The appearance of invulnerability is incredibly important because it makes it look like any money being spent on a competing effort will be wasted. But if a competitor can crack that image of invulnerability, that frees up funding and can turn a chink in the armor into a full-blown competitive wave.
For example, nobody wanted to fund against IBM until Sun created a chink in the 1980s; nobody wanted to compete against Microsoft until Netscape created a chink in the 1990s (though, ironically, Google and Apple were the biggest beneficiaries); and in servers, Intel was thought to be invulnerable until now. AMD’s EPYC win for the Oracle cloud could be just the chink AMD needs to broadly break through the current perception that Intel can’t be displaced.
Let me explain why.
While Oracle’s cloud presence isn’t yet at the scale of Amazon, Google, Microsoft, or even IBM, it is still largely an enterprise pure play, where most of the others have varied audiences that more easily drift, and in some cases are dominated, by small customer clients. This means the requirements for the servers that Oracle deploys in its cloud must comply with the most rigorous requirements that an enterprise IT buyer might demand.
So, while Oracle may not have the cloud stature of one of the bigger cloud players, its credibility as a validating brand is in line with IBM’s in terms of being a bellwether for enterprise decisions, particularly when it isn’t their own technology.
One other thing about Oracle is that buyers know the company is very focused on profits and, as a result, focuses on value and return on investment. If Oracle invests in something that isn’t its own, it generally means that, whatever that something is, it is priced well for what it provides.
IT is faced with three primary goals when investing in a new technology. It must address the needs of the users, it must comply with IT requirements, and it must provide an acceptable return on investment. Oracle’s purchase addresses the last two directly and implies, given that this is a cloud deployment, potentially broad user acceptance.
One final aspect connected to this move is that the cloud providers watch each other closely and what one does, the others will consider, which should help AMD at least get additional consideration.
AMD vs. Intel
AMD has always had two very strong advantages over Intel. It tends to be far more customer focused and its behavior and lack of complexity makes it appear and operate more transparently than Intel. While AMD’s server technology is only recently competitive again, generally OEMs enjoy working with the company more and have historically been AMD’s biggest defenders, even though they haven’t always bought from AMD in high volume. Put more succinctly, in a fight between AMD and Intel, the OEMs have tended, historically, to be far more supportive of AMD simply because they prefer to work with the company.
However, this doesn’t mean they are willing to go with AMD if the firm isn’t competitive or if they don’t see demand for AMD’s offerings. But Oracle’s move showcases that AMD is competitive and indicates that there may be unmet demand for AMD’s offerings if they were packaged in OEM solutions, which should result in some additional high-profile design wins later in the year.
It does AMD no good to have the better part if no one places that part in servers, but now that OEMs are placing AMD into servers, buyers are getting a choice. And, assuming AMD continues to execute, this could finally allow the company to have a defensible beachhead in the segment.
I also think that part of the reason AMD is advancing like this is that Intel’s handling of Meltdown and Specter security issues (the late disclosure, the CEO stock sale, etc.) left a lot of the OEMs feeling pretty raw and the firm has yet to replace its fired CEO. I’ve spoken to several who were also upset that it appears Intel has shifted most of its efforts toward Apple and smartphones and to things like automobiles, and away from servers and PCs, which has to help AMD as well.
Wrapping Up: Long-Lasting Benefits for AMD and Oracle
Oracle’s endorsement of AMD gives the firm a nice beachhead and should allow it to expand that, particularly as it appears that Intel is distracted by other efforts, into a far more viable challenge to Intel’s dominance. The biggest benefit really has more to do with creating the impression of vulnerability than it does with any volume that flows into Oracle’s cloud.
Oracle gets a benefit as well, because AMD’s comparative resistance to several of the security problems that Intel has exclusively enjoyed allows it to market their cloud offering as being more secure then the Intel-based competitors. With state-level threats continuing to be a huge concern for the market, that little security edge could do interesting things for Oracle’s cloud market share, which I doubt will be lost on competitors.
In the end, this Oracle/AMD deal may be far more powerful than many realize.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+