Eye on Oracle

Dec 2 2009   4:21PM GMT

Life in the three-company IT world may get crowded

Ed Scannell Ed Scannell Profile: Ed Scannell

This past March I wrote a blog inspired by some bold remarks Oracle chairman Larry Ellison made a while ago, predicting there eventually would be only three legitimate competitors left in the IT world.

Oracle, of course, was going to be one of them along with IBM and Hewlett-Packard. Larry didn’t consider Microsoft or Dell to be legitimate competitors selling to large enterprises and/or he assumed they would be marginalized by the competitive strategies of Oracle and the other two surviving kings of IT.

About a month after that blog, Oracle announced its plans to acquire Sun Microsystems, and it appeared Larry had taken a giant step toward crystallizing his prediction. Indeed, acquiring the core assets of Sun gives him all of the major hardware and software assets – both proprietary and open source — he lacked to compete worldwide against IBM. The delicious irony there was Larry grabbed Sun away from IBM.

I did note in that March blog that what would secure Oracle’s fate as one of the last three IT survivors, once it acquired Sun, would be buying Red Hat given its dominant position in the open source world. As cost-conscious IT shops both large and small gravitate in even bigger numbers to open source, I still think Oracle will buy them over the next year or two.

But since early September, when the European Commission (EC) announced it was going to investigate the Oracle-Sun deal, focusing particularly on Oracle’s possession of the open source MySQL database, Larry’s plan for domination of Planet IT is on hold.

It remains inconceivable to me that the EC will block this deal, a deal that passed muster with the U.S. Department of Justice. But now seeing the almost religious crusade the EC is on more clearly, together with the almost legendary obstinance of one Lawrence Joseph Ellison, it now seems a more real possibility the deal could be blocked.  I suppose we’ll know better how to evaluate that prospect after the Dec. 10 meeting where Oracle gets to plead its case, and certainly by Jan. 27, which is the deadline for the EC to make its final ruling.

But if it does happen, and Larry doesn’t pursue what figures to be a lengthy process through the European courts, it will be bad not only for Sun but for Oracle as well. It’s bad for Sun for obvious reasons given its rapidly declining market share and revenues in servers. With Sun losing $100 million a month the last few months, who would be interested in taking it over? No one is my guess, not even IBM which made a generous offer in hindsight.

But Oracle will suffer, too.  It will certainly have to give up its dreams of selling a variety of integrated hardware-software stacks, something top company officials have made clear would give them a huge advantage over its software-only competitors such as SAP and Microsoft. It won’t be able to compete as a broad-based solutions provider armed with chips, servers, storage devices, a significantly expanded open source portfolio and, oh yeah, control of a little piece of software called Java ala IBM.

It will have to revert back to being plain ol’ Oracle. Not that it’s bad thing to be a $25 billion company with a commanding share of the database market with its fire hose-like flow of maintenance revenues, as well as being a major contender in several other enterprise software markets. And Larry can still be as bad as he wants to be, flamboyant, brash and intimidating competitors as well as his own users alike. He’ll just have to do it without the collection of shiny hardware toys.

More seriously, not only will Oracle not have these weapons, but in the meantime its major archrivals have grown and will grow stronger. IBM will be an even more formidable presence when it comes to selling hardware-software-services solutions without Oracle-Sun to compete with.

Without MySQL Oracle will not be able to take advantage of the growing service and maintenance revenues in the open source database market and not have the chance to help shape the direction of open source in general.

Without Sun’s portfolio of virtualization and storage products, competitors such as VMware, IBM and Microsoft can lengthen their already significant lead over Oracle in areas such as cloud computing. (And yes I know Larry doesn’t formally recognize the term cloud computing, but he sure would recognize the future revenues from it).

If Larry’s prediction of a three-company IT world doesn’t come to pass, it won’t be for his lack of trying. Who knows, Larry may actually like living in a five-, six-, or seven-company IT world. One thing I do know, if the latter scenario comes to pass Sun as we know it won’t be around to see it.

Let’s hope for the sake of thousands of American jobs the EC wakes up and approves this deal so another iconic high tech company doesn’t fade away.

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