Oracle's Itanium gambit: A play for HP's checkbook
One way or another, Apotheker will pay
Comment Everything Oracle does is about money. You have to look at any of its actions - no matter how peculiar or provocative they may be - through an economic lens, focusing on the benefit those actions will provide to Larry Ellison and the company he co-founded decades ago.
Take last week's out-of-nowhere kick in the chips Ellison and Co. delivered to new Hewlett-Packard CEO, Leo Apotheker, on the eve of Apotheker's first annual shareholder meeting.
We can imagine Apotheker sitting down to dinner somewhere, surrounded by important shareholders in a good restaurant, sipping a very good red wine, when the message passed over his personal digital assistant of choice - probably a Nokia smartphone - that Oracle had pulled the plug on future development of its database, middleware, and application software for the Itanium processor. We see Apotheker holding a wine glass, swirling the red juice in one hand, while thumbing his email in the other hand. Suddenly, he stops swishing the wine. The glass starts to vibrate. And then he crushes it, sending glass shards and wine across the restaurant.
Or something like that.
This Itanium-Is-Dead announcement did not come out of nowhere. It very likely came out of the minds of Ellison and his new co-president, tennis buddy, and ex-HP CEO, Mark Hurd. The top brass at Oracle want to make life tough for all of the other players in the server racket while at the same time cutting back on any costs they might have to bear in developing the broad and deep stack of code that Oracle has amassed over the past two decades. We see Ellison and Hurd kicking back in a wood-paneled executive suite, swilling Chateau Mouton Rothschild 1982, each with their own bottles and sometimes using a glass, howling like frat boys pulling a prank when they came up with this one about ratting out HP and Intel on the Itanium roadmap.
The actual conversation between Ellison and Hurd was probably more subdued, probably took place right after Hurd was hired last fall. They were probably sipping small bottles of Evian or whatever the elite do these days.
This Itanium gambit is just one in what will be a long line of such maneuvers, and oddly enough, it demonstrates Oracle's now-intense commitment to the systems racket that it did not intend to get into. At one point, when IBM's acquisition of Sun was falling apart, Oracle tried to just buy Java and Solaris from the carcass of Sun and sell off the hardware business to Hewlett-Packard.
We saw a similar move back in June 2010, when Oracle suddenly yanked HP's Solaris OEM contract. At the time, IBM, Dell, and HP were all OEMs of Solaris. In late July last year, IBM said to hell with it and stopped preloading and supporting Solaris on its System x and BladeCenter machines, and two days later, HP and Dell were back in the Solaris distribution biz on their respective ProLiant and PowerEdge machines.
Oracle never explained the changes to the agreements, but we suspect that it involved HP and Dell giving Oracle a bigger cut of the support contract dough. The companies also had to agree to support Oracle's Enterprise Linux clone of Red Hat's Linux on their boxes to stay in the Solaris on x64 game.
Yanking the support contract was just a way to focus the attention of HP and Dell. And it worked like a charm.
Solaris is not a very big deal to HP, Dell, and IBM. But the Oracle database - and now middleware and applications thanks to all those big acquisitions - are absolutely huge.
Only Oracle and the Unix vendors knows for sure, but the word on the street for years is that as much as 80 per cent of Unix system sales are driven by the Oracle database. Somewhere around half of the Oracle installations in the world are on HP iron, we also hear, and the revenue probably leans heavily towards the Itanium-based Integrity servers running HP-UX. Yes, IBM's DB2 has come a long way in a decade competing with Oracle, but the Power Systems base using the AIX operating system for transaction processing is still dominated by Oracle's eponymous database.
If you think IT shops are zealous about their operating systems, they are positively righteous about their databases. If an IT shop thinks that it is getting a raw deal on its servers, it will absolutely consider moving from one Unix platform to another, or maybe even moving from Unix over to Linux or Windows platforms. Some of you will no doubt say "down" to Linux and Windows, arguing for the difference in reliability, security, scalability, and so forth. Call it what you will, but companies do it. And such a move is a big deal, one that a company might do once in a decade or two.
But databases and application software are the ultimate in sticky code. Heaven only knows what triggers, stored procedures, and hairy code application and database programmers have put into the databases and the related code to make it work with one database - and tuning it up to work well. Porting that hairball is no easy thing. It is not like moving from Solaris to AIX or HP-UX to Solaris, where the commands and features are similar. The porting of databases can be done, and is indeed done, but you are messing around with a company's data when you do that. This is the scariest thing that any company can imagine. And they will go to great lengths to avoid this.
Engineered systems, engineered financials
The big rationale for Oracle creating engineered systems based on Sun hardware running Solaris or Linux, tuned to run best on its own stack, was that this makes the job of supporting its software easier and cheaper. This is all good, and it will help to make Oracle a more profitable company if it succeeds. But supporting Oracle's diverse software base on myriad operating system and middleware platforms is expensive. And someone has to pay for this best of breed custom stacking that customers like to mix and match things across vendors for technical and political reasons. We happen to think it will be Oracle's partners that will end up footing the bill.
So all of Oracle's talk about Itanium being a dead-end product may not be the point. Getting Apotheker's attention - and enough that he will get out that big old corporate HP checkbook out of his pocket - is probably what this is all about. And Paul Otellini, the CEO at Intel that wants to see Itanium systems sell for at least the next five years (and probably more), may have to get out his checkbook too. If companies want Oracle database, middleware, and application software to run on non-Oracle operating systems and hardware, it looks like they are going to have to pay. Logically, this will apply to IBM's AIX as well as to Red Hat's Enterprise Linux and Microsoft's Windows, if this is indeed the Oracle strategy.
In the transition from Oracle 10g Release 2 to Oracle 11g, Oracle already started trimming the platform support it offers. Take a look for yourself here.
Oracle 11g runs on Windows (32-bit and 64-bit); Linux on x86 (32-bit) and x64 (64-bit); Solaris on x64 and Sparc (both 64-bit), HP-UX on Itanium and PA-RISC (both 64-bit as well), and AIX on Power (64-bit). That's it. Here's are the platforms that supported the Oracle 10g database but didn't make the 11gh cut: Linux on Itanium and Power, Windows on Itanium, Mac OS on x64, HP Tru64 Unix for PA-RISC, OpenVMS for Itanium and Alpha, Solaris on x86 (32-bit), z/OS and OS/390 for IBM mainframes as well as the BS20000/OSD for Fujitsu mainframes all have had their support pulled. The 64-bit version of Linux for IBM mainframes is available, contrary to what this story originally said; the download is available for Oracle 11g R2.
None of these pulled platforms were big money makers for Oracle, but the question you have to ask yourself is this: did the lack of Oracle 11g support help kill Windows and RHEL on Itanium? We think it did.
So, if HP wants HP-UX to live, it is going to have to work out some kind of deal with Oracle to make sure its code runs on the future Itanium chips. Logically, what applies to HP-UX applies equally well to AIX, RHEL, and Windows over the long haul. And just because Oracle and its frenemies don't make announcements of cooperation on development, testing, and support, that won't mean such deals haven't taken place or won't in the future.
And equally importantly, Intel and HP have to come clean on what the long-term roadmap is for the Itanium chip family. Outting the feeds and speeds of next year's eight-core "Poulson" chips and throwing out the "Kittson" name is no longer sufficient. If there is a roadmap for Itanium, or as plan to converge the Xeon and Itanium processors that will allow HP-UX and its applications to run unmodified and without a huge performance penalty, Intel has to start talking. Like yesterday.
The alternative - and a much more interesting one as far as I am concerned - is for HP to say to hell with Oracle, to buy Red Hat for its operating system and EnterpriseDB for its Oracle-compatible implementation of PostgreSQL. And kick Oracle right back. ®