Oracle says ‘oui’ to European cloud sovereignty

Oracle (NYSE: ORCL) has launched EU Sovereign Cloud to help enterprises benefit from cloud infrastructure while satisfying European Union regulations requiring businesses to keep European data local, where Uncle Sam can keep his mitts off.

EU Sovereign Cloud is designed to help private and public sector organizations across the European Union get more control over data privacy and sovereignty requirements while providing the same services and capabilities as Oracle’s cloud infrastructure platform (which is named, sensibly enough, Oracle Cloud Infrastructure), at the same prices, support and service level agreements.

EU Sovereign Cloud is physically located entirely in the EU, with high availability regions in Frankfurt, Germany, and Madrid, Spain. It’s supported by EU-based personnel and operated by separate legal entities incorporated within the EU and owned by Oracle.

The Oracle service is a response to increasing European data privacy and sovereignty regulations, beginning with the General Data Protection Regulation (GDPR) in 2018. These regulations require companies doing business in Europe to keep data on European citizens physically within Europe, retain local control and prevent foreign entities, such as the U.S. government, from accessing the data. The rules are designed to protect European people and help enforce local laws, but they’re antithetical to the public cloud, which is location-agnostic. Critical industries such as healthcare, financial services, telecom and public sector organizations are particularly challenged.

“A lot of organizations, especially regulated organizations, have been very hesitant to move anything into the public cloud,” Oracle VP of products and strategy Leo Leung said in an interview. “We think that EU Sovereign Cloud will help alleviate those concerns.”

The Big Red difference

In 2021, Google Cloud teamed with Deutsche Telekom’s T-Systems to build a sovereign cloud for enterprises in Germany. And in 2022, Microsoft unveiled a sovereign cloud for government customers. 

Oracle is different from its competitors in that its EU Sovereign Cloud service runs on physically separate infrastructure from the public cloud, where competitive services are only logically separate, Leung said. EU Sovereign Cloud shares no infrastructure with Oracle’s commercial regions in the EU and no backbone connections to other Oracle cloud regions.

Digital Realty hosts EU Sovereign Cloud in Madrid and Equinix in Frankfurt. Additionally, EU Sovereign Cloud provides all the infrastructure services on Oracle’s public OCI.

“Other providers typically offer some subset of their commercial services, which we think is insufficient. And they typically charge a premium for locating workloads inside their sovereign environments. Ours is the same price as the commercial regions,” Leung said.

And Oracle has plans to deliver the Oracle Fusion Cloud Applications Suite, its line of back-office software, in Oracle EU Sovereign Cloud.

Oracle faces a competitive market for sovereign cloud providers, but Oracle is first to offer a combination of data sovereignty, dedicated data centers and controls around identity and access, Rahiel Nasir, IDC lead analyst for Digital Sovereignty, said in an email interview. Additionally, Oracle offers Realms, for partitioning networks.

Other cloud providers will follow Oracle’s lead, Nasir said.

Planting a flag

“Oracle has planted a ‘big sovereignty flag’ in the EU with the launch of its sovereign cloud offering,” Nasir said. Organizations are seeking sovereign solutions, driven by regulatory requirements and “ongoing geopolitical uncertainties” (This phrase seems to be emerging as a standard industry euphemism for “war.”) But implementing sovereignty can go beyond ticking off regulatory checkboxes: sovereignty can deliver strategic technical and business advantages, including enhanced cybersecurity, greater operational resilience and improved trust among customers and other stakeholders.

In addition to EU Sovereign Cloud, for organizations requiring even more control, Oracle provides Dedicated Region, which is an entire cloud region of one or more data centers devoted to a single customer. For example, Oracle provides six dedicated regions for Vodafone, to serve that telco’s customers.

In the cloud market, Oracle is playing catch-up from far behind. In the most recent estimates from Synergy Research, Amazon Web Services ranked first, with 32% market share, followed by Microsoft (23%) and Google (10%). Oracle is included in the second tier of the next 20 companies, with 26% market share combined. However, in that second tier, Oracle is among those with the highest year-on-year growth rate.

And Oracle had an “I told you so moment” in its fourth-quarter earnings, reported June 12, with overall revenue up 17% year-on-year to $13.84 billion, cloud infrastructure revenue up a whopping 76% to $1.4 billion, cloud services and license support revenue up 23% to $9.37 billion, and revenue from cloud licenses and on-premises declining 15% to $2.15 million.

CEO Safra Catz sounded a victory note and said the company is merely “at about the middle of the beginning” of its transition from a vendor of on-premises software to a cloud vendor. She said she expects growth to accelerate in the future.

At the same time, Oracle announced a partnership and C-round investment in generative AI firm Cohere.

Financial analysts at Guggenheim said before the 4th quarter earnings announcement that Oracle enjoys a “4th mover” advantage in the cloud, with a deep legacy as a tech company, price-performance advantage and a broad array of leading technology that make it a formidable rival to competitors with much bigger market share.