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Sunset: The Oracle Acquisition Q&A

If yesterday’s epic five hour webcast discussing Oracle’s plans for its finally acquired Sun assets was a long time coming for the analysts listening in, you can imagine how much of a wait it’s been for those on both sides of the transaction. It’s been roughly nine months, remember, since the database giant announced its intention to acquire the one time dot com darling.

That it dragged out so long, courtesy the EU, was unfortunate whatever your feelings about the two organizations. But that’s all in the past now, just like Sun’s website, which has been disappeared in favor of Oracle’s standard web presence.

Between Ellison, Kurian, Phillips and the rest, we got our share of answers yesterday. But as is almost always the case in such situations, there was as much left unsaid as said. Meaning that significant questions remain; some which can be answered, some which we’ll only be able to answer in future. To tackle a few of these, let’s turn to the Q&A.

Q: Before we begin, do you have anything to disclose?
A: Yes indeed. The participants, Oracle and Sun, are/were RedMonk customers, as are many that stand to be affected by the completion of the transaction, such as Adobe, IBM, Microsoft, and SAP. For a full client list, you may as always visit the site.

Q: What’s the big picture of this transaction?
A: What was old is new again? A couple of years back, some of the best and brightest Solaris engineers began blurring the lines between what was hardware and what was software. This skunkworks project was called Fishworks, for Fully Integrated Software and Hardware…works. Basically the project was a storage device that blended features of Solaris (DTrace, ZFS, etc) with some impressive analytics, and an interesting storage hybrid incorporating both disk and flash storage elements. It’s hardware like this, I think, that is the future for Oracle.

Q: How do you figure?
A: As Cote covered in his excellent quick take, Ellison, in planning for the future, is looking to the past. Specifically, IBM’s past. “Our vision for the year of 2010 is the same as IBM’s for 1960,” as he says, meaning that you buy a single machine that has everything you want on it, preintegrated.

Will Oracle still sell you their database if you’re running on, say, Dell servers? Certainly. But will they also be telling you how much faster it runs on their integrated appliance, and how that appliance – through the magic of ZFS and storage pooling – will give you better performance at a lower cost, and real time performance analytics via DTrace? You bet.

Q: Will that appliance-like approach work?
A: Outside of a few specialized areas, like networking, it never has in recent years. Customers have overwhelmingly avoided appliances, both virtual and otherwise, in favor of so-called best of breed architectures. Still, as much as Ellison hates the cloud, it may help this time around.

Q: Why does Ellison hate the cloud?
A: Ellison hates the cloud because, in his view, it’s not new. It’s basically databases and middleware delivering value over a network. And to be fair, there is merit to his arguments, particularly in a world in which marketers are increasingly throwing the term “cloud” around like it’s going out of style.

That said, the public’s embrace of the cloud and everything that term implies – whether you believe it is genuinely new or not – does, at least potentially, make appliances an easier sale.

Q: How could the cloud possibly help them sell appliances?
A: Sun, as has been covered endlessly, has been fighting a pitched battle with Linux, primarily, but also Windows for years. At one point it was the default enterprise operating system, but Linux, thanks to a number of factors not least the fact that it was open source, caught it from behind and Solaris has been playing catch up since. In spite of being technically differentiated from the other major operating system alternatives in Linux and Windows, Solaris was a difficult sell for many because it was different.

But what if the operating system didn’t matter any more?

Q: How could the operating system not matter?
A: What’s the operating system behind Gmail? Linux, one assumes, but how would you know? How about Salesforce.com? App Engine? Even Azure is a non-standard flavor of Windows.

The point being that, in the cloud, the adoption of technology is not an operating system first equation, as it often is with locally hosted workloads. Why? Because unless it’s bare metal IaaS, which admittedly remains far and away the most popular option, the responsibility for managing the operating system is outsourced to the cloud provider.

Now it’s true that there’s a significant difference, at least conceptually, between, say, Google Docs and a local storage appliance. But it will be increasingly difficult for IT buyers to claim that they can’t deploy to Solaris based appliances locally if they’re simultaneously leveraging cloud services running on top of they don’t know what kind of operating systems.

At least in theory.

Q: What about the cloud as a product? Is Oracle going to continue to invest in the Sun cloud?
A: As far as I can tell, there was effectively no mention of that product. That doesn’t mean that it’s dead, but it’s omission was notable. Particularly given Ellison’s stated plans for the Sun business.

Q: Which stated plans are those?
A: In talking to the Journal, Ellison said the following:

“We are not cutting Sun to profitability,” Mr. Ellison said. “We think that this business will be profitable immediately.”

He went on to say, however, that he would be leaving certain non-profitable lines of business:

Mr. Ellison said that Sun will add $1.5 billion to Oracle’s bottom line in the first year, largely because he will get out of “businesses that don’t make money.”

Q: Which businesses are those?
A: Exactly.

Q: Meaning we don’t know?
A: It’s certainly less than obvious. Likely candidates like NetBeans or OpenOffice.org were explicitly mentioned on yesterday’s call, which presumably wouldn’t be the case if the plan was to immediately retire them. No, the Sun Cloud and OpenSolaris were but a few of the obvious product lines that were MIA on Wednesday.

Q: What is Oracle going to do with OpenOffice?
A: Apparently continue to invest in it, and marry it to that which Ellison hates most in a product referred to as “Cloud Office.”

Q: Isn’t it possible that a desktop business, which is quite distinct from the server where Oracle has traditionally made its money, could be a significant distraction?
A: Absolutely. I’ve argued in the past that one of Sun’s issues was a lack of focus, and trying to do too much, in too many areas, but it certainly would appear that Oracle does not agree.

Q: NetBeans survives as well?
A: Yes, although it sounds as if it will take a backseat to JDeveloper.

Q: And how about GlassFish?
A: It will be, as Oracle phrased it, a reference implementation. Beyond that, Oracle didn’t have much in the way of promises. GlassFish, as someone reminded me this morning, is not getting its own sales and marketing organization, as MySQL is. Which you can read two ways.

Q: What are those two ways?
A: First, as a commenter wrote, that “Oracle sees more opportunity for joint selling of GF+WLS to address the differing needs of projects.” Or, more cynically, that they see the product as potentially disruptive to their WebServer product line, and will kill it softly through organizational dynamics. How incented do you think the WebLogic sales folks are going to be to push a lower priced alternative?

Q: MySQL is getting its own salesforce, though, right?
A: MySQL will maintain an independent sales and development staff, yes, though organizationally it will be grouped with Oracle’s open source GBU. You could argue that this is because MySQL’s more of a competitive threat, that it’s natural given the differing markets served by the products, or that it’s at the behest of the EU. Or all of the above. Either way, it means that MySQL – at least for now – has some room to move.

Q: Back to the operating system question for a second. When the acqusition was announced, you said the following:

The betting here is that Solaris will continue to be supported, but not as a frontline option, with the possible exception of cloud offerings where the quirks of the operating system are rendered invisible by the platform. Think IBM with AIX, HP with HP-UX, and so on: there is ample precedent for the (successful) continuation of two competing product lines, and as Oracle itself acknowledges above, there’s an awful lot of Oracle running on top of Solaris.

You further speculated that some of the Solaris assets might be candidates for relicensing. What do you think now?
A: That that view is wrong. We’ll see, of course, how things play out, but it would certainly appear that Oracle is committed to the Solaris platform indefinitely. Personally, I think that will be difficult to manage over time, but it’s pretty clear that the above guess was off. As some Sun folks were kind of enough to tell me when it was published.

If anything, Oracle advantaged Solaris vs Linux during yesterday’s presentation. When discussing them both, Solaris came first and had bullet points like Secure, Scale, and so on. Linux? It was described as the most “widely used” operating system.

I remain convinced that Oracle will have a tough time maintaining and messaging two competitive products, but given the depth of their appliance ambitions they may see that as a short term problem only.

Q: How about Sun’s brandnames?
A: All kept, apparently. At least the big ones: Sun, Java, Solaris. Oracle even promised to “reinvigorate” them.

Q: What about the headcount?
A: As mentioned above, Oracle reportedly has no plans to cut Sun to profitability, so massive changes are unlikely. That said, almost everyone that Oracle trotted out yesterday said, “we’re hiring.” Which begs the question that Simon asked: what’s going to be the net change? Because if Sun’s going to grow to profitability, but they’re adding two thousand bodies, something’s gotta give.

Q: What does this mean for customers?
A: They trotted out two, yesterday: the Atomic Weapons Establishment of the UK and Carnegie Mellon, and both were predictably enthusiastic. In general, however, reactions are likely to be mixed. For customers, like the Atomic Weapons Establishment, that had positive views on Sun’s technology but negative views on its financial outlook, this is potentially a win. As it is for those that want all of their support calls consolidated to a single supplier. The cost for that one throat to choke, however, is substantial: it means you’re putting an awful lot of your eggs in one basket.

Q: What does the transaction mean for Sun’s open source communities?
A: There was very little discussion of open source yesterday, frankly. The word open was front and center, yes, but usually not accompanied by the word source. So from a macro perspective, I think the implications for open source communities are less than positive, given that they’re transitioning from an organization that was very pro-open source at the top to one that is, well, significantly less so.

In practical terms, however, I think it’s necessary to look at the communities on a case by case basis. Java, for example, will probably be fine. Oracle’s strongly incented to keeping that community happy, for any number of reasons. MySQL, likewise, will probably be left alone for the time being. The fate of OpenSolaris, on the other hand, is less certain.

Q: Ok, how about some questions from Twitter. First up, @hitezh: “@sogrady Do you see more consolidation happen? MS+Dell/HP ; IBM + SAP …”
A: Consolidation is ever the way of this industry, so yes, I do see more consolidation happening. If, however, the question is: will one of the players feel sufficiently compelled to react to this particular acquisition to attempt a major, near term merger? Then my answer would be no. The deal poses interesting challenges to all of the above, but until we have a read on how the market will respond to Oracle’s appliance-strategy, any such moves would be premature.

Q: @petrillic: “@sogrady lots of talk about SPARC, what about x86? Very quiet about x86.”
A: This is one of the $64,000 questions, in my opinion. Oracle was quite bold yesterday in expressing their disinterest for “commodity markets like x86,” which they were quite content to leave to Dell. It’s rare these days to hear a large systems vendor publicly dismiss x86; VMware’s Paul Maritz, for example, basically said at VMworld the exact opposite. It sounded a lot like, in fact, Scott McNealy in the old days, when he steered Sun away from x86 towards theoretically higher margin but disastrously lower volume SPARC opportunities. And we all know how that turned out, with Sun subsequently bowing to the inevitable and adding support for x86. Could we see a repeat of that history? It’s possible, based on what I heard yesterday, but we’ll see just how aggressive they are on that front.

Q: @Straxus: “@sogrady Oracle says they plan to drive forward Java 7 – how are they going to resolve the impasse in the JCP to allow a Java 7 JSR?”
A: That’s an excellent question, and the short answer is that I don’t know. I think Oracle may be slightly more pragmatic about the JCP in general than was Sun, for whom the platform involved significant emotion, but it’s difficult to predict how things will play out.

Q: @ctirpak: @sogrady the obvious questions re: mysql’s future and how Oracle will behave in the FOSS world since they are not exactly an FOSS company
A: I’ve answered these both to some extent above, but the short answer is that I think MySQL will be mostly business as usual in the short to medium term, but that many of Sun’s open source engagements which don’t promise similar value – either competitive or revenue – will be scaled back or withdrawn from. Oracle, far more than Sun, is ruthlessly profit focused, and that makes certain open source commitments unlikely to be sustained.

Q: @ctirpak: @sogrady also is this an opportunity for Postgres/Enterprisedb?
A: I’m sure those and other MySQL competitors such as Percona will use it as such, and doubtless there will be some customers averse to working with Oracle that will turn to MySQL alternatives in the wake of the acqusition. But by and large, I think the impact will be less than material. It’s just such a pain to switch databases that you need to have a really good reason to do so. Until Oracle behaves badly with respect to MySQL, be it in development or pricing, I think there’s not enough incentive for a volume of users to switch.

Q: @nacredata: @sogrady does focus of solaris on clusters mean the end of opensolaris usefullness for desktop or standalone servers?
A: Yes, no. Or, more specifically, I do get the impression that we will see a significant deemphasis with respect to Solaris/OpenSolaris as a desktop option. That said, no, I think it’s future on the server is quite secure.

Q: Any last thoughts?
A: Just that I wish the Sun people well. Sun was one of our earliest customers and supporters here at RedMonk, and they were consistently one of our favorite clients to engage with. Not because we always agreed with them, or vice versa; I never understood their commitment to NetBeans, and made no bones about that fact. But they were always willing to listen, and – however things may have worked out – the people of Sun were generally willing to experiment and try new things. So I, like many of us, will miss working with people like that.

The good news is that while the Sun culture is certain to be assimilated by Oracle, it has and will continue to survive in its people, wherever they might land. We look forward to speaking and working with them, whether that’s now or in future.

Categories: M&A Announcements.