How HP Can Use Itanium Ruling to Beat Oracle

If Hewlett-Packard plays its cards right, it could turn Oracle's court-ordered support for HP servers running Itanium chips into a better platform for Oracle software than it was when HP and Oracle were bosom buddies.

By Rob Enderle
Fri, September 07, 2012

CIO — A recent California court ruling forces Oracle to honor an earlier agreement and port its database and other software to Hewlett-Packard servers running Intel's Itanium processor just as it supports the IBM Power platform. HP's courtroom win puts it in a unique position to turn the tables and play Oracle.

The unique dynamic between hardware and software companies generally favors the software side, which is far more flexible and moves faster, but this new ruling should slow Oracle down and give HP a huge edge—if the company plays it right.

Why Software Is King, to Hardware's Chagrin

I became familiar with this dynamic years ago while working in IBM's software division. Much of the value the software unit provided was in optimizing hardware so people didn't end up buying as much of it. Software had evolved from being a free part of the IBM solution to being the highest profit generator for the company—but a lot of that profit came at the expense of hardware sales.

This is particularly true of traditional hardware-independent, large-scale software companies such as Microsoft (at least with its servers) and, prior to its purchase of Sun Microsystems, Oracle. Such firms can focus a great deal of their efforts on extending, maximizing and sharing existing hardware and use the hardware cost savings as a benefit that offsets new software costs.

While this works great for software companies, the hardware vendors, and internal hardware divisions, aren't amused. Software used to be king, but, with the recent judgment and Oracle's policy to support HP and IBM equally, the worm may have turned.

Making Itanium Oracle's Preferred Platform

Oracle is built around a complex pricing model designed to milk every ounce of cash from a potential customer. Tying execution to IBM architecture potentially locks Oracle into a strategy that HP could use against the company. Theoretically, HP could design hardware reversing the model that optimizes Oracle pricing, or HP could use software supplements to reduce Oracle charges and therefore justify their existence based on the Oracle licensing money that is saved. Or HP could do both.

Commentary: Oracle Shows What Happens When Sales Runs the Show

Should Oracle respond with price adjustments, HP could legitimately call foul and may get financial relief and penalties from Oracle, which HP could then turn into additional discounts for its customers, becoming a huge thorn in Oracle's side in the process.

Since HP doesn't have a database product and now has an adverse relationship with Oracle, the typical balance between hardware and software doesn't need to be maintained. HP can focus like a laser on both, pointing out Oracle's nasty pricing model and providing creative workarounds for it.

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