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Oracles aggressive expansion

Michael Warrilow | April 21, 2009
Forecast of sharp reductions in Sun's workforce and operating costs

We note that management and operation of Oracle's acquisitions remain largely autonomous to the point where Oracles business strategy is to clearly focus on recurring licence revenues and that the customer's benefits remain secondary to Oracle's accountants and shareholders.

For Oracle to succeed in the long term it will have to convince the market that it can deliver on its promises of an integrated stack and/or provide more flexible software licensing models.

From a software perspective, we believe the acquisition heralds the end of Sun's romance with open-source software, which had confused many organisations in the Asia Pacific. In fact, while both Sun and Oracle were probably the most vocal organisations espousing the new economy and the benefits of open source software during the late 1990s, Oracle in particular failed to translate this new age thinking into revenue, and instead, decided to focus more on traditional software licensing markets.

Oracles recent interest in acquiring Sun Microsystems suggests Oracle now sees an opportunity to support the new, new economy, again in denial and/or defiance of the changes in enterprise software development and licensing practices that have been prevalent over the last 30-40 years but that are now slowly changing as a result of the trend towards cloud computing.

Hydrasight notes that the majority of Asia Pacific organisations remain uncertain as to how, when or why to use open-source software that is effectively free but has been relatively unsupported. As such, Sun's licensing and terms for much of its software has previously been a stumbling block. We expect Oracle will rapidly address the open-source issue but this may well introduce new concerns for Sun's existing (software) customer base.

We note that Suns software portfolio goes well beyond Solaris / OpenSolaris. In many cases that software portfolio will now overlap substantially with Oracle. Significant examples include operating systems (for example, Oracle Linux versus Solaris / OpenSolaris) plus middleware including identity management, portal and, not least, database such as MySQL [refer to Sun to acquire MySQL here and below].

Interestingly, as a positive for Oracle, the acquisition of Sun (and to a lesser degree BEA) puts Oracle in control of what remains a major foundation for heterogeneous enterprise software developmentnamely, Java. This may make companies such as IBM increasingly nervous and/or may ultimately make Java less attractive to end-user organisations.

From an industry perspective, we also note that the acquisition will impact Oracle's commercial partnerships with hardware vendors. This includes HP (for example, Database Appliance), which had shown signs of early appeal to certain Oracle customers. Such interest will now, understandably, be put on hold.

Michael Warrilow is principal analyst and managing director for Australia-based research house Hydrasight.


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