Oracle Wants Israeli Firms to Give Up Basement Servers for Cloud Farm

The U.S. software giant plans to grow from 16 server farms worldwide to 40 by the end of 2020, with Israel's high-tech sector a choice target

Oracle Field Office at Wilson Boulevard in Arlington, Virginia, U.S., October 18, 2019
\ TOM BRENNER/ REUTERS

Software giant Oracle plans to change the way Israeli companies and government ministries store data when it sets up a local server farm at an estimated cost of more than $200 million over the next five years.

In September, California-based Oracle announced a plan to establish two such facilities in Israel, one with particularly high security standards for the Israeli government and security services, and a second for the business sector.

Oracle is the first of the technology giants in the cloud computing field to announce its entry into the Israeli market. Firms such as Amazon, Microsoft, Google and IBM have no Israeli-based cloud – no local server farm where clients’ data can be remotely stored. That keeps clients with sensitive data from using their cloud services.

Oracle’s biggest challenge will be finding companies willing to shift the storage of data from physical servers located at their own offices. Migrating to cloud computing requires a conceptual, operational and cultural shift that is no simple task for an organization, so Oracle is holding a series of informational meetings with potential clients.

The company has dispatched Eran Feigenbaum, Oracle’s chief information security officer, who is originally from Israel, for the task. “The guys here in Israel filled my day with government meetings and big business clients,” he told TheMarker, adding that he is meeting information technology staff from major banks, health institutions and government agencies. “We discuss the cloud in general and cybersecurity specifically, and why I think their security situation will improve after migrating to the cloud,” he said.

IT people are used to being able to touch their servers, Feigenbaum acknowledged. “Some are starting to see the advantages,” he said, ”such as being able to pay for computing power only when you need it, and adding features,” he noted. “They also see security breaches and understand they can’t meet all the threats alone, especially in light of the global shortage of security personnel. They haven’t yet been able to migrate activity to the cloud because there were no server farms in Israel, but the game is changing.”

Made for the most sensitive organizations

Potential clients are concerned about suffering a data breach similar to what the financial services firm Capital One experienced in July in the United States, when a hacker gained access to data on over 100 million customers from a server hosted by Amazon. An FBI investigation found that former Amazon employee Paige Thompson had exploited a misconfigured web application firewall to steal the data from Capital One and 30 other clients.

Feigenbaum said such an incident won’t happen at Oracle because it entered the field late, meaning that it has had the benefit of learning from the competition and jumping straight to the next generation. “We’re planning a cloud designed for the most sensitive organizations in the world,” such as governments, intelligence agencies and financial entities that are run locally, he noted. “Now the challenge is to create an even more secure cloud.”

Oracle is also throwing its entire weight into an autonomous cloud, which uses machine learning to eliminate some database maintenance. For example, the company promises continuous security updates without the need to download and restart individual computers, as other platforms require, which leads many organizations to postpone security updates until the weekends.

“Just like with an autonomous car, we want to move toward autonomous cloud security,” Feigenbaum said. “I mean a database that backs itself up, that secures itself and closes breaches automatically.”

Migrating government to the cloud

Establishing a locally based cloud will shake up competition among cloud suppliers. This summer the government launched the Nimbus Project, which will see the state’s entire computing infrastructure transferred to the cloud at an estimated cost of 500 million shekels ($142 million). The government wants the data center in Israel for security reasons, if not as a result of legal considerations.

Global cloud giants have demanded that the government commit to a minimum level of use and a minimum fee, but the Israeli government was in no rush to make such a promise. Oracle went ahead and announced its Israeli plans anyway.

“Oracle’s decision to open two server farms came with an ‘If you build it, they will come’ attitude,” said Feigenbaum, a reference to the American film “Field of Dreams.” “It’s no small investment, but we believe in it,” he said.

Eran Feigenbaum, Chief Information Security Officer, Oracle

Oracle’s entry into Israel is part of an aggressive strategy, Feigenbaum claimed. “If Oracle had four sites worldwide last year, it now has 16, and it will have 40 by the end of 2020,” he noted. “If you look at the map, you can see we are going to underserved markets” such as Brazil, Japan, South Korea, Saudi Arabia and the UAE.

The decision regarding the Israeli market may stem from Oracle’s relations with the Israeli government, which has paid the American company some 29 million shekels over the past three years, according to public information. The biggest user is the Health Ministry, which spent over 16 million shekels on Oracle technology licenses. Oracle may also have security clients, whose expenditures are not a matter of public record.

The Information and Communication Technologies Authority, which is in charge of Nimbus, said preparations are now under way to invite bids for cloud computing services for government ministries. “We are pleased about any investment by an international player in Israel, which bears witness to the attractiveness of the economy for leading players in this field.”

Good news for startups

Oracle is traditionally oriented toward big business, but its foray in Israel may also be good news for high-tech startups. They currently avoid owning servers, and rely almost exclusively on public cloud servers that are mostly based in Western Europe. Oracle’s entry will allow them to receive faster cloud services, and they will also be able to serve more Israeli clients whose data is particularly sensitive.

There is stiff competition among cloud companies to attract startups. The cloud service providers offer free trial periods in the hope of snagging clients when they are small, so they can grow with the startups. The moment a startup hooks up with one platform, migrating to another cloud gets complicated.

The cloud is a major growth engine for the technology giants. According to the Canalys market research firm, cloud infrastructure generated $27.5 billion in revenues during the third quarter of 2019, a 37 percent year-on-year jump. The figure is expected to top $100 billion for 2019 as a whole. Growth averaged 45 percent annually from 2016 to 2018 and hit $80 billion last year.

Oracle is the third largest software company in the world, with annual sales of $40 billion. It’s ranked fifth in the cloud market.

Feigenbaum, who left Israel 32 years ago at the age of 16 and was an amateur hacker in his youth, joined Oracle in mid-2018. If you search for him on YouTube, you can might find him performing some breathtaking magic tricks under the stage name Eran Raven.

Eran Raven, 2008