Oracle acquires Cerner

Last December I wrote a blog after the announcement of Oracle’s intent to acquire Cerner, a electronic health records company for $28B. Well, it just happened today after clearing regulatory scrutiny. Now they are officially one company. It seems a bit hard to see a database company acquiring one of the largest health records management company! Welcome to the new digital economy.

At the announcement time, someone from Oracle said that it planned to modernize Cerner’s systems and move them to the Gen2 Cloud, which he said could be done quickly as some of Cerner’s most prized systems already run on the Oracle Database. He also promised changes to the user interface. It is an expansion strategy for Oracle to get into the healthcare vertical. You may recall that Microsoft paid almost $20 billion for Nuance Communications in April 2021 — that deal closed in March, 2022. Seeing the same market potential as Microsoft, Oracle paid a pretty penny for Cerner to dive headlong into the healthcare market.

Holger Mueller, an analyst at Constellation Research, said it would bring the lucrative market to the Oracle cloud, and that’s why the company was willing to pay so much for it. “It’s a smart move by Oracle. It cements Oracle technology even deeper into healthcare, and brings a lot of current and especially future work load to Oracle Cloud. Not to mention that Oracle is buying into the largest and fastest-growing vertical industry,” 

With headquarters in North Kansas City, Cerner is one of the largest employers in the Kansas City area. The company is an electronic-medical-records company that designs software used by doctor’s offices and hospitals to store and analyze medical records and health care data. “Working together, Cerner and Oracle have the capability to transform healthcare delivery by providing medical professionals with a new generation of healthcare information systems,” said Larry Ellison, Chairman and Chief Technology Officer, Oracle.

Oracle’s head of vertical industries promised improved efficiency for healthcare customers by using Oracle’s Fusion app suite to bridge “the bedside and the back-office, enhancing employee experience (better retention, less administration), streamlining the supply chain (reduced shrinkage, better inventory management), and giving the executive a better understanding of the issues impacting their business (greater predictability and cost control).”

Oracle is behind in its cloud deployment compared to AWS, Azure and GCP. Time will tell how quickly Cerner adapts to Oracle’s cloud and analytics platform and integrates with Oracle’s ERP system. Clearly it is a big bold move by Oracle.

Oracle plus Cerner – A Bold Move

Yesterday Oracle announced its purchase of electronics medical records company Cerner for $28 Billion dollars. It is going to be an all-cash transaction where Oracle will pay $95 for every share of Cerner and the deal will close in 2022. It is an unusual move and is the biggest deal Oracle has ever done. The previous purchases of Peoplesoft and Netsuite were in the $9-10 Billion range. Of course valuations of tech companies have been defying gravity lately. The question is why did Oracle make such a bold move.

Hospitals and physicians offices use Cerner software to record and share health and medical data. The companies said Monday that Cerner systems running on the Oracle Gen2 Cloud will be available 24 hours a day, every day, with the goal of having zero unplanned downtime. Clearly Oracle wants to get a slice of the lucrative healthcare market and this will push the wider adoption of Oracle’s cloud services, which have been lagging way behind the three top players – Amazon AWS (46.5% market share), Microsoft Azure (14% market share) and Alphabet GCP (4.8% market share). Oracle’s cloud business is only half a percentage of the global cloud market (per IDC). Last year Oracle’s attempt to buy TikTok did not pan out, which would have given Oracle’s cloud business a foothold in social media. The Cerner deal gives Oracle a major presence in an industry that is one of the top drivers of growth for cloud computing.

Healthcare has emerged as a battleground for cloud computing, because the industry is so big. The U.S. healthcare spending accounts for nearly 20% of the country’s GDP and has often been slow to adopt the latest digital tools. Cerner sells software that hospitals and doctors use to store and analyze medical records. It is the second largest vendor in the market, after Epic Systems Corp. This market according to Constellation Research will reach $29.1 Billion in sales this year and will grow to $35.5 Billion by 2025. By acquiring Cerner, Oracle will be buying a strategic healthcare customer away from Amazon.

Microsoft purchased Nuance communication as a way into the healthcare market, but is facing challenges in the UK with the regulators. David Feinberg, Cerner CEO since October 1, came from Google where he headed the Google Health business. Cerner has seen very slow growth over last few years and this deal must be a happy one for the shareholders. Cerner signed a deal with Amazon AWS in 2019 and it will be interesting to see how Oracle manages to move that business to its own cloud solution.

This is clearly a big bet by Oracle to become a relevant Cloud vendor.

Amazon’s Oracle-Free Saga

I think it was end of 2019 when at the AWS Summit, their CTO Werner Vogels said that Amazon has finally gotten rid of all Oracle products for their internal use. Amazon was built on traditional relational databases from the beginning. Long before the ecommerce giant launched AWS, it used Oracle to support its consumer operations, handling the core of its retail transactional systems. Amazon also had a separate fleet of Oracle RAC systems handling analytic workloads. This powered a data warehouse that would gather all the data from the transactional systems and run around 600,000 reporting jobs each day.

These systems had served the company well for years, but Amazon’s growth trajectory was beginning to strain the Oracle-based infrastructure. Traditional legacy Oracle databases were confined by the computing and storage capacity that Amazon purchased to support the transactions. That problem was exacerbated by the lack of virtualization. The Oracle databases ran on bare metal legacy hardware, meaning that Amazon couldn’t just deploy more compute and storage capacity from its cloud infrastructure when needed. Instead, it had to deploy more hardware that sat idle just in case capacity spiked. This was common, thanks to the volatile nature of ecommerce workloads. Large events like Black Friday were already testing its limits. When the company introduced Prime Day in 2015, transaction volumes soared again. Also the Oracle licensing fees were skyrocketing as the workload volumes grew. All these led to an internal decision by Amazon to migrate out of Oracle to its own cloud database offerings. Another motivation was to show their customers the viability of their own AWS database and analytics services and entice them to follow suit.

Amazon resolved to migrate its systems to various managed databases in AWS in a project that would last from late 2015 to 2019. The Oracle RAC analytics migration began in late 2015 and was completed by 2018. The OLTP migration started in 2017, eventually expanding to include non-critical services alongside critical ones. That project, nicknamed ‘Rolling Stone’, finished in 2019. The process was complex and required careful planning and staged execution so as not to disrupt operations. The cost savings were huge. For example, the service teams decided to simply move a read-only database to an S3 bucket. One such migration moved postal address lookup data from an Oracle database running on a $65,000 server to an S3 bucket costing just a few dollars per month.

The analytics migration moved the Oracle RAC data to a data lake architecture in AWS, combining Amazon’s Redshift data warehouse and S3 storage. This and the transactional migration yielded some significant functional and financial wins for the company. It has slashed its database costs by around 60 percent while provisioning more capacity, and it has simplified cost allocation between different service teams by introducing consistent practices.

Overall, Amazon migrated almost 7,500 databases during the three-year transition period, involving over 100 service teams and transitioning 75 Petabytes of data. It reduced database administration overhead by 70 percent, replacing a lot of “undifferentiated heavy lifting” with more value-added data architecture tasks.

Now Amazon says it deploys its own AWS cloud database and analytics services (DynamoDB, Aurora, RedShift..) from start to finish. Oracle needs to pay attention to its own cloud services so as not to see this kind of migration by their current customers.

Oracle & TikTok?

We woke up this morning to the news that ByteDance, the owner of TikTok, has sent a proposal to the Federal Government to have Oracle as its US “technology partner”. It has rejected the highly-expected proposal from Microsoft to sell its US business. Citing concerns that Americans’ personal data would be shared with the Chinese government, the White House had imposed a Sept. 20 deadline for ByteDance to announce a plan for a sale of TikTok in the U.S. or be banned by Sept. 29. The deal would have to be done by Nov. 12. ByteDance denied that TikTok data was shared with China.

The first reaction I had was “how does this make sense for Oracle and ByteDance to combine their business’? An outright purchase of ByteDance’s US operation will throw Oracle into a market segment which is far away from its core. Oracle sells its database software and ERP applications to large enterprises and it has never dabbled in the consumer sector (unlike Microsoft which primarily served the consumer market, but has expanded to the enterprise with its Azure cloud and Dynamics app.). According to CNBC, “As an app that entertains people, TikTok stands out from the rest of Oracle, which sells software to large businesses, schools and government institutions. Oracle and TikTok share an interest in marketing, though. TikTok derives revenue by showing users ads, and Oracle offers software that marketers can use to manage the distribution of ads on Facebook and other channels. TikTok has been adding users quickly, while Oracle’s revenue has declined in four of the eight most recent quarters”.

On closer look, the “technology partner” deal is not an outright purchase, but shows a way to address the concern of data security of the US users. Serving as a technology provider to TikTok might mean Oracle will offer its cloud infrastructure for the app to use. That would give Oracle another popular property for its executives to boast about as a cloud client, and it could attract additional cloud business where it is way behind Amazon, Microsoft, and Google. By providing its cloud infrastructure to TikTok it wins a huge customer. Few months ago, it won a big contract from Zoom, the fast-growing video-call provider. If this ByteDance deal goes through, then Oracle gains a stronger foothold in the cloud infrastructure market. It’s differentiator in that market is its autonomous and highly scalable database plus the security features. Having Zoom and ByteDance as its customers in the growing consumer and small business market, it gains big.

This is also a political move by Oracle. With its inside access to the White House and federal government, it will, most likely, convince the authorities that a partnership deal will alleviate any fear of security breach of customer data. Hence a full acquisition is not needed. Oracle will have a big stake in ByteDance’s US business, but will let it run independently as now.

Oracle started its business back in 1977 with the CIA as the first customer on a secret consulting project called Oracle. That’s how the name of the company was given. It always had a strong federal/state government presence. This latest move only enhances its government relationship and will pave the way for more business in future. If approved, this will be a smart move by Oracle after all.

Congratulations, Michael Stonebraker for winning the 2014 ACM Turing Award

This week, the 2014 ACM Turing award was given to Michael Stonebraker, professor of computer science and engineering at MIT. Mike spent 29 years at University of California, Berkeley, joining as assistant professor after his Ph.D. in 1971 from the University of Michigan. His undergraduate degree was from Princeton University. Since 2000, he has been at MIT. He is a remarkable researcher, pioneering many frontiers in database management. Personally I have interacted with him several times during my days at IBM and Oracle. We have even spoken at the same panel in couple of public forums during the 1990s.

The award citation reads, “Michael Stonebraker is being recognized for fundamental contributions to the concepts and practices underlying modern database systems.  Stonebreaker is the inventor of many concepts that were crucial to making databases a reality and that are used in almost all modern database systems. His work on INGRES introduced the notion of query modification, used for integrity constraints and views. His later work on Postgres introduced the object-relational model, effectively merging databases with abstract data types while keeping the database separate from the programming language.”

The ACM Turing award is considered as the “nobel prize in computer science” and is named after the British mathematician Alan Turing. The first award was given in the year 1966 and included a citation and $250,000 cash. Since last year, Google has sponsored and lifted the award to $1 Million dollars. Many stalwarts like Charles Bachman (1973, for inventing the concept of a shared database), Edgar Codd (1981, for pioneering the relational database), and Jim Gray (1998, for seminal work on database and transaction processing) have been honored with the Turing award. Mike Stonebraker joins this illustrious group.

The specialty of Mike is that his research has culminated in many product companies  as the following list (partial) shows:

• Ingres – early relational database based on Dr. Codd’s (IBM) relational data model.
• Postgres – object-relational database, base for products like Aster Data (part of Teradata), and Greenplum (part of EMC).
• Illustra – Object database sold to Informix (now IBM) during the 1990s
• Vertica – columnar data store, sold to HP in 2011
• StreamBase – stream-oriented data store
• Goby – data integration platform
• VoltDB – in-memory database with high-speed transaction processing
• SciDB – scientific data management
• Tamr – to handle sensor data from varieties of sources

He has publicly derided the NoSQL movement, mainly due to its relaxed integrity (ACID) approach which he calls a fundamental flaw. He has also said in a recent interview, “IBM’s DB2, Oracle, and Microsoft‘s SQL Server are all obsolete, facing a couple major challenges. One is that at the time, they were designed for “business data processing.” But now there is also scientific data and social media, and web logs, and you name it! The number of people with database problems is now of a much broader scope. Second, “We were writing Ingres and System R for machines with a small main memory, so they were disk-based — they were what we call ‘row stores‘.” You stored data on disk record by record by record. All major database systems of the last 30 years all looked like that – Postgres, Ingres, DB2, Oracle DB, SQL Server — they’re all disk-row stores.” He says in-memory processing is quite economical and is the trend for future. He is a bit self-serving as his company VoltDB is based on that principle.

Mike thinks Facebook has the biggest database challenge with its “social graph” model which is growing in size at alarming speed. The underlying data store is MySQL which can not handle such load. Hence they have to come up with highly scalable innovative solutions, which will be mostly home-grown as no commercial product can handle that kind of load.

Mike Stonebraker is a legend in database research and the Turing award is well-deserved for such a pioneer. Congratulations!

Musings on 2014

Another year comes to a close. What did we see as significant technology events?  In the disruption category, we saw Uber getting valued at $41B even with all its issues in the news. When you disrupt an entrenched business such as taxi service, it is only natural that resistance will happen. But consumers like me love the value-added service from Uber. This is unstoppable as evident from the investor’s confidence in providing $1.2B funding. In the disruption category, companies like Snapchat, Instagram, Airbnb, Instacart, and others made good progress. Re-imagination is the catchword here. See my blog on that topic.

Big Data continued getting more momentum in 2014. We saw Hortonworks (Hadoop packaging) had its IPO. Cloudera  continued its momentum. NoSQL products like MongoDB and Datastax (Cassandra) moved into mainstream enterprise deployment. The first MongoDB World summit in new York city in June saw 2000 attendees, not bad for a six-year-old company. VoltDB made lots of claim in realtime, in-memory, stream processing. Phrases like Datalake, and Data Refinery entered our lexicon. Data stored in its native format and extracted for analysis became a hot discussion point. The incumbents like Oracle, IBM, HP and Microsoft were not sitting idle. They all introduced their NoSQL and Hadoop offerings, besides the data warehouse appliances (e.g. IBM Netizza, Oracle Exadata and Exalytics, HP Vertica, EMC Greenplum, etc.). SQL interface for Hadoop took front stage with several offerings. The space got more confusing with so many products and vendors. Personally I spoke at several conferences on how to look at the broad landscape and make some sense, so that customers do not equate Big Data with just Hadoop. Analytics is another hot space where meaningful information can be extracted to impact business decisions. Here, we have a long way to go, but this space will certainly grow fast in 2015, with increasing demand on data scientists and data engineers.

Cloud computing inched forward in the maturity curve. Oracle made several announcements at their Open World conference. They continue to acquire new companies (e.g. Datalogix last week) to gain better foothold on cloud-based solutions. Even their last quarterly finance showed significant growth in cloud product revenue. IBM also pushed cloud in a big way and so did Microsoft under its new CEO. The Azure cloud solution is starting to gain customer acceptance, a good alternative to Amazon’s AWS. GCE (Google computing engine) is yet to impact the enterprise market, but making headway.

The big news from Apple was the introduction of the Apple Watch. Wearable computing is coming in a big way and Apple’s product will be available in 2015. I am heading off to CES (Consumer Electronic Show) next week in Las Vegas to see firsthand all these new gadgets for connecting home, cars, etc. – the real Internet of Things (IoT). At the first IoT Expo in San Francisco, I spoke on the topic “Data – the oxygen of IoT”. IoT makes big data even more critical.

Overall, 2014 was another exciting year in technology for consumers. The enterprise space continues to struggle with injecting new technology such as cloud, mobility into their old archaic applications and systems. I am hoping this will pick up momentum in 2015.

Industry Bifurcation?

Apple reported record sales in the most recent quarter, thanks to its upgraded iPhone line. But it was almost alone among the big technology firms in doing so. Profits reported for the same period, have fallen at Google as well as at IBM, SAP and VMWare.

IBM has done more financial engineering than the real kind in recent years by its $100 billion buyback of its own shares since year 2000. It has shed less profitable assets, but now lacks a big fast-growing business. It even started layoffs in India recently. The earnings at VMWare dropped because of a recent acquisition. Some firms are having difficulty shifting to new trends such as cloud computing. SAP and Oracle are seeing more of their business shifting to the cloud. That requires big investments in data centers and yields lower margins, at least initially. Workday, a cloud-based HR products company has been enticing existing customers (of SAP and Oracle) due to its low cost and better usability.

Google, for example, is hit by the shift of users to mobile devices, where advertising rates are lower. Apple and even Yahoo are taking advantage by their shift to mobile-advertising sales (Yahoo got 17% of its revenue of $1.1 billion on these sales in the past quarter). More fundamentally,  the IT industry is maturing and seeing slow revenue growth of only 3% (according to Boston Consulting Group). The biggest sectors such as hardware, business software, and IT services are growing slowly or even shrinking.

This is the “bifurcation” (between new emerging trends and old traditional segments) which will lead to big restructuring of the industry. HP recently talked about breaking up its business to separate entities. IBM continues to shed unprofitable businesses. Others like SAP are buying web-based travel and expense management company, Concur (for $8.3 billion!). Oracle continues to acquire more and more companies with cloud technology for the growth of its cloud business. During the Oracle Open World in late September, the whole theme centered around Cloud and to some degree mobility.

The recent disappointing results are another harbinger of an unbundling and rebuilding of the IT industry. It will be hard to tell how the new landscape will look like at the end of the process. But Apple continues to prove that bold innovations and winning user’s mindshare can bring big rewards. Older incumbents must learn a few lessons from Apple’s success.

Speaking at the Oracle NoSQL Meetup event

I was invited to speak at a Oracle NoSQL and Big Data Meetup last night. Here is the link for the event. I kicked it off with a broad picture of the Big data landscape trying to clear some confusions on varieties of terms – NoSQL, NewSQL, Data Warehousing Appliances, data exhaust, M2M, Hadoop, data visualization, machine learning, etc. Then Dave Rubin from Oracle presented their latest release of Oracle NoSQL 3.0 that was announced this week. Oracle acquired Sleepycat which was the keeper of BerkleyDB, the key-value store that originated at the UC, Berkeley during the 1990s. Mike Olson who founded Cloudera was one of the key developers. Then I presented MongoDB Momentum showing seven examples of actual customer usage of MongoDB to solve business problems.

Oracle’s new release adds a tabular model on top of the key-value store. It also added secondary indexing, a shard key, and several operational features. It is not surprising to see the push to view tables in line with the Oracle RDBMS. Time will tell how useful that is, as the NoSQL experience is to move away from the two-dimensional row-column view. But it may be a co-existence statement by Oracle to its customer base.

My theme on MongoDB momentum was to highlight the need for Systems of Engagement (something Geoff Moore has been talking about lately) on top of Systems of Record. Geoff says these systems of record were built decades back with an RDBMS at the center. They are like the interstate highway system in the US. Now what we need is to build cool and groovy interactive applications using newer technologies like the web, cloud and mobile devices. These systems must be built very rapidly and must be highly elastic to accommodate new data formats and high scalability with performance. I mentioned several such examples at enterprises like MetLife, Telefonica, Cisco, Intuit, etc. These new-age modern applications are built using MongoDB’s flexible data model and horizontal scale-out architecture to yield fast performance and scale. MongoDB is rapidly growing with over 7 million downloads and thousand plus customers in just 4-5 years of its life.

There were 117 people attending the event and it was quite interactive with lots of questions at the end.

Listening to Mike Olson, founder of Cloudera

I attended a meetup last night in MountainView, sponsored by Oracle.

David Rubin, head of Oracle’s NoSQL team presented the recent advances made to their NoSQL product. This code base was acquired by Oracle 6 years ago from Sleepycat Software, the custodian of Berkeley DB (BDB). Mike Olson, who founded Cloudera and currently is the chief strategy officer (formerly CEO), wrote many parts of the  code for BDB during his graduate school days at UC Berkeley under the guidance of Professor Mike Stonebraker. Oracle’s new slogan says – Oracle now offers an enterprise grade NoSQL solution at the most compelling price point in the industry! It seems they are making an aggressive push of this NoSQL product lately. It is based on key-value record abstraction, but many operational features including SQL support have been added to make it enterprise-ready.

Then followed the interesting talk by Mike Olson, a true software engineer with a rich pedigree. He gave a historical account of  data management, starting with punch-card based records in the 1960s. The ISAM movement took the record-oriented data processing by storm, as one could re-arrange data in many ways via indexes. The key-value store was abstracted and suddenly files could be exchanged via Unix OS. Much work happened during the 1970s at Berkeley in both BSD Unix and KV store called Berkeley DB. From the wikipedia we find this fact – The founders of the company were spouses Margo Seltzer and Keith Bostic, who are also the original authors of Berkeley DB. Another original author, Michael Olson, was the President and CEO of Sleepycat that provided commercial support for Berkeley DB. Oracle finally acquired Sleepycat in 2007.

He then described how relational DBMS came about and became very popular during the 1980s. But nothing much happened in the database industry for two decades, until recently with many NoSQL products plus Hadoop etc. He compared the current NoSQL movement to what happened during the late 1990s when MySQL came out to support the backend-storage for Internet startups. It had many weaknesses but was adequate as a read-heavy database that was open source and free. There are too many NoSQL databases now, and many will disappear over time. The current funding of MongoDB at a valuation of $1.2B suggests there is perceived value and something is happening.

He also said that platforms like databases are interesting, but the real touchpoint for the customers will be applications such as analytics and machine-learning. He pointed to his iPhone and said in five years that will be your personal assistant. The need for analytics and such software is key to the success of the NoSQL products.

It was a great talk, specially for those of us who spent decades in the database business and I could relate to everything Mike said.

Big Data – Status

According to a Wall Street Journal article today by Rachael King and Steven Rosenbush, the market for new databases serving Big Data reached $1.22B last year and is expected to more than double by 2014 (according to research firm Wikibon). That is quite impressive.

Since relational databases using SQl are inefficient in handling data from social chatters, smartphones, and clicks (because of volume and variety), new databases are popping up over last 3-4 years. In the past two years 119 database software companies have been funded by VC’s for $1.17B (according to Venture Source, a Dow Jones company). This is remarkable, as not too long ago, the space was declared taken by 3 incumbents – IBM, Oracle, and Microsoft. However, the scene has changed dramatically now.

Thanks must go to Google for pioneering the start of new innovations in Big Table, GFS (Googel File System), and Map-Reduce algorithms for massively parallel processing using commodity hardware clusters. These technologies became part of Apache open source foundation and the result is Hadoop, HDFS, and several associated tools for the new ecosystem. Amazon, Yahoo and Facebook have also contributed good work here.

The article mentions a client Autozone using one of the new DBMS’s called NuoDB for better managing store inventory according to local shoppers. NuoDb like many others offers a cloud service with an annual subscription, cutting Capex for customers.

Another client Trulia (online real estate) was using MySQL, but has added Cassandra to better manage the listing of home foreclosures and apartment listings of its 100 million homes in the US.

Shutterstcok, a photo agency, stores 24 million images with 10,000 added each day. It uses HDFS (Hadoop) to find out user behavior (how long they hover over an image before purchasing).

The article suggests that large financial clients will stick to existing vendors such as Oracle for various reasons, but the threat of these newcomers is there. This is much like the cloud software  is shaking up Microsoft’s desktop software model.

We are in the data-intensive computing era now and the race will be fierce for leadership and market share.