Thoughts on Oracle and Sun

Like everyone else, I was caught just a little bit off-guard with the announcement this morning.  But now I've had a few hours to consider different aspects of the deal, and it's an interesting mixed bag.

I'm sure we'll hear lots of commentary (and spin!) regarding this combination in the next few weeks and months.

So let the games begin!

It's All About Software ... Isn't It?

Front and center in this transaction is Sun's open source software portfolio: Java, Solaris, MySQL, etc. etc.

When we were considering the IBM version of this transaction, I offered that perhaps only IBM had figured out how to monetize open source software.

While Oracle is no slouch when it comes to marketing software, I still don't see them as having learned the trick of monetizing open source software assets.  Then again, one could theorize that Oracle saw significant value in just making MySQL go away, so to speak.

Oracle will have an interesting task in positioning software you pay for (most of Oracle's portfolio) with software you don't (most of Sun's portfolio).  But it's not an unworkable set of circumstances.

Or Maybe It's About The Hardware?

If you've tracked Larry Ellison over the years, you know he's always had a penchant for being in the hardware business.  Be careful of what you wish for, you just might get it.

Sun has been struggling in this end of the business for many years -- does Oracle bring anything unique to the table?

No, not really -- actually, just the opposite if you think about it.  The Oracle field and corporate organizations don't have much server and storage DNA in them, and Sun has lost most of theirs.

And, if you might think that somehow Oracle's database or application relationship with customers can somehow be leveraged to incentivize them to purchase sub-optimal infrastructure, well -- you might be mistaken.

A New Kind Of IT Company?

The new, augmented Oracle doesn't neatly fit into existing models of IT vendors.

You'd be tempted to compare them with vendors like HP and IBM, except that Oracle doesn't have the massive services arms of either. 

And one could argue that most of Oracle's future is as an application vendor (think SAP or Salesforce.com) -- and neither of those companies have much to do with IT infrastructure.

Either way you look at it, it's a strange beast, and I can't begin to figure out where any strategic synergies would come from. 

Maybe there was a pile of money burning a hole in Oracle's pocket.

Winners and Losers

The big winners here are obviously Sun and their stakeholders. 

Sun got a substantial premium for their business (good for them), and Sun's customers will probably see their investment soldier on for a bit longer into the future (good for them too!).

I think that NetApp probably ducked a bullet as well.  Sun's storage technology (especially ZFS) in IBM's hands could have posed a bit of a problem for them.

And, if we look at the list IT vendors who won't be pleased by this announcement, HP is pretty much near the top.

HP has been working hard to woo Oracle over the last few years.  Does anyone remember the breathless Exadata announcement from last year?  I think it's going to go down in IT history as the "DeLorean" of its time.

Thankfully, not too many people bought one.

Watch This Space

Both Oracle and Sun have an undying interest in server/storage combinations that are optimized for use with larger databases.  We saw some of this with Exadata, and some of this with Thumper.

I can't believe that there will be any less of the experimentation in this category going forward.  Neither company will be able to resist the temptation.

However, I'd predict that these new hybrids will be about as successful as every other "integrated" database/hardware combination, which is to say "not very successful at all".

The end of the DW/BI appliance is coming to an end (thankfully!), and I don't think that anyone will be all that interested in an Oracle/Sun "appliance".

Maybe It's The Cloud?

I don't know if you're as amused as I am when the mysterious "cloud" is used as a rationale for M&A.

Oracle has been publicly dissing cloud for a while.  Of course, that could change on a moments notice.

Sun has made a good amount of noise of the years, but hasn't achieved any traction -- either selling cloud-oriented architectures to service providers, or directly selling their own cloud-based services.

Hard to see where this will end up -- at least, at this time.

The Bottom Line

Simply put, this is not the most obvious deal I've ever seen.  There are a few parts that make sense to me, and a whole lot of aspects that don't.

The real question is -- what will customers think?

Comments

[John Webster]

"I think that NetApp probably ducked a bullet as well. Sun's storage technology (especially ZFS) in IBM's hands could have posed a bit of a problem for them."

OTOH, both EMC and NetApp could count on Oracle as a beneficiary. Not any more, assuming this is the final, final ending and IBM and anyone else potentially interested will let Oracle walk away with Sun without making a counter-offer.

[Geoff Mitchell]

In one swoop, Oracle potentially damages cooperative strategic relationships with HP, Dell, EMC, IBM and about a dozen other major IT companies.

What does it get out of this? It's definitely about the software as well as a defensive play by augmenting the portfolio against IBM.

[Robert Max]

A couple of thoughts...

The tape part of this doesn't make much sense -
Does Oracle really have any interest in promoting tape as an archival strategy (?) - wouldn't they be more inclined to want to promote a "live archival" type of architecture - more licenses, more disk, more servers?

I would think that the first move the combined Sun/Oracle salesforce will make in the way of storage is to look to replace the HP-branded USP with the Sun/Oracle-branded USP when tech-refresh opportunities present themselves. They could really make this difficult for HP by bundling with Server HW/DB licenses.

So where is the compelling reason for purchasing HP-branded USP outside of HP shops?

And while there may be interest in the Sun/Oracle customer base for the proposed synergy, what will be the level of interest amongst SAP, Microsoft, CMA, mainframe, VMWare, etc. customers?

Let the games begin indeed!

[Juan Jose Palacios]

Hello, Chuck.

Have you considered what could have been the effect of having a large slice of your yummy DB Business' tier 1 platform (Solaris) in the hands of one of your main competitors (IBM)?

I do not think, however, this is the main issue for Oracle. But I suspect it had some relevant weight in the decission.

Juan

[John F.]

If you stare at the sun too long, you'll go blind. Personally, I've given up speculating on the subject. I guess we'll just have to wait and see where the chips fall.

John

[Juan Jose Palacios]

I agree with all of you we'll just have to wait and see.

But if we just think what's Oracle's core business and how they've been successful with it (that is, partnering with the whole industry and becoming a de facto standard) let me doubt that the hardware issue will have a long term run for Oracle.

Too many new problems created when the business was running nice and smooth.

Yes, let's wait and see anyway...

Juan

[Sudhir Brahma]

Professor Farnsworth (Futurama fame) let me have a peek into his “What-if “ machine.
Before I could click on “download Java”, the website now offered me 2 versions:
1. Professional Java (Licensed version, with 30 day only free usage and lots of goodies including optimization for Virtual machines, not to mention special optimization for Oracle Database). Cost: just a few dollars.

2. Free Java (suitable for prototype with encouragement to move to the Professional version)

The machine switch off and then turned on again few years later with Google news : “ Oracle recovers cost of buying SUN Microsystems from excellent sales of its flagship product: “Professional Java” ….at that point, the rest was history.
regards
sudhir.brahma@gmail.com

[John F.]

"Professor Farnsworth". Now that's a play on names. Philo T. Farnsworth was arguably the father of television http://encarta.msn.com/encyclopedia_761583171/Philo_Farnsworth.html

In addition to TV, he patented the "fusor". There are thousands of hobbyists that build these things for fun. The University of Wisconsin has a program to develop the techology for commercial purposes (like transmuting high level nuclear waste and inspecting pipe welds). Robert Brussard built upon that foundation by replacing the grid (the reason a fusor will never reach net power is too manyt electrons smack the grid) by using a "virtual grid" comprised of magnetic fields in his "polywell fusion" designs. Polywell Fusion research, led by Dr. Rick Neibel, is actually currently funded by the department of the Navy, and shows great promise of being the first fusion design to produce net power (http://www.talk-polywell.org). All that at a fraction of the cost of ITER, which is not expected to produce net power for at least another 50 years...

Polywell fusion, Philo T. Farnsworth, the fusor, now there's something worth talking about. Sure beats going blind staring into the Sun.

John

[Gene Piatigorski]

I think Joe Tucci was not advised well, when EMC turned away from a bid for Sun.

The EMC-Sun merger would have been a win-win for everyone with greater synergies between the product lines (and ability to monetize Sun's IP) than either the IBM-Sun or Oracle-Sun merger.

Oracle's 'knitting' is in the software business. It will be interesting to see how they handle the hardware business (servers and storage) without much experience or exposure to running either one of those.

Maybe there is a hardware unit(s) spin-off or sale(s) in the Oracle-Sun future... Fujitsu has been building Sun's servers for awhile.

Maybe Oracle will no longer market servers and just market (open)Solaris and ZFS portions of that business.

But what can they do with the StorageTek unit? IBM can't buy them because of anti-trust issues for mainframe tape... If Oracle keeps the ZFS IP in its software coffers, there is nothing interesting left in that unit. Maybe a spin-off candidate...

[Chuck Hollis]

Hi Gene -- thanks for the vote of confidence in EMC's abilities to mergers and make them work.

I really can't say too much here, other than many companies looked at the Sun situation very carefully, including EMC.

The rest of the story can only be told over beers :-)

-- Chuck

[Business Opportunities]

Oracle has stepped up the rhetoric when it comes to its plans for Sun. In a message to Sun customers, the company said it would "dramatically improve Sun's hardware performance by tightly integrating Oracle software and Sun hardware.