Will customers buy into Oracle's modern-day mainframes?

How about that stack, Larry...

Internet Security Threat Report 2014

The benefits

"On a two-socket system, these two expenses alone [OS and hypervisor] can represent as much as 71 per cent of total TCO over a three-year period," the report states. "Why pay for virtualisation when it comes for free?" Oracle asks in its brochure.

However, it's unlikely that bundled price savings alone will entice customers to adopt Oracle's engineered systems. Despite the sales pitch, Oracle isn't giving away its Linux OS and hypervisor software. Big companies never pay list price, especially when buying from Oracle, so it's not fair to assume they wouldn't bargain with Red Hat and VMware for better terms.

Industry observers say the biggest challenge that Oracle faces with engineered systems is convincing customers that putting all of their enterprise IT eggs in Oracle's basket is a good thing.

"The danger is, it's one throat to choke, and you're becoming more and more dependent on Oracle," says Wang, CEO of Constellation Research.

"Oracle wants to be able to get to this point where customers are saying, 'Look, you're already a super strategic supplier to us' and here's what you do.' [But] it'll make it harder to get off, because everything is there at the infrastructure layer."

Wang says the customers who are most receptive to "one throat to choke" are Oracle's die-hard Red Stack fans who face huge integration headaches and costs.

"These folks are never going to leave Oracle,” he says. "They started with a database. They adopted the financial apps and then they bought the middleware. For them now, it's a complete IT consolidation play. Soup to nuts, these are die hard fans, and they're saying, 'Oracle, thanks for putting this all together. We're eliminating five other vendors, and delivering it for less than the cost of five other vendors'."

But what do the acquired customers think of the lock-in?

Less receptive to the engineered systems approach are customers Oracle obtained through acquisition.

"These guys say, 'I bought the best of everything. There was a reason I wanted Sun or I wanted IBM or HP,'" he says. "Then Oracle comes in, like a rude guest, and says, 'Oh, by the way'."

"That vendor lock in is scary," says a former VP in Oracle's engineered systems program, who asked not to be named in this story. "I don't think that's any customer's real desire. To be locked in scares customers in a significant way. They want to have strategic partners. They want somebody who understands all the different components in a highly virtualised, highly heterogeneous environment. [They don't want somebody] saying 'Hey everything has to be a Red Stack or a Blue Stack.'"

The most likely Oracle customers to give engineered systems a try are net-new customers, and those ready to make the move to Oracle Fusion Apps. After all, two-thirds of Fusion Apps deployments are being made on Oracle's cloud, which is composed in part of engineered systems.

But there are only 400 Fusion Apps customers out there, compared to tens of thousands of E-Business Suite, PeopleSoft, JD Edwards, and Siebel customers. These are the customers that Oracle needs to adopt engineered systems, but don't expect rapid adoption.

Whether it's fair or not, Oracle has a reputation that precedes it, and the question of lock-in is not something to be taken lightly. While it backed off its initial plan to eventually consolidate its business apps on Fusion when Fusion launched in 2005, it has ruffled the feathers of some of its acquired customers, notably JD Edwards EnterpriseOne customers who run their ERP on IBM fully integrated Power Systems (AS/400) servers.

Blue Stack

In 2010, Oracle announced that, at the end of 2013, it will no longer sell the Blue Stack of software (WebSphere and DB2) needed to run the ERP system on IBM gear, and from September 2016 will no longer take support calls for Blue Stack software issues. This is a powerful incentive for EnterpriseOne customers to move to Oracle's stack.

JD Edwards and PeopleSoft customers will approach the consolidate Oracle stack slowly and cautiously, says Jeff West, the president of the Quest International Users Group. "Replacing any or all of the components can be expensive for existing customers and has to be weighed against the potential benefits of a unified Oracle stack," West says.

Existing customers probably won't consider the engineered systems approach until their next hardware refreshes and system upgrades, he says. "For net new JD Edwards or PeopleSoft customers, the value proposition may be slightly better and an easier transition to make since they are already making a sizeable investment in a new ERP and may be able to realise the unified stack benefits quicker," he says.

Oracle has the size and funding to play the long game with engineered systems. That may actually benefit its enterprise software customers, which are stretching their system upgrade cycles to five years and beyond, and like making strategic architectural decisions about as much as a root canal.

"Whatever evil image of Oracle people have, they're not forcing customers," Wang says. "Oracle is one of the few [tech] companies with a big R&D team. They're actually developing and building. Other people buy companies and don't build on top of them. They just let them die.

"Whether you're looking at cluster or storage, or looking at the database appliance or Exadata, what Oracle is really saying is, 'Look, we're just dropping these in for you. And if you're not getting cost savings, nobody would buy it to begin with'."

The Register approached Oracle to comment on this article, but it was unable to respond by the time of publication. ®

Internet Security Threat Report 2014

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