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Oracle and Sun: First takes

Like IBM in 1960

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The roadblocks to Oracle’s purchase of Sun Microsystems have fallen away, and the deal is – for all intents and purposes – done.

So what did we learn during last week's five-hour marathon webcast? A lot. Oracle laid out its entire strategy, at least in a broad sense.

True to its word, it intends to stay in the hardware market and carry forward most of Sun’s major product lines. This includes Solaris, of course, and also UltraSPARC-based systems, x86-based systems, and the SPARC64-based systems developed with Fujitsu. One of the most detailed accounts of Oracle's plans is Timothy Prickett Morgan’s article here.

This heralds the beginning of some very interesting times in the industry. Almost from the beginning we believed that Oracle, with the purchase of Sun, had the potential to change the game… and we were pretty much alone in that opinion for quite a while.

We communicated that belief to our vendor and end-user clients with varying results and wrote about it here and here.

On the vendor side, clients were – in the early days at least – not taking the deal seriously. They figured that Oracle would dump the hardware as quickly as possible, or that they would be only half-hearted in their pursuit of hardware sales. Customers didn’t know what to think, particularly in the absence of any definitive statements from Oracle (which, in all fairness, couldn’t say much until the deal actually closed.)

What we heard last weekd confirmed our hypothesis. Oracle announced its intention to pursue a very enterprise-centric strategy, optimizing Sun hardware and o/s to work extremely well with Oracle databases and applications. This optimization will begin at the microprocessor level, continue up the stack, and carry all the way through to system integration, configuration, and even the sales channel.

Of course, Oracle didn’t lay out the entire detailed roadmap or disposition of the myriad things Sun does. There are still many unanswered questions. And already the pundits and analysts are picking away at things we consider, at this point, to be details that will be cleared up soon. Having been involved in these deals before, I can attest to the fact that you’ll NEVER hear all of the roadmaps, plans, schedules, etc. at this early stage. And we won’t hear about some of this stuff for quite a while. Some patience is in order.

In the call, Oracle representatives stated time and time again that the goal they’re striving for is application performance. Of course, Oracle is not unique in this pursuit. IBM, HP, and Dell also hammer this nail a lot in their own marketing materials. However, talking about it and actually, objectively proving it are two different things.

With its new ownership of an o/s and several hardware platforms, Oracle has a unique portfolio. As the only player that controls the stack from HW to applications, it has an unparalleled opportunity to modify all of the piece parts to provide more customer value with the delivery of an integrated offering.

This is a very interesting strategy and, in a lot of ways, hits directly at customer desire to have integration done at the factory on the vendor’s dime rather than their own shop floor at professional services’ hourly rates. Of course, service and consulting is another lever that Oracle can now use to add more value and disrupt competitors.

As Larry Ellison said toward the end of the webcast, “Oracle’s strategy of 2010 is the same as IBM’s of 1960. It made them the most powerful company in the world, and we like that.” That’s a pretty good summary of how we see it too. The question is, of course, if this is the model that customers want these days. I suspect we’ll discuss this issue a lot in coming months.

The key for Oracle will be whether it can build offerings of Sun hardware and Oracle software that provide business value over and above what competitors can offer with those same Oracle apps on their own hardware. Oracle isn’t going to do anything that will make its apps perform worse on anyone else’s HW, or do anything that makes it more difficult to optimize those apps on anyone else’s o/s.

All their components, Ellison stated, will be “best of breed. But in addition to that, all those things will work together.” We take this to mean that the company will explore every possible way to put forward a stronger value proposition for Oracle apps and databases onSun hardware.

The company has a lot of options for putting together this value proposition. The quick-fix, inexpensive approach would be to bundle either SW into the HW price, HW into the SW price, and services into any of them.

This is a page out of IBM’s book; it log-rolls various deal components to put together a package that beats competitors. Longer-term efforts include optimizing and redesigning Sun hardware and Solaris to work with databases and other Oracle-esque software more efficiently. Both efforts, with proper execution (which is always the hard part) should yield more sales.

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