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Oracle’s Fatal A.I. Constraint

Oracle is obsolete, perhaps the biggest short sale in a generation, we are going to prove it to you here

https://fractalcomputing.substack.com/p/the-fatal-limitation-of-oracle-in

Excerpt:

OK, we said it, Oracle is obsolete and we are giving you a front row seat for an inevitable valuation collapse, nobody currently sees, but most importantly, for you the tech follower, you the short seller, is trackable and begins to show itself during the next 18 months.

This is not investment advice - we are providing a glimpse into what is happening in the field - in real deals and disruption - demonstrating Oracle, and a dozen companies like Palantir, dependent on the current tech stacks are over-valued by a factor of 10.

.....How did Oracle become Oracle?

We were at the birth of a little company called Relational Technology Inc., or something like that in the 1980s.

It’s founder, Larry Ellison ran around the country with a 35 mm slide carousel (if you are under 50, Google it) telling VP’s of IT (that is what they called a CIO then) - telling them his database - Oracle, ran the same instruction set on their DEC VAX machines and IBM mainframes.

It was complete bullshit, as Oracle had two different products, but it didn’t matter much because relational database (RDBMS) was becoming a thing, mainframes were getting much faster and nobody cared about the overhead.

Ellison was selling a story - and that always works in software - until proof of hidden disruption seeps out and undermines the story - which is happening in the field now - unseen or ignored by the tech press and analysts.

The tech landscape in 1983 was driven by a company called Cullinane Software, later Cullinet, and ADR and a few others with early database management software.

IBM had this ghastly database called IMS - purpose-built to suck up more mainframe - so IBM loved it, customers, not so much.

The constraint in those days was people-intensive tech support for modifying the database.

Cullinet had a product called IDMS which used network pointers - hard coded little gremlins in the data and if you changed something, you had to rebuild an entire structure.

RDBMS (relational database) software - Oracle in particular - was far easier to manipulate but more of a storage and compute hog - as everything had to be lined up in rows and columns causing lots of data duplication.

So RTI at the time, took off, changed its name to Oracle - and Larry Ellison bought much of Hawaii.

That was then, this is now.

Oracle was built for HR, billing, common transactional systems using 1980s technology and for 40 years Oracle ignored advances in modern chip design - as all software companies did.

The overwhelming amount of data created today is not for CRM, HR and billing systems - rather from meters, sensors, cameras and devices - called IoT, Oracle is not a tech fit for that market.

So, provable today, super high volume, IoT data, needing collection, storing, decisioning instantaneously - is completely out of Oracle’s reach.

Oracle has close to total market penetration for the old stuff - HR, Billing, CRM but cannot compete in the new high volume, super speed decisioning applications.

Oracle’s huge market share exists - only because they are pretty much the last database standing from the 80s, and there is no newer technology to replace Oracle databases.

All kinds of data today is absolutely NOT going into an RDBMS - much of the IoT data - for instance, which is, by the way, the overwhelming amount of data on the planet.

Much of the A.I. data is not a fit for Oracle either - because much of the A.I. stuff is column based, needs to run at speeds that cripple an Oracle database - so Oracle must survive on current customers and getting into new businesses, like cloud computing.

Remember, there is no cloud.

Cloud computing is simply using someone else’s computer to run yesterday’s centralized compute technology.

Oracle is big in the cloud.

Cloud companies are showing continually lower valuations - because cloud computing is the Walmart of computing - lots of transactions at ever falling prices and tiny margins with undifferentiated services.

Ellison, probably the most brilliant marketer in the history of software - we are huge Larry Ellison fans here - is positioning Oracle as the next big thing in A.I. and A.I. development.

This week his stock valuation was reported to grow enough to buy the rest of Hawaii - because he announced a deal with OpenAI for $300 billion - running their stuff in his cloud.

Here are a couple of comments published in Wall Street Journal:

“To put Oracle’s $300 billion cloud deal with OpenAI in context, consider that the contract will require 4.5 gigawatts of power capacity, roughly comparable to the electricity produced by more than two Hoover Dams or four million homes.

The financial details are equally jarring.”

“OpenAI is a money-losing startup that disclosed in June it was generating roughly $10 billion in annual revenue—less than one-fifth of the $60 billion it will have to pay on average every year,” the WSJ reports.

“Oracle is concentrating a large chunk of its future revenue on one customer—and will likely have to take on debt to buy the AI chips needed to power the data centers.”

Remember the note above that Ellison told the 1980s market Oracle could run the same instruction set on a DEC VAX and an IBM mainframe?

Sort of the same thing here - this is an announcement - that any critical thinker can predict will never fully materialize - but it sounds good at a time of mindless market froth.

Only stock analysts, tech reporters and investors chasing unicorns would buy this story - and its subsequent Oracle valuation - without doing the math below the surface.

.....OPEN AI doesn’t expect to be cash-flow positive until 2029 at $129 billion in revenue.....

.....We are not saying there is no coming disruption from A.I., we are just telling you it isn’t coming from ChatGPT, building horrendously large LLMs (large language models) at the very time even NVIDIA - who does make money - is saying the world is all small language models, running distributed, which ain’t Oracle.

.....Ellison’s bet, like the quantum bet, is software cannot be made to run faster - data centers need to be made bigger - and A.I. is the technology demanding huge data centers - running Oracle.

META is building a data center the size of Manhattan - so they all think the same way.

The problem is software CAN be made to run 1,000 to a million times faster through the reduction of I/O wait states - which is about 95% of what software does.

If software can be made to run 1,000 times faster, it can do the same work with 1/1,000th the hardware.

Thus it needs only 1/1,000th the energy = NO DATA CENTER - or the current data center can do 1,000 times more work, thus no need for Larry Ellison’s half trillion dollars in NEW data centers.

Software speed is happening without Oracle - and if Oracle or RDBMS is anywhere in the formula - software remains slow, needs a data center, destroys Virginia farm land.

That’s the emerging industry choice: Does the market want software that runs 1,000 times faster, uses less energy and is 1/10th the cost, reduces storage 90% and is almost infinitely scalable?

OR:

Does the market want massive data centers, Oracle license costs, slow software, energy constraints, software that chokes on massive databases…..

.....Blinding software speed - essential for A.I. modeling - via I/O wait state optimization is Kryptonite for Oracle and all RDBMS.

Same for the cloud.

These two tech alternatives - low I/O wait state software and current relational database-dependent applications - cannot coexist over the long term.

Once you eliminate the need for a relational database and the need for ever growing data centers, the Oracle story collapses.

That’s still not the fatal virus.

Oracle knows very well its database customers have nowhere else to go.

A massive application running on Oracle today will run on Oracle almost forever - the costs of change are prohibitive.

That is why currently every major agency and corporation spends over 60% of IT budgets on maintaining the stuff they have - not innovating - because they cannot get out of their infrastructure limitation.

.....But, low I/O wait state category software is proving to have a disruptive impact on application modernization - without Oracle.

ANY Oracle application can be re-platformed, in 90 days or less, to an I/O optimization technology, and will run 1,000 times faster, at 10% of the Oracle cost, reducing storage 90%, eliminating the need for a data center.

Let’s go back to 1983.

This is how it’s going to happen - beginning in the next 18 months - so pay attention here.

The Great Oracle Tulip Bulb Crash is coming - engineered by competitors - like we did to Cullinet.

It’s hard to envision a company called Cullinet, which nobody under 50 ever heard of, owned the database world in 1983 - but they did.

They were a Wall Street darling.

Their CEO was on the front page of Business Week and spoke at many major tech conferences.

Every senior IT exec knew Cullinet meant success, and they lined up to buy Cullinet.

A company called ADR had an early relational-like database called Datacom. They lost to Cullinet in every engagement. 100% of the time. They were big deals too - as in $500,000 to a million bucks license fee - in the 80s.

But, unknown to the investment world, unseen by analysts, a slight but significant shift occurred in the market.

Tech talent became the hidden constraint.

Always look for those pesky emerging constraints - they become the seeds of disruption.

.....The current two constraints are energy and software speed.

Both are fatal to Oracle and every RDBMS vendor.

In the 80s, there were few DBAs (data base admins) - each was super expensive - at a time when salaries were climbing.

Cullinet and ADR went head to head, in Upstate NY, in Binghamton - for Singer Aerospace. Cullinet was set to win.

The ADR team innovated.

.....“We love Cullinet. Everyone buys Cullinet, but, well since you ask, it’s really hard to change anything in IDMS - it does not adapt to our changing business.”

That was the opening. Then came the killer phrase.

“We use Cullinet, the problem is hiring a Cullinet DBA costs a ton, then we train them and they leave for more money.”

.....The ADR team set up a challenge - build a simple application in Cullinet and in Datacom. You, the Singer guys do it with our tech rep - do the same thing with Cullinet.

Then change the application - and experience how hard it is.

Cullinet collapsed.

The customer learned fast, the Cullinet story was old embedded pointer crap technology they could not easily modify, their DBA would cost a mint, and the ADR Datacom product could be adapted almost immediately.

Cullinet was all hype, all marketing, no cattle - because constraints changed and there was now an ALTERNATIVE.

Alternatives deliver obsolescence to market leaders.

After the ADR Singer win, which was huge, every deal went ADR.

It didn’t matter, the Wall Street analysts did not care about ADR, they cared about Cullinet. A tree had fallen in the forest and nobody heard it.

.....The story was: “Everyone told us to buy Cullinet, but our business changes every day and Cullinet cannot change with it.”

Sound familiar?

Scott started publishing this material - from real sources, and the bullshit story collapsed - Cullinet’s valuation with it - and Cullinet was sold for scrap to Computer Associates. ADR died a few years later, as the tech world changed again.

So here we are - you the reader, you the hedge fund guy, you the technologist - you are hearing that low I/O wait state software is replacing Oracle or RDBMS in some deals - and in every one, guys like the Fractal guys - prove there is no need for Oracle, Palantir or any of these central processing dinosaurs.

The tech press ignores it - thus the opportunity.

.....There’s another little story you do not hear - most Oracle customers loathe that company. For several years, as our team met with CIOs and CFOs, their first question was “…..can you help me get rid of Oracle?”

Oracle has captive customers, not loyal ones - and an alternative - one that solves their energy needs, can implement A.I. immediately - without a new data center - at 10% of the cost is pretty appealing.

This week Oracle missed its earnings - but Ellison became $110 billion richer - because of a great story. Wall Street analysts are the most tech uneducated lot and they follow the herd - off the cliff.

.....Ellison is a brilliant marketer.

He knows it’s over for Oracle in the current market - so he is reinventing Oracle as a cloud vendor, and as an A.I. player.

Oracle is now in the distraction business.

Who knows, they may even buy Tik Tok - but their core business is obsolete and cloud computing cannot support their current valuation.

Playing arsonist and firefighter: How the West is falling for Qatar’s deadly game

While harbouring and funding Hamas and spreading the Muslim Brotherhood’s agenda, Qatar has styled itself as an ally and “mediator” – and European leaders are indulging the charade

https://www.thejc.com/opinion/playing-arsonist-and-firefighter-how-the-west-is-falling-for-qatars-deadly-game-m5p34kbb
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Amidst the heated discussion over Israel’s assassination attempt on Hamas leaders in Qatar, the silence about Doha harbouring these terrorists is deafening. Worse still, while condemning Israel for striking those who orchestrated October 7, Western leaders are lavishing praise on the Gulf emirate as if it were a trustworthy ally rather than a funder of global Islamism and terror. Qatar exploits its cosy ties with Hamas to cast itself as an indispensable “mediator” – and the West allows it to get away with this charade.

The gas and oil rich Emirate has long provided a safe haven, finance and even arms to the who’s who of Global Terrorism Inc. It has shown a remarkable willingness to embrace every group from Al-Qaeda and Hezbollah through to ISIS and the Taliban, including Khalid Sheikh Mohammed, the architect of the 9/11 attacks.

The same red carpet treatment was proudly given to Hamas. The terror group’s so-called ‘political’ leaders relocated to Doha from Damascus amidst the Syrian civil war and enjoyed their billionaire lifestyle until Israel showed its hand last week.

Qatar has made no secret of its support for this Palestinian branch of the Muslim Brotherhood, becoming the terror groups’ principal political and financial backers. Former Qatari Emir Hamad bin Khalifa al-Thani was the first head of state to visit Gaza after Hamas took power, and the cash rich country has disbursed north of £1 billion into Gaza ever since, including suitcases of cash for Hamas which Israel had mistakenly thought would buy quiet.

All the while, Doha-based Al Jazeera news network relentlessly pumps vitriolic Hamas propaganda around the world. This is the same channel that gave a programme to Yusuf al-Qaradawi, the Muslim Brotherhood’s spiritual leader, who endorsed the tactic of suicide bombings but was still regularly welcomed as the guest of honour at events hosted by Qatari Emir Tamim bin Hamad bin Khalifa Al-Thani.

As the atrocities of 7th October were unfolding, Hamas leaders were filmed celebrating in their luxury Doha quarters. This chilling footage may have long-since been forgotten by most, but for the State of Israel it left an indelible mark and signalled that a new security paradigm was required.

Hamas’ leaders have been on borrowed time ever since. Israel’s security and military apparatus have successfully hunted and eliminated Hamas’ leaders one by one, with daring strikes in Tehran, Damascus and amidst the grinding house-to-house combat Hamas has imposed in Gaza.

For all their apparent outrage over Israel’s attacks, the leaders of Western capitals would do well to consider how their actions have enabled Qatar to execute their double game of promoting extremism across the world, while positioning itself as a key strategic ally. This hybrid war against Western interests has been conducted in plain sight.

......Qatar has been playing the UK for fools. Its brokering of ceasefire talks may have been praised but in reality, Doha has been using them to engineer its own pro-Muslim Brotherhood agenda. It is much like the arsonist who also tries to play the role of a firefighter.

Israel’s political leadership have grown weary of allied countries demanding it negotiates with Hamas even when the group has rejected ceasefire deals time and again. Unlike those governments happy to merely proscribe terror groups in distant lands, Israel doesn’t have the luxury of geography and has again embarrassed grandstanding Western leaders by taking the difficult but necessary actions required to keep one’s country safe.

Despite the indignant public statements from regional actors, Qatar’s Western-oriented Sunni Arab neighbours are certainly no fans of Hamas and have long held grievances with Qatar for its destabilisation of their countries during the Muslim Brotherhood’s hijacking of the Arab Spring in the 2010’s. Saudi Arabia’s unofficial ties with Israel have withstood the tragic events of the last two years and driven by a determination to move beyond the region’s history of extremism and bloodshed, they seek the ending of this conflict as a pathway to expanding the Abraham Accords with the Jewish State.

.....For too long, Qatar has been permitted to pursue and gain from a regional strategy premised on support for extremism and fanning the flames of Islamist sedition and violence. Israel last week demonstrated the intrinsic limits of such a strategy – it only works for as long as its victims acquiesce to it. Israel has now made clear that it will no longer play its allotted role. Western governments would be well advised to do the same.