Oracle has made multiple previous attempts to enter the cloud IaaS market — most recently (early this year), with the Oracle Compute Cloud. At Oracle OpenWorld this week, however, Oracle announced a brand-new cloud IaaS offering. Oracle hasn’t officially given this a real brand yet, so for the purposes of this blog post, I’ll call it their next-gen cloud.

News of this project leaked last year. Oracle has paid richly to hire an “A” team, so to speak — former long-time senior AWS engineers lead the project, and they’ve recruited heavily from all three hyperscale clud providers in Seattle (AWS, Microsoft Azure, Google Cloud Platform). These are credible product and engineering people who, in my opinion, understand what they need to build and the enormous challenges ahead of them.

The next-gen cloud currently consists of an SDN (capable of both Layer 2 and Layer 3 networking, which is a differentiator), block storage, object storage, and bare-metal servers (thus the initial moniker, “Oracle Bare Metal Cloud”). Virtual machines (VMs) are coming later this year, with containers to follow early next year. Based on a detailed engineering briefing that Oracle provided to myself and my colleagues, I would say that smart and scalable choices seem to have been made throughout. However, I would characterize this early offering as minimum viable product; it is the foundation of a future competitive offering, rather than a competitive offering today.

In the near term, Oracle’s next-gen cloud will be interesting primarily to a general audience in a bare-metal context. Here, Oracle will compete with Packet, and to some lesser degree, the bare-metal cloud offerings from CenturyLink and Rackspace (OnMetal). It is a true software-defined cloud IaaS offering, provisioned in minutes and billed by the hour. This sets it apart from more hosting-like bare-metal offerings such as IBM SoftLayer, Internap, and Cogeco Peer 1.

It is unlikely that Oracle’s announced price-point — 20% below AWS list prices — will be sufficient to move the needle in a market where AWS’s “real” prices are lowered up to 70% by reserved instances (plus AWS negotiates custom discounts), and where Google is already competing intensively on price (especially on negotiated deals) and has an offering substantially more featureful than what Oracle will have in the market in the next year. Good price-performance is table stakes here. This is not a commodity market; providers compete on their capabilities. This is also not about capital investment to build data centers; Oracle can use colocation until they reach a scale where building makes sense, though since such projects can take years, they’ll need to time that properly.

Bare metal, of course, significantly outperforms VMs in some cases — especially high I/O use cases. But bare metal should be thought of as part of a complete offering — a compute option for some of a customer’s workloads. Price-performance should always be considered in the context of the customer’s specific architecture. In the case of Oracle, bare metal and the layer 2 SDN features are important because they are needed for Oracle RAC and for better performance of Oracle application software. Oracle has built the core of their offering around off-box virtualization of networking and storage, which is important for allowing their cloud IaaS offering to smoothly interoperate with other Oracle hardware placed into the same environment, like Exadata appliances.

Overall, this should be seen as a positive move for Oracle, but one with many open questions about its future. As always, if anyone has more detailed questions, I am happy to answer them in the context of client inquiry, and I’ve set aside some time to speak with reporters during this OpenWorld week.