Zoom's choice of Oracle as a cloud vendor was a surprise when the news landed Tuesday morning. But a day later, the pick made a lot more sense, after Google and Microsoft showed signs of moving more aggressively into Zoom's sweet spot.
Google, which is third in public cloud infrastructure market share in the U.S., behind Amazon and Microsoft, said on Wednesday that it's giving away its Meet video chat product for free starting in May. Zoom shares dropped 6.5% after the announcement.
And later on Wednesday, Microsoft said in its earnings report that its Teams collaboration suite, which includes video, now has 75 million daily active users, up from over 44 million last month. The spike in usage helped lift Microsoft's revenue in the quarter by 15%, despite a slowdown in licenses from smaller businesses and lower ad spend on LinkedIn.
The top video chat providers are all seeing a surge in demand with so many people working from home and uncertain about when they'll leave because of the Covid-19 crisis. Microsoft CEO Satya Nadella began his earnings call by talking about the new "world of remote everything" and Microsoft's role in help powering it.
While Zoom is singularly focused on video, Microsoft and Google are massive tech conglomerates with the ability to lose money in certain areas — like video — if it means picking up market share. Zoom would rather not fund its rivals' cloud businesses, which have been growing rapidly as large enterprises move away from traditional data centers.
That's where Oracle comes into play.
Oracle has been touting its cloud infrastructure in recent years, though it remains in the category of "somewhat niche players," according to Synergy Research Group, and rarely wins a marquee deal in the cloud market. So it was unexpected on Tuesday to see a press release from Oracle, saying that Zoom had chosen its cloud "for its advantages in performance, scalability, reliability and superior cloud security."
Unexpected — until you consider that Oracle doesn't compete with Zoom.
For cloud, Zoom has long been reliant on Amazon Web Services, while also handling a lot of capacity from its own data centers. The company admits its infrastructure wasn't prepared for a global pandemic that would send millions of office workers and students home almost overnight, with Zoom as the primary way they would be staying in touch with co-workers, friends and family members. The number of daily meeting participants jumped from a high of 10 million in December to more than 300 million this month.
In a webinar for users on Wednesday, Zoom CEO Eric Yuan said that Oracle, which has been "a great customer," wanted to offer additional support on top of what Zoom was getting from AWS. Zoom tested out Oracle's service and "it worked so well," Yuan said, that Zoom added the Oracle's servers to the mix.
Yuan said that the combination of Zoom's data centers, many thousands of servers from Amazon and Oracle's infrastructure "together serve all that unprecedented traffic." Brendan Ittelson, Zoom's technology chief, noted that the company does use some technology from Microsoft Azure.
In an emailed statement to CNBC, Zoom reiterated that point:
"We've seen exponential growth the past couple months — going from 10 million to 300 million daily participants — requiring quick and efficient scale to our infrastructure. Oracle Cloud Infrastructure was able to jump in and help us scale quickly, adding to our mix of providers which had already included AWS and our own data centers."
To be sure, Zoom would only pick Oracle for such critical work if it had confidence that the technology was up to the task. But Zoom also knows that, at a time when Microsoft and Google have emerged as two of the tech superpowers, Oracle is the one that's not coming for its bottom line.
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