Oracle's plans to aggressively sell integrated stacks made up of Oracle and Sun components run the risk of upsetting the delicate balance of co-opetition it has with a handful of major Oracle-Sun competitors, industry analysts believe.
While Oracle traditionally fights tooth and nail with IBM in the database market, for instance, the company still sells more databases on IBM’s Power Series of servers than any other.
Over the past several years, Oracle has had a fruitful partnership selling its software on Hewlett-Packard’s line of servers. But with the Sun acquisition, HP is likely to look to one of Oracle’s hardware and software competitors. Last week, it signed a $250 million deal with Microsoft geared to creating cloud computing solutions.
“This is the riskiest thing Oracle has ever done," said Dana Gardner, principal analyst with Inter-Arbor Solutions in Gilford, N.H. "They are driving HP and Microsoft into each other’s arms, they are alienating IBM, and they are giving Red Hat, Cicso, EMC and Dell all kinds of incentives for ramping up competitive ecosystems. Larry [Ellison, Oracle chairman] is playing Whist here and he wants all the cards.”
What could also further complicate this balance is Oracle’s plan to sell these integrated stacks direct to Oracle and Sun’s largest customers, bypassing value-added resellers and integrators. Typically, integrators help glue systems from disparate vendors, allowing critical business processes to work across platforms.
“I have Oracle databases and some other software by them mixed in with IBM databases and Microsoft LAN-level stuff. We use local resellers to help us with making this all work. It will be interesting what Oracle’s pitch to us will be,” said Eugene Lee, an IT administrator with a large bank in Charlotte, N.C.
Jean Bozman, vice president of IDC’s enterprise computing group, believes it is important for Oracle to maintain its co-opetition balance, but she sees Oracle’s stack selling approach in the context of a broader industry trend, namely converged infrastructure.
Bozman notes that the recent HP-Microsoft alliance and similar alliances over the past few months, including the Oracle-Sun stack strategy, are really about fine-tuning significant infrastructure pieces as a way of lowering IT shops’ operational and technology costs.
“We have seen this trend of convergence infrastructure over the course of 2009 with companies like Cisco, VMware and EMC, and now HP and Microsoft,” she said. “They are not aimed so much at Oracle and Sun as they are appealing to users trying to keep their costs in line through this recession.”
As might be expected, Oracle’s archrivals were underwhelmed by the five-hour-long rollout of the combined company’s plans. Many felt what was laid out offered no significant advantage over what they already have in place or that Oracle will have difficulty getting users to accept a few of its strategies, most notably its integrated stacks.
“Listening to Larry, you think they invented integrated systems,” said Scott Handy, vice president in charge of IBM Power Systems’ strategy and marketing. “It was very ‘me too’ in its approach, except for one thing -- we still outgun them when it comes to running their software under Unix. Our power systems simply run Oracle databases better than any other server, including Sun.”
Handy bristled at Ellison’s insinuation that IBM didn’t have the technology to competitively cluster its own DB2 database. He pointed out that Ellison made no mention of IBM’s DB2 pureScale, a cluster-based shared disk architecture announced just last quarter.
Ellison was also a bit too boastful about offering integrated hardware-software stacks that his competitors, particularly IBM, could match.
“We have the Smart Analytics system that comes with hardware, operating system, a data warehouse, and Cognos Modules, which is exactly what he talked about with his stack,” Handy said. "And when you need a patch for something in that stack, we can ship just one integrated patch which installs pre-tested."
SAP likewise was not impressed with Oracle’s selling complete stacks. One company official said that strategy is fundamentally flawed in that corporate accounts simply do not buy software this way.
“The customer doesn’t exist in isolation; every customer has a system landscape that is more or less heterogeneous,” said Kaj van de Loo, SAP’s senior vice president for technology strategy. “The notion that such an integrated stack automatically decreases TCO is also flawed -- it will increase the TCO."
SAP can achieve many of the same technology and costs benefits Oracle outlined last week through industry partnerships without incurring some of its disadvantages, van de Loo said. For instance, companies can optimize across layers of a stack without having to own them all.
SAP prefers to focus on selling appliance-like applications with service providers, making sure its software is finely tuned to whatever hardware those service providers are selling, van de Loo said. For instance, if a customer has a relationship with IBM, SAP will want to ensure its applications will be low cost and run efficiently in data center environments, he added.
Yet another competitor that sees Oracle’s stack strategy as somewhat risky is Teradata, a major competitor in the data warehouse market. The company sees Oracle having difficulty successfully executing its plan without alienating longtime hardware partners.
"This is a big bet by Oracle, and you can imagine how their ex-hardware partners are now trying to position how to compete against Oracle," said Randy Lea, vice president of Teradata products and service marketing. "IBM, HP and others have a big part of their business in the OLTP market and aren't going to go down easily.”
Asked whether Oracle is a bigger threat to Teradata in the data warehouse appliance market now that it has Sun’s hardware to go along with its own data warehousing software, Lea didn’t believe it would make much difference.
“From a Teradata perspective, we don’t see much of a change from their HP-Oracle Exadata V1 to the Sun-Oracle Exadata V2," Lea said. "Exadata is primarily an OLTP configuration. The Exadata storage layer is an improvement in scanning, but the Oracle RAC layer is still a bottleneck in the dynamic data warehouse environment."