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Thanks Oracle! Java licence squeeze puts a rocket under Azul

"Oracle’s licensing model for Java SE can be dauntingly expensive, and many users are exploring other options" says Gartner. A big winner? A low-profile Java veteran...

For 20 years, as unicorns rose and fell, cloud computing became Rather a Big Thing, social media platforms flourished and then fell out of fashion, the founders of Azul plugged away determinedly and with great focus at a suite of software products that is entirely focused on all things Java

Java may not be particularly sexy. CIOs planning their future state architectures and digital transformation strategies may not make “optimising Java” a linchpin of them. But it underpins everything from massive data processing engines, to machine learning libraries, via mobile applications and cloud computing platforms – and its "write once, run anywhere" promise has made it a truly ubiquitous enterprise presence. 

As Azul CEO and co-founder Scott Sellers puts it to The Stack, over lunch in London: “It's really quite remarkable how consistent Java has been as basically the default language of choice for traditional business applications that are dealing with business logic, or decision making, or transaction throughput. Java continues to be the heart of the enterprise.”

Of Azul, he adds pithily: “Most of the revenue-generating applications within the enterprise are based on it, so we built a business around it...”

After two decades-worth of refining and optimising its proposition, which includes what it describes predictably bullishly as “the world’s most secure and stable build of OpenJDK” (an open source distribution of the Java Development Kit – more on that anon) an unlikely friend came and put a rocket under the company’s revenues in 2023: Enter, Oracle.

Oracle’s “dauntingly expensive” Java licence changes

Oracle is not known for helping out its rivals, but an aggressive new Java licencing regime announced in January 2023 has been a colossal boon to Azul. The Oracle Java Licensing change made organisations purchase a licence for their entire employee population if even a single employee or server has installed a licensable version of Java – which is widespread, often without organisations realising this. And Oracle, notorious for its ferocious audits over the years, is stepping up audits of Java users.

As Sellers puts it: “They have significantly expanded the team that is responsible for it… the Global Licence Advisory Service, or GLAS.

“They have expanded that team considerably. What we're seeing worldwide is much more aggressive tactics in terms of looking at what customers are downloading; literally reverse IPing and seeing what people are doing, and then going after them with audits and threats. I mean, by nature, when you download Oracle software, you are agreeing to a licence agreement that says they audit the use of this software…”

Sellers, of course, has skin in the game, but the new licencing regime has resulted in profound and widely recognised bill shock in many quarters. 

As Gartner put it in late 2023: “Oracle’s licensing model for Java SE can be dauntingly expensive, and many users are exploring other options, in a paper that noted “Moving from one Java runtime to another is relatively simple… Oracle’s changes to the Java licensing model since 2019 have motivated many applications and software engineering leaders to adopt, or at least investigate, less-expensive third-party Java runtimes.”

That’s been great news for Azul. As Sellers tells The Stack: “We’re a very healthy, profitable company. But even at a high run rate, our platform [revenue] has doubled over the past year mostly because of Oracle.” 

Azul collateral upsells that pricing differential. nb. The Stack could not independently confirm these figures.

The often muddy waters of Java politics, distributions and licence changes can be confusing. One thing is simple however: There are alternatives to Oracle and, Sellers says, swapping Java Development Kit (JDK) from Oracle to Azul, for example, is not as complex as many presume. (Amazon is among those also providing an alternative, in the form of Corretto.)

Azul engineers its Java platform products to be fully compatible with Oracle Java SE: As Sellers puts it: “We conform to the same standards, verify with the same TCK test suite…” Azul also furnishes both quarterly security-only updates for rapid deployment plus consolidated Patch Set Updates that combine bug fixes, new features, and security patches.

It is also a significant contributor to the OpenJDK project – the open-source implementation of the Java Platform, Standard Edition that received a massive shot in the arm with another Oracle licence change…

As Azul’s Simon Ritter noted in a 2023 blog, with the release of JDK 11 in 2018, Oracle made a significant change to the overarching license for the Oracle JDK. “The new license was called the Oracle Technology Network License Agreement. This placed many more restrictions on where the Oracle JDK could be used freely, namely for personal use, development and testing, Oracle-approved applications and in the Oracle Cloud. 

“All other use cases required the purchase of a Java SE Subscription.  What had an even more dramatic impact on users was that this license was also applied to Oracle JDK 8 from update 211, released in April 2019.  Suddenly, anyone using Oracle JDK 8 to run enterprise, mission-critical applications would need to pay for security patch and bug fix updates.”

That decision led to a proliferation of OpenJDK distributions, like Azul’s. And those 20 years of focus seems to have paid off; customers are fans.

To their credit, Oracle's frankly, I think, been fantastic for the Java community in general - Azul President Scott Sellers

Sellers is reluctant to knock Oracle however. Over lunch in the City, he tells The Stack: “To their credit, Oracle's frankly, I think, been fantastic for the Java community in general” and gives a potted history: “All of Java is developed in the open source community, there's a project called OpenJDK, a given version of Java has somewhere around 10 million lines of code. It's a very complex open source project; all of the major software vendors that you could think of, from Oracle to us to IBM, Red Hat, Google, Amazon, Microsoft [are involved.] It's a very cooperative development environment that we all are advancing the state of Java [in].

“The fact that it's open source means that it can flourish and be quite a popular platform… but given its proliferation, it also has commercial interests behind it. Oracle has figured out a way to very effectively monetize their place in the Java ecosystem. And companies like us all, we built a business around that as well. But the market dynamic is such that about five years ago, Oracle, by developer use, was probably 60 to 70% market share according to Gartner. This year, that's down to 30%. 

“Because users have choice. They can choose to use Oracle's, they can choose to use ours, they could choose to use Amazon as their build; Microsoft has theirs; the Eclipse project has theirs. And what's cool about it is they're all interoperable. Because they ultimately come from the same source code; they all have the same set of Java compatibility tests.”

Regardless: Azul is making hay out of Oracle’s Java licence changes and is having particular success in financial services, among other verticals.

Many banks have legacy Java on their risk register; they’re running aging and unsupported versions for example and looking for modernisation partners. Sellers says his firm offers enterprise-grade 24/7 support and has also rolled out something called Azul Code Inventory, which “identifies all the dead code in production, which customers’ teams can review and remove quickly and easily.”

That’s a feature of a broader suite called Azul Vulnerability Detection; an agentless cloud service that pulls insight from inside the Java Virtual Machine (JVM) to see what code is running in production and offering optimisation options as well as highlight vulnerabilities.

Tools like this have helped power Azul to over 1,000 enterprise customers and a staff of approximately 300. So what next?

His focus in 2024, other than the obvious one – growth – is building out Azul’s channel: “Oracle has pulled a lot of their products out of the channel in general, so there's an awful lot of channel partners that are looking for a new Java partner. And so we've put a significant amount of emphasis and investment on building out a much more advanced partner programme.”

So just how big has Azul quietly got? Sellers declines to disclose run rate. (The company is owned by a UK-based growth equity firm.)

All he says is: “We are a very profitable, very healthy company. Our investors are quite pleased with our performance. If we were to continue on our current trajectory, in a normal Public Market era, we would be looking at an IPO in a couple of years, whether or not we choose to do that, TBD. But certainly that gives you a perspective, kind of the size and scale…”

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