The big news this week this is undoubtedly the $7.4 billion purchase of the troubled server company Sun Microsystems by database specialist Oracle. But, given the very different nature of the two companies, will it work?
Well-known in the industry for being the favourite of developers and geeks, and among its customers for its high-powered, reliable but expensive systems, Sun has nonetheless suffered financially since the implosion of the dotcom bubble. Its accounts have bled red for years, and selling the company seems for eons — that’s eons in IT years — to have been the only way out.
Just two weeks ago, IBM made overtures to buy the company. This author among others could see that there would be some synergies, although I struggled to see how Big Blue would swallow Sun’s server range, given that it has a well-established and rational product portfolio already. IBM and Sun would have fitted together mainly on the software side, where the acquisition of Solaris, a major platform in the database world, along with Java and many open source technologies including OpenOffice, would have sat comfortably alongside IBM’s espousal of open source, and its conversion from hardware to software and services company.
It wasn’t to be. Sun demanded too much of IBM — more here — and the deal fell through. We wondered at the time how Sun could have let it happen, and accused the Silicon Valley stalwart of greed and complacency.
What we didn’t know was that it had another suitor in the wings, one willing to pay Sun’s pretty substantial asking price.
Early post-purchase signs are good. Most analysts and observers see more positives than negatives emerging from the deal. Oracle is a software company first and foremost, while Sun’s revenues stem mostly from hardware.
What’s more, Sun’s Solaris is a major platform for Oracle’s eponymous database, which means that Oracle can now offer the whole stack, from raw iron upwards, and so is in a better position to offer more tightly integrated solutions. As the company’s acquisition statement said: “Oracle will be the only company that can engineer an integrated system — applications to disk — where all the pieces fit and work together so customers do not have to do it themselves”.
Some systems integrators may suffer as a result, but that’ll be some way down the line, after two or three product refresh cycles.
The deal has even got some of the opposition thinking. As Colin Barker reports from an HP product launch in Berlin (which I was unable to make, sadly): “HP executives thought that the news was interesting and it was not difficult to see their internal calculators trying to work out any options the move would give them.”
So far so fitted.
But big questions remain to be answered. Sun has always been a fairly open company, and has always seen itself and wanted to be seen as part of a wider community. When open source came along, Sun gradually adopted it and, with no little external persuasion it seemed at the time, even made some of its own, expensively developed technology open source.
In complete contrast, Oracle has rarely if ever done that — apart perhaps from its development of its own version of Red Hat Linux, which the market has largely ignored. Oracle’s proprietary approach and eagerness to squeeze every last dollar out of its large enterprise customers is the stuff of legend.
This is unlikely to change, especially now that it can lock down those customers to a tightly integrated hardware platform. The reactions of those customers, of the competition, many of whom are in alliances with either or both the parties to the acquisition, and of the channel remain to be seen.
There will be layoffs too, given the economic situation, and the more obvious lack of need for duplicated sales, marketing or HR departments, for example. One analyst is reported to have predicted up to 10,000 job losses. I would expect the culture shock to squeeze quite a few through the out door.
But if you’re a customer, you might prefer not be locked in. If you’re a hardware partner of Oracle’s, you’re likely to be re-thinking that deal, big time. HP is in that boat, given that it’s co-developed servers for Oracle, in the database company’s first venture into hardware, back in 2008. And if you either work for Sun or are one of the developer community in Sun’s orbit, you might well find yourself wondering where to go next, whether voluntarily or not.
My take is that most customers will stay put. It’s not the time to start launching into expensive new IT roll-outs. That’s not to say that those with an aversion to single-supplier deals won’t bail as soon as possible.
However, the pressure on the competition in the current climate is likely to result in more mergers and acquisitions, and a jungle populated by fewer but bigger beasts.
But who and which? Here are some questions: will IBM swallow EMC? Will Cisco buy Brocade? And could Microsoft finally buy Yahoo!? And how many more yachts will this deal enable Oracle CEO Larry Ellison to buy?