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Rapid growth in cloud computing revenues helped lift Oracle Corp.s fortunes in its third fiscal quarter reported today, as its profits easily beat forecasts on a 2 percent rise in revenues.

The Silicon Valley software giant reported a profit of 69 cents a share before certain costs such as stock compensation, up 7 percent from a year ago. Sales rose 2 percent, to $9.2 billion, or $9.3 billion after backing out the impact of foreign exchange rates.

As in previous quarters, Oracle showed particular strength in two cloud categories: online applications known as software as a service, or SaaS, and platform as a service, or PaaS, a collection of technologies for creating and deploying those applications. In those two areas, Oracles revenues shot up 73 percent, to $1 billion, the first time theyve topped that milestone. The growth was likely helped by Oracles $9.3 billion NetSuite acquisition last year, since this is the first quarter after the closing of the deal.

Total cloud revenues, including infrastructure as a service or IaaS, the base-level computing and storage layer dominated by Amazon.com Inc. and Microsoft Corp., rose 62 percent, to $1.2 billion, up 62% in U.S. dollars and up 63% in constant currency. Total cloud and on-premises software revenues rose 4 percent, to $7.4 billion.

Our pivot to the cloud is now in full swing, co-Chief Executive Safra Catz said during the earnings conference call. She added that cloud revenue growth has overtaken declines in license revenues, and predicted that in the next fiscal year,cloud revenues will surpass software license revenues.

Analysts on average had expected a 62-cent profit, down about 3 percent from a year ago, on $9.25 billion in revenues, up 3 percent, according to Thomson Reuters. Its only the second time in the past nine quarters that Oracle has shown year-over-year revenue growth.

Investors liked what they saw and Oracles shares rose in after-hours trading, nearly by 5 percent after the earnings conference call started. In regular trading today, shares rose a little under two-thirds of a point, to $43.05. The reaction is a reversal from the second quarter, when Oracle missed expectations despite continued growth in cloud computing as software license revenues fell more than forecast.

The company still depends on sales of licenses for business software such as databases for most of its revenues. But with rivals such as Amazon Web Services and Microsoft Azure getting an early lead in the cloud, often with competing applications, Oracle and its co-founder and Executive Chairman Larry Ellison (pictured) have been making an aggressive push into cloud computing for the past three years. Co-Chief Executive Mark Hurd last year predicted cloud technologies would constitute 80 percent of information technology budgets by 2025.

Hurd took the opportunity to point out Oracles lead over another cloud superstar, Salesforce.com Inc. Over the last year, we sold more new SaaS and PaaS than Salesforce.com, and were growing more than three times faster, he said in a statement. If these trends continue its just a matter of when we catch and pass Salesforce.com in total cloud revenue.

Likewise, Ellison took more shots at Amazon Web Services, which he had singled out at the annual Oracle OpenWorld conference last fall. He said Oracles second-generation IaaS is faster and lower-cost than Amazon Web Services. As a result, he said on the call, Some of our largest customers are negotiating huge Infrastructure as a Service contracts to move all their databases to the cloud. He said some such deals will happen in coming weeks.

And now our biggest customers can run their largest and most demanding Oracle database workloads in the Oracle Cloud something that is absolutely impossible to do in the Amazon Cloud.

The race to become a force in the cloud isnt coming cheap, however. Oracle continues to spend big on its cloud computing. Research and development alone grew to $5.1 billion in fiscal 2016, up $2 billion from six years ago, much of the increase from rewriting software for the cloud and creating new cloud services.

Catz set a new, higher fourth-quarter profit forecast of 78 to 82 cents a share on total revenues ranging from down 1 percent to up 2 percent. That includes the expectation that currency headwinds will have a 2 percent negative impact on revenues and depress profits by 2 cents a share.

On the cloud front, Catz said Oracle expectsSaaS and PaaS revenues to rise 69 percent to 73 percent. IaaS revenues could grow in a range of 25 percent to 29 percent. Over time, she added, gross margins on the cloud business will be about 80 percent.

The company alsoraised its quarterly dividend by 4 cents, to 19 cents.

Read more:
Cloud computing growth lifts Oracle's profits, and its shares - SiliconANGLE (blog)

Are open source software and the cloud good for each other?

At first glance, the question seems a little silly. After all, cloud computing and open source have both experienced surges in use to the point where nearly every company on the planet uses both. And many analysts suggest that neither one would have experienced their current level of growth without the other.

According to the RightScale 2017 State of the Cloud Report, 95 percent of organizations are either using or experimenting with infrastructure as a service (IaaS). And market research from Synergy Research Group found that cloud spending grew 25 percent in 2016.

"Id say that 2016 is the year that cloud started to dominate many IT market segments," said Synergy founder Jeremy Duke, in a statement. "Major barriers to cloud adoption are now almost a thing of the past, especially on the public cloud side. Cloud technologies are now generating massive revenues for technology vendors and cloud service providers and yet there are still many years of strong growth ahead."

On the open source side, the numbers are nearly as good. In its 2016 State of Open Source Report, Zenoss found that 91 percent of the those surveyed were using open source software. Similarly, the Future of Open Source Survey from Black Duck found that 65 percent of enterprises increased their use of open source software last year. In that report, Black Duck president and CEO Lou Shipley concludes, "Simply put, open source is the way applications are developed."

But despite the growth that both the cloud and open source have experienced, some observers have expressed concerns about the relationship between the two.

The most vocal critic of the impact that cloud computing has had on the open source software movement is undoubtedly Richard Stallman, the founder president of the Free Software Foundation. Stallman doesn't actually like the term "open source," preferring "free software" instead. And in an article on the Gnu website, he lays out his opposition to cloud-based software.

Stallman argues that paying for a cloud service is a "way to lose your freedom" and "give someone else power over your computing." He writes, "The basic point is, you can have control over a program someone else wrote (if it's free), but you can never have control over a service someone else runs, so never use a service where in principle a program would do."

With cloud-based applications, the users don't see the underlying code; they have no real way to know if their privacy or security is being compromised. In Stallman's opinion, that "gives the server operator unjust power over the user, and that power is something we must resist."

But not everyone within the open source movement agrees with Stallman.

Many open source companies have embraced the SaaS model as a way to monetize their open source offerings. Some seem to have experienced financial success with this approach, but the jury is still out on whether this approach will be viable over the long term.

In a 2013 blog post, Cloudera founder Mike Olson highlighted the great irony facing open source software companies. "It's pretty hard to build a successful, stand-alone open source company," he wrote. "Notably, no support- or services-only business model has ever made the cut. . . . Separately, but simultaneously, there's been a stunning and irreversible trend in enterprise infrastructure. If you're operating a data center, you're almost certainly using an open source operating system, database, middleware and other plumbing."

In other words, everyone seems to be using open source software, but open source-only vendors don't seem to be making any money from that trend.

Whether that situation is good or bad for the open source movement as a whole is open to debate.

Looking at the situation from the perspective of cloud vendors and enterprise users, it seems much more clear that open source has been good for the cloud.

Today, much of the cloud runs on open source software. In its Guide to the Open Cloud, the Linux Foundation noted, "As cloud technologies have evolved it's evident that any cloud without open source would be the equivalent of an automobile without an engine." It adds, "Without open source collaboration, the open cloud we know today would not exist."

Some of the most well-known cloud services, like Amazon EC2 and Google Compute Engine, were built on open source software. Even Microsoft, once the biggest enemy of the open source movement, now supports open source technologies, including Linux, on its Azure cloud computing service. According to an SDx Central survey, the most popular cloud management platform is OpenStack, an open source solution. And many of the workloads that enterprises are now running in the cloud rely on open source software. Applications like Hadoop and Docker have come to dominate their respective markets, and areas like the Internet of Things (IoT), big data analytics, machine learning, development and DevOps tooling, and many others are dominated by open source software.

Clearly, the enterprises using these open source tools in the cloud think that open source has been good for them. In fact, the Zenoss survey found that the majority of organizations of all sizes were satisfied with their open source software, and among enterprises, the satisfaction rate was around 75 percent.

And judging by the rate at which they are adding new services based on open source technologies to their catalogs of offerings, the cloud vendors are happy with open source as well.

As a result of their positive experiences with open source thus far, enterprises and cloud vendors seem to have plenty of incentive for increasing their use of open source software in the cloud.

In fact, most analysts predict that the use of open source software and the use of cloud computing will continue to rise for the foreseeable future. Gartner anticipates 18 percent growth for the public cloud services market in 2017 with an annual total of $246.6 billion. It forecasts that the IaaS market will increase 36.8 percent while the SaaS market grows by 20.1 percent. And Statista predicts that open source software revenue will grow from 51.02 billion in 2016 to 57.33 billion by 2020.

Based on past history, it also seems highly likely that individuals within the open source community will continue the ideological debate about whether the cloud is good or bad for the open source movement. For better or worse, the trend toward cloud computing has increased reliance on open source software, but only time will tell if the open source movement will continue to thrive in the future.

See the rest here:
Open Source and Cloud Computing: Friends or Foes? - Datamation