data. It can be simply understood as a large data warehouse and is known as one of the three major software components along with the operating system and middleware. The technical difficulty of a database lies in how to achieve efficient storage and rapid retrieval under massive data.

In the 1990s, with the surging demand for databases from Internet companies, Oracle rapidly rose and grew. At its peak, Oracle's share in the database market even exceeded the sum of IBM and Microsoft.

However, with the development of big data and cloud computing, more and more users are replacing traditional data centers with cloud data centers. This change has two impacts: First, the replacement frequency of traditional servers is gradually decreasing, impacting Oracle's server business; Second, the demand for unstructured databases in cloud computing is increasing, which poses a blow to Oracle's business model centered on structured databases.

In this context, this veteran IT giant embarked on the path of cloud transformation, catching up with competitors through a series of measures such as acquisitions, layoffs, and adjustments to the organizational framework.

Oracle transformed its on-premises applications into cloud-based services, and gradually expanded its cloud ecosystem by adding services such as enterprise resource planning (ERP), customer relationship management (CRM), and healthcare IT management. In addition, Oracle also launched its own cloud platform - Oracle Cloud Infrastructure (OCI).

According to the previously announced first-quarter results of fiscal year 2025, Oracle's cloud business revenue was $5.6 billion, a year-on-year increase of 21%, of which $2.2 billion came from cloud infrastructure revenue, a year-on-year increase of 45%.

Oracle CEO Katz said in a statement: "As cloud services become Oracle's largest business, our operating income and earnings per share are accelerating."

In the first quarter, Oracle's revenue increased by 6.86% year-on-year to $13.307 billion; under the Non-GAAP accounting standard, operating profit increased by 14% year-on-year to $5.7 billion; earnings per share was $1.39, higher than the analysts' average expectation of $1.33.

At the same time, Oracle's strong expectations have also boosted the market.

Katz said that driven by the strong demand for artificial intelligence workloads, it is expected that in the current fiscal year ending in May 2025, Oracle's revenue growth will reach double digits. In addition, she also revealed that Oracle's cloud infrastructure department is expected to grow by more than 50% this fiscal year.

The financial report shows that Oracle's remaining performance obligation (RPO) reached $99 billion, setting a new company record and far exceeding the market expectation of $73.9 billion. Katz further pointed out that it is expected that approximately 38% of the RPO will be recognized as revenue within the next 12 months.

Although Oracle missed the opportunity for cloud computing transformation, this may also have made it a blessing in disguise.

The Wall Street Journal pointed out that many of Oracle's 162 data centers were newly built in recent years to develop artificial intelligence models. Compared with those data centers built earlier, Oracle's new data centers are more adapted to the current AI development needs, which gives it an advantage in the competition.

"Oracle is the only hyperscale provider that can offer a complete technology stack from cloud infrastructure to cloud platform to enterprise-level cloud applications." John DiFucci of investment firm Guggenheim said straightforwardly.

At the same time, Oracle did not develop its own large-scale artificial intelligence model to compete with potential customers, which also makes it be regarded as a neutral and non-threatening participant, thereby helping it turn competitors into partners.

In September this year, Oracle announced a new partnership with competitor Amazon to advance its multi-cloud strategy. Prior to this, Oracle has already reached cooperation with OpenAI, Microsoft, Google, etc., to attract more customers by expanding its cloud infrastructure and further expand its business coverage.

In the earnings call, Oracle boss Ellison told analysts that customers recently signed contracts to purchase more than $2 billion in capacity for Oracle's "second-generation cloud" products.

02 After 15 years of "De-Oracle", Have Domestic Databases Made Money?

For many years in the past, most of China's commercial data systems used the "IOE" architecture.

The so-called "IOE" refers to IBM's minicomputer + Oracle's database + EMC's storage. The "IOE" architecture was almost unbeatable for a long time.

As the first world software giant to enter China, Oracle sold its database products to the mainland in the 1980s.

At that time, it coincided with the wave of informatization of state-owned enterprises in the fields of finance and telecommunications in China. However, due to the fact that businesses such as finance and telecommunications often have extremely high requirements for system stability, and in some key services, domestic databases and overseas software cannot be interconnected, overseas products have thus formed a de facto monopoly.

Oracle, IBM, and Microsoft took advantage of the situation and won a large number of database orders from key departments such as the government, finance, energy, and electricity. According to IDC's research, Oracle's market share in China reached its peak in 2008, close to 50%.

In 2009, Ali took the lead in shouting the slogan of "De-IOE".

At that time, with the continuous expansion of Ali's business scale, the traditional IOE could no longer meet the needs of e-commerce and other businesses, and the maintenance cost of IOE was very high. Taking Oracle as an example, in addition to paying a one-time fee according to the number of servers when purchasing the software, there is also an annual technical service fee of about 22%.

Therefore, Ali chose to replace the minicomputer with PC servers, replace Oracle's database with its self-developed database OceanBase, and replace EMC's storage with Aliyun.

On May 17, 2013, Ali's last IBM minicomputer was offline in Alipay. Two months later, the Oracle database used by Taobao's advertising system was offline, which was also the last Oracle database of the entire Taobao.

Ali's "De-IOE" has shown a sample to the market and enterprises. Coupled with the "Prism" incident sounding the alarm for global information security, "De-IOE" has gradually evolved into an industry consensus, and even "De-IOE" concept stocks have appeared in the stock market.

In addition to Ali, domestic database developers such as KingbaseES of Renmin University, Dameng Database, Gbase of Nanda General, Shenzhou General, as well as Internet and IT giants such as Tencent, Baidu, and Huawei have all participated in the development of domestic databases. In addition, a number of emerging databases have also emerged, such as PingCAP's universal database TiDB.

But 15 years after "De-IOE", domestic databases still face the problem of being highly praised but not well-received.

In September 2022, Document No. 79 of the State-owned Assets Supervision and Administration Commission of the State Council requires that by 2027, 100% domestic substitution should be completed in the "2 + 8 + N" Party and government and eight major industries, including the localization of databases.

From the perspective of substitution results, according to the research of First Voice, the domestic substitution rate of databases in the Party and government field has reached 80%, which is basically at the end of the substitution stage. However, due to the low overall substitution rate in the eight major industries, the non-core system in the financial industry is around 40%, the energy industry is less than 15%, and multiple industries such as healthcare, manufacturing, and education are less than 5%.

Chart: The application of domestic databases in various industries; Image source: First Voice

"The technological gap still exists, and the possible risks that may occur during migration cannot be completely ignored." An industry insider told 36Kr.

In addition, the homogenization phenomenon of domestic database products is still serious, and most of the database products on the market are relational databases. Coupled with the background of the market slowdown in recent years, the operating pressure of domestic database manufacturers has also significantly increased. The main reason for this phenomenon is that domestic databases are still not mature in the kernel.

Take relational databases as an example. According to the statistics of the China Academy of Information and Communications Technology, most of the domestic relational database products are secondary developed based on MySQL and PostgreSQL.

Su Guangniu, CTO of Huawei Cloud Database Business, once predicted in an interview that with the natural elimination of the market, within the next three to five years, the number of domestic database manufacturers may be reduced to about 10, including both cloud service providers and independent database manufacturers.

It is true that the domestic database industry is undergoing a reshuffle. According to Motianlun Data, a total of 286 databases participated in the ranking in October 2023, but by October 2024, the number of databases participating in the ranking has decreased to 225.

It is not difficult to see from the financial reports of several listed database companies that this money-burning business is not easy to do.

Hailiang Data's revenue in the first half of 2024 increased by 93.5% year-on-year to 204 million, but the loss was as high as 24.12 million.

Youxuan Software, which is listed on the New Third Board, had a revenue of 120 million in the first half of 2024, a year-on-year decrease of 34.8%; the loss was 88.44 million, a year-on-year increase of 67.54%.

The road to breakthrough is never easy.

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