Amazon‘s (NASDAQ:AMZN) leadership in the cloud computing market is under pressure as Oracle (NASDAQ:ORCL) prepares to enter the market as an IaaS (Infrastructure as a Service) provider. Oracle already has Fusion Applications and PaaS (Platform as a Service) which are supported on its cloud. The move will make Oracle the only tech company with a presence across the three main forms of cloud services (IaaS, SaaS and PaaS). 
Presently Amazon provides both IaaS and SaaS (Software as a Service). The retailer has been expanding its market for its cloud products and recently launched Amazon Cloud Drive in Spain and Italy. It competes directly with Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), IBM (NYSE:IBM) and HP (NYSE:HPQ) in the cloud computing market.
Oracle has not yet announced the pricing and launch date for the service, which will include its operating system and virtualization technologies. The company will also roll out Oracle Private Cloud, which will run on identical infrastructure and software but will be located at the customers’ premises and behind their firewall. The customers will be charged a monthly fee based of the installed capacity, even though that may be in excess of their immediate needs. The private cloud service will be particularly attractive to banks and other companies that prefer to run their IT infrastructure in-house.
In comparison, Amazon’s cloud service supports multiple operating systems and is cheaper since it relies on commodity servers compared to the high-end specialized hardware required by Oracle. As it gains popularity, Oracle’s IaaS service could attract new enterprise customers who can afford higher prices or those who want to extend support to the other Oracle products they currently use.
We believe Amazon’s IaaS service (Elastic Compute Cloud) can successfully weather the threat from Oracle on its lower prices and independence from platforms and operating systems. Besides, customers have the option to quickly scale up their computing capacity depending on their needs at no added costs. This could help the e-retailer attract smaller businesses as well as retain its existing customers.
We have a $222 estimate for Amazon which is 15% below the current market price.Notes:
- Oracle Disrupts Cloud Industry With End To End Approach, Forbes, October 2012 [↩]