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Oracle Offers Free Cloud Services to Snag New Customers

By Timothy Green – Sep 18, 2019 at 3:04PM

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The company’s perpetual free tier is generous, and it could drive cloud database adoption.

Database giant Oracle (ORCL 3.29%) has been trying to break into the cloud infrastructure market, which is dominated by Amazon Web Services and Microsoft Azure. The company has talked a big game, but that talk hasn't been backed up with results or transparency. Oracle stopped disclosing key cloud metrics last year, making it difficult to tell how its cloud business is really doing.

Oracle's latest move to spur adoption of its cloud might actually work. The company announced on Sept. 16 that it was introducing a new free tier, giving developers permanent access to a set of free cloud services and credits for additional services. This provides developers with a no-risk way to try out Oracle's cloud, which could help the company attract customers who would have otherwise chosen one of the market leaders by default.

A cloud.

Image source: Getty Images.

A generous offering

Free tiers from cloud computing providers are nothing new. Amazon Web Services, for example, offers a mix of always-free services and 12-month trials. Notably, Amazon offers an always-free version of its DynamoDB database, which competes directly with Oracle's bread-and-butter database business.

Oracle's new free tier appears more generous than Amazon's when it comes to the core services necessary to develop an application, although Amazon's catalog of services eligible for some sort of free trial is much larger. Here are the key cloud services Oracle now offers for free:

Service

Oracle Cloud

Amazon Web Services 

Database

2 Autonomous Databases; 20 GB storage each with limited compute power

1 DynamoDB; 25 GB storage with limited read and write capacity

Compute virtual machines

2 Compute VMs; 1/8 OCPU and 1 GB memory each

Only available as 12-month trial

Block storage

100 GB

Only available as 12-month trial

Object storage

10 GB

10 GB

Load balancer

1 load balancer

Only available as 12-month trial

An OCPU is equivalent to one physical CPU core. Data sources: Oracle and Amazon.

Oracle's free tier provides everything needed for a developer to build and test an application on an always-free basis. "Enterprises can use Free Tier to prototype, prove out new technologies, and do testing before moving production workloads to the cloud. They can sample robust enterprise infrastructure capabilities like load balancing and storage cloning," according to the press release.

Oracle needs a cloud boost

This free tier announcement comes soon after Oracle reported disappointing fiscal first-quarter results. Total revenue was flat, and revenue from software licenses dropped 6%. Cloud revenue is now split between two different reporting segments, making it difficult to tell what's going on under the surface.

The company managed to grow per-share adjusted earnings, but share buybacks were the main driver. Adjusted net income was actually down from the prior-year period.

Oracle's Autonomous Database is an important product; it gives existing on-premise database customers a path to the cloud, and it makes the company's core database product accessible to new customers. With the free tier including two Autonomous Database instances, Oracle is opening up the product to a wider swath of users.

"The Autonomous Database is the most successful new product in Oracle's history. We added more than 500 new Autonomous Database cloud customers in Q1, and we expect to more than double that in Q2," said CTO Larry Ellison in prepared remarks included in the company's earnings release.

It's unlikely that Oracle is ever going to be a market leader in the cloud infrastructure-as-a-service market. However, the cloud database market is a different story. With the Autonomous Database headlining the company's free cloud tier, Oracle is now better-positioned to win new database customers.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AMZN and MSFT. The Motley Fool has the following options: long January 2021 $85 calls on MSFT. The Motley Fool has a disclosure policy.

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