In the recently concluded OpenWorld Conference held in San Francisco, Larry Ellison of Oracle (NASDAQ:ORCL) announced a new in-memory offering to the company’s latest 12c database platform. This much awaited in-memory option from Oracle comes almost 3 years after the launch of HANA, a similar product from competitor SAP (NYSE:SAP). The in-memory platform utilizes a computer’s main memory (RAM) instead of its disk drive to process queries faster through fewer interactions with the CPU while processing information. Such a platform generally improves query processing rate many-fold, as well as improve the performance of the core-CPU in the long run.
The new in-memory option for Oracle databases is expected to receive huge demand from its customers. Data is stored in both row as well as column formats in the database, with faster transactional operations in row format and faster analytical operations in the column format. Oracle expects the new platform would increase query rates by 100 times and improve processing rates by three times. 
Three years since the launch of HANA, SAP has seen tremendous growth with more than 2,500 customers shifting to the hybrid cloud-based platform.  Revenues from HANA for the recently concluded quarter increased 21% q-o-q to €102 million and are expected to amount to €650 – €750 million for fiscal 2013. With hundreds of thousands of customers for its database business’ alone, Oracle’s decision to offer an in-memory option to its new cloud based database looks promising. We believe this offering could provide some resistance to SAP HANA, and therefore expect demand for the cloud-based in-memory platform to be robust.
Cloud Computing Bubble Signals Transition From On-Premise Software
Streamlined processes and increased demand for productivity from businesses has brought forth various cloud options into the software market. Cloud based services provide faster provisioning, on-demand access and agile resource scheduling by using countless virtualized servers on the cloud to cope with increased processing requirements for a customer. A survey by Oracle shows that 65% of survey respondents would shift to a Database-as-a-Service (DBaaS) system from an on-premise database management service because DBaaS’ are quicker. 
Although the continuously growing data requirements will keep driving growth in the database market, cloud-based database management services are on the rise. The adoption of cloud-based services by businesses is growing at a rapid pace as the DBaaS model costs less than on-premise software. The increase in virtualized offerings from various cloud players and weakness in IT spending resulted in slowing growth in the on-premise database software market. Currently, the cloud-based DBaaS market is estimated to be worth $150 million. However, the market is estimated to grow at an annualized rate of 86%, to reach about $1.8 billion by 2016. In comparison, the market for on-premise deployments is expected to grow at 33% annually until 2016. 
With new products like 12c database coupled with its efforts to make inroads into the cloud market, we expect the company to leverage from this incredible growth opportunity in cloud services. The latest in-memory offering for the company’s first cloud-ready database offers seamless transitioning from older databases and no challenges in data migration for customers.  We believe this could be the start of a transition from on-premise database management services to DBaaS for the company, and expect the business to be a big growth opportunity for market leader Oracle.
We have a $43 Trefis price estimate for Oracle, which currently stands 28% above its current market price.Notes:
- Oracle Announces Enhanced In-Memory Applications with New Oracle Database In-Memory Option, Oracle PressRoom, September 2013 [↩] [↩]
- Seven More Questions for SAP’s Co-CEO Bill McDermott, AllThingsD, January 2013 [↩]
- Delivering Database as a Service (DBaaS) using Oracle Enterprise Manager 12c, oracle.com, March 2013 [↩]
- DBaaS poised to drive next-generation database growth, 451Research, August 2013 [↩]