Even if expected, the announcement last night of Oracle and Microsoft’s new partnership is still surprising in how far it actually goes. Announced at the ongoing Microsoft Build conference in San Francisco, it means that from here on in Oracle’s software will be able to run on the Azure cloud, as well as the Hyper-V virtualization platform.

Oracle Partnerships

The partnership itself had already been flagged by Oracle CEO Larry Ellison during the earnings call around the Q4 figures last week, describing the partnership announcement as “startling”.

While he also flagged partnerships with both Salesforce and NetSuite, there was no sign of announcements about either partnership yet, although the Wall Street Journal has cited an email from Salesforce CEO Marc Benioff which acknowledges that such a partnership is on the way without mentioning specific dates or terms.

We are working closely with Oracle to unite our strategies…Larry and I agree we have to work more closely together,” Benioff said in the message.

Microsoft, Oracle

If the exchanges between Salesforce and Oracle have not always been so cordial, neither have relationships between Microsoft and Oracle -- but just look at them now.

Speaking at the press conference announcing the partnership, Steve Ballmer, CEO of Microsoft said:

Our customers will be able to take advantage of the flexibility our unique hybrid cloud solutions offer for their Oracle applications, middleware and databases, just like they have been able to do on Windows Server for years."

In a blog, which appeared soon after the partnership was announced, Oracle explained exactly what it entails. According to Gene Eun of Oracle there are 5 elements to it:

  1. Oracle users can run Oracle software on Microsoft’s Hyper-V and Windows Azure
  2. Oracle provides license mobility for those that want to use Azure
  3. Microsoft will add Infrastructure Services instances with configurations Java, Oracle Database and Oracle WebLogic Server
  4. Microsoft will offer licensed and supported Java in Windows Azure
  5. Oracle will offer Oracle Linux, with a variety of Oracle software

Speaking during the press conference, Steve Ballmer said that while the two companies had been working -- and competing -- for a a number of years to enable Oracle databases work on servers using Microsoft operating software, the fact that more and more enterprises are pushing more applications onto the cloud had forced them to look at ways of providing enterprise customers with cloud services that work together seamlessly.

With this partnership, customers of both companies can deploy Oracle software on Microsoft private clouds and Windows Azure, as well as Oracle private and public clouds and other supported cloud environments.

Microsoft, Oracle Market Shares

While the bottom line here is that customers of both Oracle and Microsoft come out on top, the real driver here was market share and the fact that there are a lot more rivals in the cloud space than there were in the days when the two companies could sling mud at each other with impunity.

Microsoft is under pressure to build up its cloud services as it seeks to face off rivals in the same space like Google, Amazon and Salesforce who we have seen over the last few months have been really squeezing Azure with price and storage capabilities.

In a blog post about the deal, Forrester’s James Staten said that with it, Microsoft will be in a better position to compete. It strengthens Hyper-V against VMware vSphere, while giving Azure near equal position against Amazon Web Services (AWS) as the fully licensed support covers all Oracle software.

For Oracle, the fact that so many of its customers are using Oracle on top of Windows servers has forced it to offer them a tighter and more integrated experience to justify the maintenance fees they pay Oracle. Such customers, needless to say, will also expect Windows updates and additions automatically as part of those fees.

All that remains to be seen now is what Oracle is going to do about Salesforce and NetSuite and what those partnerships involve. At the moment there is no indication at all of what is involved or when the promised partnerships will be announced.