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New public cloud measures proposed by the US government would be a bad thing for Oracle, which risks losing a very lucrative customer. Two days ago, the US
New public cloud measures proposed by the US government would be a bad thing for Oracle, which risks losing a very lucrative customer.
Two days ago, the US government put forward a proposal to exclude China from the public cloud. A new escalation in the increasingly bitter trade war between Washington and Beijing. If the measure is adopted, American cloud providers will no longer be allowed to provide cloud and AI infrastructure for Chinese companies.
According to Business Insider, one major provider is currently holding its breath: Oracle.
Why Oracle? The company is currently working with one of the most desirable Chinese technology companies. Let’s take a step back to 2020. The US government is considering banning TikTok unless parent company ByteDance partners with an American company.
Microsoft sees an opportunity to integrate the wildly popular social media company, but in the end, surprisingly, it’s Oracle that takes the trophy. The deal is also more interesting for ByteDance, which in this construction can retain control of its top product while still meeting Washington’s minimum requirements. In addition to the regular cloud provider for the American market, Oracle is also involved in the social media platform.
That was celebrated with lots of champagne at Oracle at the time. Oracle appreciates ambitions to break the triarchy of AWS, Microsoft Azure, and Google Cloud, and with a fat fish like TikTok on the hook, those ambitions get even more vigor. The cloud provider had a record year with sales of almost fifty billion dollars. However, market numbers show that Larry Ellison and his colleagues are still overshadowed by the Big Three.
The measures that the USA now wants to implement make the forced marriage between Oracle and TikTok practically impossible. TikTok may therefore be forced to partner with a non-US player. The big Chinese tech companies like Alibaba and Huawei will be ready to welcome ByteDance to their cloud with open arms.
However, ByteDance will recognize all too well that working with any of these companies would mean an irrevocable exit from the US, a key market for any social media platform. In this respect, too, ByteDance finds itself in an awkward situation.
What about the other cloud providers? They would feel the effects of cloud restrictions much less, says a well-known Wall Street analyst Mark Moedler. For example, Microsoft has a separate entity, 21Vianet, that provides Azure services in China. To a limited extent, the company also does business with Chinese companies.
The same analyst also softened the impact that losing TikTok would have on Oracle’s cloud revenue. ByteDance only buys IaaS services from Oracle, while the big fat pot for Oracle also lies in the sale of SaaS applications.
Oracle’s situation is particularly illustrative of the growing divide between political and technological interests. Tech companies from both camps often view the escalating trade war between the US and China with regret. Political behavior thus seems to have more losers than winners.
Source: IT Daily
As an experienced journalist and author, Mary has been reporting on the latest news and trends for over 5 years. With a passion for uncovering the stories behind the headlines, Mary has earned a reputation as a trusted voice in the world of journalism. Her writing style is insightful, engaging and thought-provoking, as she takes a deep dive into the most pressing issues of our time.
