The latest is Oracle Exastack. This is Oracle’s effort to get third-party software vendors to optimize their applications to run on Oracle’s Exadata and Exalogic data center appliances. Oracle, trying to juice Exadata and Exalogic hardware sales,

ISVs can use Oracle’s best practices and guidelines to certify their apps as Exastack ready or Exastack optimized. Fifty ISVs are in the beta program, said Judson Altoff, the senior vice president in charge of Oracle’s worldwide channels and alliances. Oracle expects to showcase their best work at the upcoming Oracle OpenWorld 2011 next fall.

More important to Oracle’s VARs and VADs is the company’s decision — based on “popular demand”  —  to separate out the rebate programs between distributors and VARs.

In the past, Oracle paid  out back-end rebates to the VADs, they’d take their chunk and pass the rest on to the affiliated VAR. “When times were good, people behaved well and shared. When times were bad, not so much,” Althoff said.

Now there are discrete rebates to be paid out starting at dollar one to both parties. “There is no bogie to hit. And you’ll know at each deal if you’re eligible for a rebate,” he noted.

VARs can sell into Oracle’s “Global 2000″ top accounts–which are cordoned off for direct sales attention–but will not get that back-end money. “It’s not a hard deck per se, but if they refill/resell [product] whatever they make in front-end margins is all they’ll make there,” Althoff said.

There is additional rebate money available to those VARs who sell designated “strategic products.” That list will be tweaked every six months or so.  The current hit list includes all SPARC servers, all T-Series servers, ZFS storage and tape products.

That makes sense, given that Oracle hardware sales flagged, falling 6% in the fourth quarter compared to the year-ago number.

Althoff acknowledged that there has been attrition in the Sun hardware channel since Oracle completed its Sun Microsystems buyout in January 2010 but maintained that Oracle is happy with the partners it retained. The thinking is that the company got rid of the dead wood.

“When we started the fiscal year, we were clear that we were changing the go-to-market substantially and that [the VARs] had to focus on companies outside our top account base which would go more direct. If we look outside those top accounts, we actually grew that [hardware] business–it’s larger today than before. The VARs that got that message and worked with us to transform their business outside those big accounts did well.”

“Did we lose some VARs living off fulfillment in high-end accounts? Yup. Did we lose VARs doing single-digit margin in server sales? Yup.”

Indeed, several large Sun hardware VARs have disappeared altogether. Others that kept their certifications continue to offer Sun hardware but have also picked up IBM or HP or Dell servers as a hedge. Off the record, several executives at those latter VARs said they no longer lead with Sun hardware because they see the writing on the wall.

For Oracle’s part, it prefers not to focus on hardware or software VARs but systems or solutions VARs. Their marching orders are to sell the aforementioned stack into net-new accounts.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com.

Check out more IT channel news on SearchITChannel.com and follow us on Twitter!

On yesterday’s Oracle fourth quarter  earnings call, there was the usual happy talk about fat margins and great execution. The by-now-expected great software license sales numbers, we all know the drill. 

But the hardware business has not been kind to Oracle and Wall Street is finally taking notice.  

Oracle stock was down nearly 3.57% Friday to $31.30 per share as I type these words. Pundits attribute that to growing anxiety around Oracle’s ability to execute its high-margin hardware push even as it guts Sun’s bread-and-butter commodity hardware lineup. And there is growing irritation among Oracle/Sun shops over the vendor’s support and maintenance policies.

For the quarter, in which Oracle’s direct team put its patented year-end  discount push on Exadata systems, actual sales of hardware systems fell 6% to $1.2 billion.  Oracle co-president Safra Catz said she expects hardware growth to come in between -5% to +5% next year–not including support revenue. Note to Oracle: That is not exactly hitting the cover off the ball.

But back to support. That support and maintenance money is really what this game is all about. If Oracle can persuade companies to move their database workloads to Exadata and their middleware/Java/applications load to Exalogic, it can lock in all of those software AND hardware support loads into very, very lucrative long-term support contracts. And that, is where the real money is.

On the call, the Other Oracle Co-president (OOC for short) Mark Hurd referred to the importance of “attach rates” of software, support and service to Oracle hardware. (For more on the earnings call check out Eye On Oracle.)

The problem for Oracle is customers listened to their savvy VAR advisors or otherwise figured out that these attach-rates equate to vendor lock-in and all the unpleasantness that entails.  

Catz stressed that hardware margins–at least on the stuff Oracle does sell–are a remarkable 56%. The reason? Oracle no longer sells much hardware at a loss or much third-party hardware. Instead,  it “is focused on value-added systems,” aka the Exadata and Exalogic data center appliances, she reminded analysts.

But even figuring in those caveats, the overall hardware numbers were not good. When Oracle closed its acquisition of Sun Microsystems in January 2010, channel sources warned  that digesting a hardware company would be a lot harder than integrating software companies. They have been proven right.

If you listen very hard, you may hear Sun hardware resellers laughing–or they would be if it wasn’t so painful to watch their hardware sale and services business disappear.

Oracle disenfranchised die-hard Sun channel players as it incorporated Sun by taking all support and maintenance revenue direct. Many Sun-only hardware VARs went out of business altogether or reconstituted themselves with new vendor alliances. Some retained their Sun/Oracle ties but quietly shifted more business to Hewlett-Packard, IBM or even (gasp!) Dell hardware.

Many Sun/Oracle shops remain supremely unhappy about what they call Oracle’s scorched-earth support policies. Several started moving hardware sales to rivals last year. Some may kick the tires of Exadata and Exalogic, but I’d bet very few are inclined to commit more of their data center dollars to a company they view as draconian. CEOs and CIOs at those companies must love it when Oracle execs refer to software/hardware maintenance and support as “Oracle’s birthright.”

And they may well disagree that that is the case.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com.

Check out more IT channel news on SearchITChannel.com and follow us on Twitter!

Example: When Oracle CEO Larry Ellison unveiled the Exalogic “cloud in a box” at Oracle Open World last year he maintained that it’s the perfect solution for companies like Facebook because a pair of Exadatas could run the whole Facebook work load. That may well be true but there’s a small problem: At last count there are a very limited number of Facebooks in the world (one at last count) and none of them appear to be using this sort of hardware.

Exalogic, detractors say, is far from cloud in a box because it requires companies to buy a lot more hardware than they may need. Admittedly, they can then grow into their hardware, but in a real cloud, they could start out buying/renting just the capacity they need and then scale up and down, paying only what they actually use–not a shelf full of expensive CPUs and infiniband networking.

In Boston last week, master marketeer Marc Benioff decried much of the noise from hardware vendors seeking to unload pricey server-storage-networking bundles as nothing more than the rantings of a “false cloud” that is “not economical, not environmental and not democratic.”

Of course, Benioff, an Oracle alum, has a dog in this fight. His Salesforce.com has led the Software-as-a-Service (SaaS) charge for years now and is watching as legacy competitors like Microsoft and SAP scrap to catch up. He’s also made a lot of hay out of how Salesforce.com runs on a boatload of inexpensive commodity Dell servers. He emphatically denied rumors that Salesforce.com, like NetSuite, bought Oracle Exalogic/Exadata hardware.

Not to pick one side of a marketing war (although I am), but Benioff  actually has a point when he says that if your cloud requires a big hardware purchase then it’s not, in fact,  cloud.

He also took aim at other “legacy” IT powers claiming that Microsoft CTO Craig Mundie once told him that the existence of Salesforce.com probably  meant that 400,000 to 600,000 servers were not sold over the past few years.  Salesforce, he claimed, runs all the CRM and SFA workloads for some 100,000 active customers on 2,000 servers.

Whether or not those exact numbers are true is almost beside the point. The existence of truly efficient cloud computing means that companies like Cisco and Oracle and HP will have a very hard sell for their pricey, some-would-say proprietary big boxes going forward.

The lack of a market for big-bang converged hardware may be bad for these vendors that have a lot at stake in grabbing more of the data center workload for themselves. It’s less bad for VARs who already know how to build less-pricey multi-vendor hardware and software solutions for those shops. And it’s probably good news for those elite VARs and integrators who can help customer businesses figure out where and when true cloud computing fits into their IT plans.  Who can do cost-benefit analysis and show customers when it makes sense to offload compute loads or storage to a cloud provider and when it’s a smarter move to keep stuff in house. For those VARs, as the mantra has long held, there’s margin in complexity.

In the meantime, watch for Cisco, HP, Oracle to keep on claiming the cloud mantle while pushing these very pricey and uncloudlike hardware solutions to data center customers.  

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com.

Check out more IT channel news on SearchITChannel.com and follow us on Twitter!

What remains to be seen is if the big–and even after discounts they are big– hardware deals will make up for the rank-and-file Sun server customers deserting the company. Give Oracle credit though. CEO Larry Ellison has said for a year and a half now that he doesn’t care about commodity hardware and by golly, he’s proved it. There is an off chance that Oracle president and resident ”hardware guy”  Mark Hurd will reemphasize plain-old Sun X86 and Sparc-based servers, but don’t bet the ranch on it.

Still some of these fourth-quarter Exadata deals bear looking into. NetSuite bought Exadata in a move that apparently moved Oracle’s share price.  Here’s some verbiage from NetSuite’s release:

NetSuite “is working with Oracle Corporation to leverage the power of the Oracle Exadata Database Machine for NetSuite’s cloud software solutions. By becoming an Oracle Exadata customer, NetSuite can deliver extreme levels of performance and other benefits to NetSuite customers to power their business growth.”

Wow. Sounds impressive. However, it appears from a May 13 8-K filing that what NetSuite bought was a single quarter-rack Exadata X2-2 HP box. For the record, that’s the smallest Exadata one can buy. The price was $432,100 including $55,000 for annual support and maintenance. 

Given that Ellison owns about half of NetSuite, the deal had to be disclosed. Whether a half-million-dollar sale into company co-owned by the seller’s CEO should boost the seller’s share price is an interesting question.

There was another rumor that Salesforce.com, another company that spun out of Oracle’s orbit, bought a pantload of Exadatas. If true, that would be a blockbuster, given the public thrashing Salesforce.com CEO Marc Benioff gave Exadata last September.  Benioff, sharing a stage with Michael Dell, noted that Salesforce.com preferred to use lots of reliable, standard Dell servers to run its services and mocked Ellison’s notion that Exalogic (the little brother of Exadata) was really “cloud in a box.”

Asked this week whether Salesforce.com had, in fact, gone X-crazy, Benioff let it fly via email:

“We’re 100% Dell. That’s 100% cheaper. Higher quality, easier, and open. Just like Facebook, Google, et al. is doing. No different. There is no internet service to my knowledge using exadata proprietary mainframes to deliver billions of transactions to customers. Our architecture is based on standard pc architecture. Commodity systems. Our uptime is at http://trust.salesforce.com. Does that help?
Aloha,
Marc”

 

Stay tuned for Oracle’s earnings call June 23, for more information on Exadata/Exalogic momentum.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com.

Check out more IT channel news on SearchITChannel.com and follow us on Twitter!

Sales of new software licenses rose a healthy 29% to $2.2 billion compared to the comparable-quarter last year.  (Here’s a transcript of the earnings call.)

But the real story on Oracle hardware, on the other hand, remains a mystery. Oracle claimed $1 billion in hardware sales for the quarter but there is no year-ago comparison since Oracle completed its Sun buyout in the midst of its third quarter last year.

Oracle co-presidents Safra Catz and  Mark Hurd (Larry Ellison was on jury duty. I kid you not.) declared several hardware victories, saying Oracle realized an eye-popping 55% margin on hardware sales and claiming Exadata and Exalogic sales were up 50%. Of course, “up from what” would be the relevant question here.

These are big-iron machines and they carry big-iron prices. Exadata starts at $300,000 for a quarter-rack machine, hardware only. A full-rack Exadata lists for $1 mill, also hardware only. Software and support easily add another $250,000. So this tends to be a long sales-cycle kinda deal.  

The mantra out of Redwood Shores since the get-go of Oracle’s Sun odyssey was that Oracle does not care about low-margin, commodity hardware. Good thing, since that business is evaporating at a pretty fast clip given recent IDC, Gartner numbers and anecdotal accounts. The question is whether there are enough customers with the cash and need to buy these high-end machines to make up for all those other lost customers.

Software, most especially database software, is notoriously sticky. It’s hard to swap it out. That means even customers irritated by Oracle’s high-handed sales-and-support tactics, particularly its audits–keep coming back for more. Hardware, on the other hand, is fungible. People can and will switch. HP and IBM are all too happy to welcome Sparc/Solaris shops aboard.

The Oracle sales force is being pushed–hard–to move these things. Sources said each sales person has to sell at least one box per quarter or suffer the consequences compensation-wise. And that means big dough.

Calling down a list of a half dozen Oracle/Sun partners last week, I found exactly one that has actually closed Exadata business but granted, it was quite a lot  of business. Kerry Osborne, CTO of Enkitec,an Oracle partner in Dallas, said his company has sold eight (count em 8!) Exadata boxes since the first of the year. Pretty impressive.

Osborne is not aware of any Exalogic sales and neither is anyone else. Another long-time Oracle VAR said Oracle’s claims notwithstanding, it’s not clear the company has even built, let alone shipped, any Exalogic machines. Oracle announced Exalogic, it’s “cloud in a box” at Oracle OpenWorld last fall.

For more, see Eye on Oracle: Is Oracle Exadata and Exalogic selling as well as Oracle says?

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com.

All well and good and worthy of discussion. But here are the real questions coming out of the show.

1: Can the appeal of Oracle’s technology overcome customer FUD?

The issue of technology audits was an undercurrent throughout the show. Oracle, like any software company, audits customers. But it gets negative style points in how it does so.

In a quick meeting in front of the Iron Men at Oracle Openworld, a systems integrator and an IT pro with long experience in Sun shops, said they’re seeing more and more audits in Sun hardware accounts, and much heavier-handed ones than in the past.

Audits have ramped up since Oracle completed its acquisition of Sun and the new wrinkle is that customers updating Sun machines running Oracle apps are now, within days of dealing with the hardware sales force, being hit up by Oracle software sales. The message tends to be: You have to buy more software licenses for your new hardware. One customer was told he needed to buy more Oracle database licenses for the apps he already had as he moved them to new hardware. That was not true. His apps had the requisite database power to stay legal. Hey, guess it doesnt hurt to ask.

2: How long will the Hurd-Catz duality last?

Ellison is famous for burning through number two execs. Charles Phillips (or “the fallen”  as Marc Benioff referred to him)   lasted a very impressive  seven years. Safra Catz has been there longer.

On paper, Mark Hurd compliments Ellison well: He’s an operations-and-logistics guy. Ellison is a strategy guy who parachutes in for the odd (and long) keynote or the multi-billion-dollar acquisition. Only thing is that Catz, like Hurd,  is also a logician who makes the trains run on time. Oracle is a big company but is it big enough for both these powerhouses? This could get interesting.

3:Will Oracle Exadata/Exalogic signal a return to the mainframe mentality?

Whatever Larry Ellison says, this whole notion of software-and-hardware-designed to work together is a very old notion. Sometimes he even acknowledges the debt Oracle owes the old IBM.  To some extent the whole argument of whether Exalogic represents a cloud in a box is beside the point. Sure Exalogic can power a cloud. How much would Ellison love it if AWS powered its cloud on Exalogic instead of zillions of Intel servers?

This is just a return to the age-old big iron vs. distributed computing battle and it’s unclear that folks are really hankering for a return to that big and very expensive iron. Especially when they see the maintenance-and-support costs involved.

Ellison also ripped multi-tenancy as an “old” technology and touted virtualization as the key to true cloudiness. Um, as one colleague noted: “Multitenancy may be 15 years old, but virtualization is FIFTY years old!”

4: Can Oracle curb its impulse to monetize at all costs?

When Oracle raised support prices on Sun hardware, Sun customers were outraged. They’d gotten used to a pretty good thing. The independent Sun Microsystems, as it struggled, was easy peasy when it came to enforcing support policies. Flexibility was the word of the day. Customers and Sun VARs decried Oracle as greedy. But, one naysayer countered: “Is it greed or is it just fair?”

Given that the support clock starts ticking as the Sun-Oracle hardware leaves the loading dock — so customers pay for hardware they don’t even have in house – it’s easy to call it greed.

The costs don’t end with delivery and installation however. Simply moving existing Sun hardware to another data center turns out to be very pricey as well. One company that specializes in data center moves said Oracle quoted a price to unplug and re-certify Sun servers at what amounted to be $6,000 to $8,000 per hour.

5: Can Oracle salve hurt feelings over Java?

Folks in the Java One fold were none too happy to be jettisoned from their usual Moscone haunts to the hotel hinterland this week.  And, they wanted to know what happened to the Ellison-and-Thomas Kurian session they’d been promised. They’re already irked that Oracle let James Gosling take his ball and go home. And some (though not all) are miffed about the lawsuit Oracle filed vs. Google.

6: What happened to Ellison un-plugged?

In past OpenWorlds, the best part was the audience Q&A with Ellison. It’s been gone for a few years now and the show is diminished as a result. Sure, corporate message mongers like it that Ellison is more scripted now–one year he “announced” a price change that, apparently, no one else knew about.  Truthfully, I can’t even remember if the price change ever happened but things like that differentiated the show and is why it’s time to bring Ellison unplugged back.

Check out more IT channel news on SearchITChannel.com and follow us on Twitter!

 The Salesforce.com CEO was clearly aware that he and his company had been a punching bag for Oracle CEO Ellison at the Oracle OpenWorld 010 keynote Sunday night.  There Ellison painted Salesforce.com as a faux cloud player and even took shots at Benioff’s book “Behind The Cloud.”

Walking into his own OOW event Wednesday, Benioff said: “You can say what you want about me, but leave my book alone. It’s not hurting anyone.”

Asked if he’d character Ellison’s new Exalogic super-server as “cloud in a box” as Ellison had, Benioff scoffed: “You tell me! It’s a BOX!”

Benioff said it’s an honor to be targeted. “You pay extra to be insulted ,” he noted.

During his public remarks, which featured Michael Dell, Benioff returned again and again to the notion of a “big, gigantic box, taller than me” painted with big Xs saying “keep out!”

He asked Michael Dell if he built big computers like that, “bigger than me,” and Dell said yes. 

He quoted a twitter post by Amazon.com CTO Werner Vogels who apparently doesn’t see Oracle Exalogic as cloud-like in the least: “If you need to buy a big box to get started, it’s not cloud,”  Vogels apparently tweeted.

“You don’t have to build software and hardware together because they are togehter. I don’t really understand that,” he said. Oracle’s new too-long mantra is something about software and hardware engineered to work together.

No one gives a better come-to-Jesus keynote better than Benioff.  And, while he always draws a crowd, it’s fair to say that thanks to Ellison’s Salesforce.com bashing, interest in his counter-Oracle programming today got a big boost.

Check out more IT channel news on SearchITChannel.com and follow us on Twitter!

Oracle CEO Larry Ellison touted the new converged hardware in dozens of slides claiming the system will do for application servers what Exadata did for databases–soup them up and make them scream. Pricing and availability information was not forthcoming but Ellison said an Exalogic machine costing $1,075,000 would have 40% more CPU capacity than a $4.4 million  IBM Power 795 server.

Many claims flowed:  Exalogic would enable companies to build private clouds within their firewalls and those “big honking clouds” would run an industry standard software stack. Except of course, when it’s not all that industry standard. Oracle now plans to maintain two Linux kernels. The existing Red Hat compatible kernel as well as the new-and-improved  Oracle Unbreakable Enterprise Linux kernel.

Exalogic will also come with two guest OSes–Linux (one of the above, I guess) and Solaris. Users can run one or both in any combination. It  will run Oracle VM.

It will pack 30 servers, an Infiniband internal network linking the servers, high-availability storage and “all the middleware needed.”

Each server comprises two six-core processors for a total of 360 cores. What processor, you might ask? Excellent question and Ellison didn’t say. Not once did he mention that the machine would run 64-bit X86 processors as pointed out in the Exalogic press release. 

Expectations were that Oracle would announce SPARC-based data center appliances at the show. Ellison volunteered that Mark Hurd and John Fowler tomorrow  will unveil new eight-socket machines, with two TB of DRAM and 4096 CPUs. SPARC or Intel? Your guess is as good as any.

Check out more IT channel news on SearchITChannel.com and follow us on Twitter!

Stay tuned to find out what Exalogic is and what’s up with the knights? (Update: Oops! They’re not knights but Iron Men.)

(Update again: More on Exalogic here and here.)

Check out more IT channel news on SearchITChannel.com and follow us on Twitter