Oracle Confirms 12.2 Database Release Will Be Cloud-Only At First, Analyst Predicts Move Will 'Frustrate' Customers

Oracle has confirmed plans to make the next major update to its 12c database available only in the cloud for a period of time to entice customers that currently run the software in their own data centers.

CRN was first to report on Friday that Oracle would be delaying the release of the on-premises version of Database 12c R2, the first major update to the product since 2013, to drive sales of the cloud version.

Penny Avril, an Oracle vice president in charge of database product management, said Tuesday that Oracle plans to release Database 12c R2 "cloud first" sometime in the second half of the calendar year. Avril revealed the strategy at an Oracle user group meeting in Glasgow, Scotland.

Avril didn’t specify when Oracle plans to make the on-premises version of Database 12c R2 – also known as 12.2 – available to customers. An Oracle spokeswoman declined to provide a timeframe for the release.

Database PM VP Penny Avril on stage at about the Next Release of the database

One source familiar with Oracle’s plans told CRN last week the vendor may delay releasing the on-premises version of Database 12.2 for a few months to spur sales of the cloud version. Other sources inside Oracle claim the delay could extend to a few quarters.

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[Related: Oracle May Delay On-Premise 12.2 Database Release To Drive Sales Of Cloud-Based Version]

Database 12c Release 2 features improvements to multitenancy -- which lets more databases run on a single machine – and faster performance for in-memory database and big data analytics.

Oracle customers typically wait for the second release of a database before upgrading to ensure that all the bugs have been worked out. So Oracle’s decision to make the 12.2 database available exclusively in the cloud for a time could complicate buying decisions for organizations that want to take advantage of the new features and functionality.

Craig Guarente, CEO of Palisade Compliance, a New York-based firm that helps Oracle customers with licensing matters, told CRN he thinks the cloud-first Database 12.2 release "will frustrate the overwhelming majority of companies" that license Oracle database software and pay for support updates.

"This move puts them at the back of the update line. It appears that this is not only a cloud-first strategy but also an Oracle-first strategy," Guarente said in an email.

Oracle, Redwood Shores, Calif., is in the midst of a companywide transition away from on-premises software, and is said to have significantly boosted incentives for salespeople to include cloud in deals, sources told CRN last June. As a result, Oracle salespeople will often give customers discounts on deals if they agree to buy cloud credits, or licenses redeemable for Oracle cloud services.

Yet sources have told CRN that few customers are actually using cloud credits, and that releasing a cloud-first 12.2 database could be a move on Oracle’s part to address this issue. The vendor may adopt the cloud-first approach in other future product updates, according to the sources.

Although cloud accounts for only about 8 percent of Oracle’s overall revenue, its senior leadership claims this business is seeing meteoric growth. CTO Larry Ellison said on the vendor's fourth-quarter earnings call earlier this month that he believes Oracle has ’a fighting chance’ of beating Salesforce to become the first SaaS vendor to reach $10 billion in annual revenue.

Oracle had total SaaS and PaaS revenue of $2.2 billion during fiscal 2016. Salesforce had fiscal 2016 revenue of $6.67 billion and has forecast fiscal 2017 revenue of $8.08 billion to $8.12 billion.