I just finished watching Larry Ellison’s conversation with Ed Zander at the Churchill Club, a Silicon Valley business and technology forum. While these type of dialogues are not rare in the industry, I found this one to be particularly insightful. I think we will look back at this conversation as a watershed moment regarding the role of hardware, software, integration, and the cloud.
In case you missed seeing this video on YouTube (I recommend that you watch it http://www.youtube.com/watch?v=rmrxN3GWHpM). In case you don’t have time, let me summarize the key points that I heard and give you my take.
In essence, with the acquisition of Sun Microsystems, Oracle is hoping to put the right pieces in place to position itself as an equal to IBM in the IT market. Clearly, Oracle likes the software stack that Sun has built including ownership of Java and a lot of interesting distributed computing technology. And if we are talking about the cloud, Sun has a lot of good technology it picked up through various acquisitions. While many prognosticators assumed that Oracle would sell off Sun’s hardware assets, it is becoming clear that Oracle wants to make good use of Sun’s hardware. On some certain level, I think this is crazy since the hardware business has low margins and a complex business model. However, if you listen to Ellison’s talk it is clear why he wants to keep the hardware. He envisions a world where customers want to buy in a more straightforward way – no complex integrations, no piece parts from hundreds of different vendors.
Clearly, customers do want to have fewer vendors to deal with but it is not clear that they want 100 percent one-stop-shopping. It’s sort of like back to the good old days of computing in the 1970s – one mainframe, integrated applications, and simplified management.
What Oracle envisions is to be able to ship a system to its customers that comes bundled with everything including packaged applications, bundled with its database, middleware, — all the bells and whistles. It would be tuned and configured as a black box. The customer benefit would be that there would be no need for any integration of component parts. It would act like a complete system. There are clearly benefits to Oracle in being able to grab total share of wallet from the customer. For the customer there is benefit in not worry about so many moving parts.
The only thing that could possibly spoil the vision is cloud computing. Customers looking to a future of cloud computing would increasingly rely on software as a service, platform as a service, and infrastructure as a service to meet many of their computing needs. Increasingly companies are looking to a new generation of applications that leave upgrading software to the SaaS provider.
Larry Ellison decries the cloud because it assumes that there is no middleware, hardware, chips, etc. But, of course, this is not true. There are lots and lots of hardware and chips but they are configured and used differently than Ellison’s vision. There are lots of middleware and business services that will be available to customers but it is offered in a new economic model that the cloud represents.
I think that Ellison is uncomfortable with the cloud because it could have an impact on Oracle’s vision of deeper control over the customer. In time, the cloud could also dramatically impact maintenance revenue.
Of course, the cloud won’t take over the world of computing in the short run. It will evolve over time until more and more computing is based on the cloud. The cloud will have a disruptive impact on the way everything from hardware, software and services is delivered. And if I had to bet on outcomes, Ellison will be plotting a comprehensive cloud strategy just in case.