Is it just me or did anyone else ROFL when they learned about the pending Snoracle merger? On one hand, you have a company (Sun) that pioneered and embraced open source (UNIX, Java and MySQL). On the other (Oracle), you have something more along the lines of Star Wars’ interstellar crime lord Jabba the Hutt: “As long I get my cut, everything’s good.”
Oracle chairman Larry Ellison says: “The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems. 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. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.”
Sun CEO Jonathan Schwartz had this to add: “This is a fantastic day for Sun’s customers, developers, partners and employees across the globe, joining forces with the global leader in enterprise software to drive innovation and value across every aspect of the technology marketplace.”
Oh, really? So Ellison and Schwartz want us to believe that their primary motivation was to make everything better for their customers and the industry. Oracle and Sun simply saw an opportunity to drive value and innovation across the technology marketplace. That’s nice, but I’m not buying it.
CIOs, you may want to stop doing that happy dance now.
During an April 20 analyst call, Ellison called Java “the single most important software asset we ever acquired.” Now we’re getting warmer. I agree with Citigroup analyst Brent Thill who said Oracle looked at Java as a $1 billion business even though it contributed just $220 million of Sun’s 2008 $14 billion revenue. Now you tell me: Will Oracle get Java from $220 million to $1 billion by increasing sales, or is it more likely that innovative re-pricing, like the Death Star, is heading our way?
Thrill also noted that Oracle expects half its 2009 revenue to come from the support and maintenance of products its customers have already licensed – support contracts that carry profit margins approaching 90 percent. Given that interesting expectation, can open source maintenance and support fees be far behind?
And, in this brave new world, what happens to MySQL, the leading open source database alternative? How will Oracle monetize MySQL, and will its attempt to extract value from this market backfire into a mass exodus to other open source database alternatives like PostgreSQL?
When I made my five hype-free predictions for 2009, two trends appear directly relevant to the Snoracle merger. Here’s what I said then:
- Open source enterprise software will continue to displace expensive royalty-based and seat license-based services.
- Facing slumping sales, many technology suppliers will try to increase revenue by raising their service fees and trying to force their clients to upgrade to new hardware and software.
If I may say so, the Force seems to have been with me. It looks like Oracle is building their game plan straight from this playbook.
And, to be fair, it all makes business sense. Sure, Oracle will slash the workforce on the server side of the Sun line, and Ellison will milk it as long as he can. That’s not a bad idea and probably it’s the same thing IBM would have done if it had been able to snatch Sun itself.
On the other hand, I don’t see Oracle emerging as a leading server company nor as the next Jedi guardian of open source software. As they say, a Wookie can’t help being shaggy, and servers and open source are two things missing from Larry “Java the Hutt” Ellison’s DNA.
As always, I welcome your comments, tips, insights and topic suggestions. You can reach me at email@example.com.
Michael Bullock is the founder and CEO of Transitional Data Services (TDS), a Boston, MA-based consulting firm focusing on green data centers, data center consolidation / relocation, enterprise applications and technical operations. Prior to founding TDS, Bullock held executive leadership positions at Student Advantage, CMGI and Renaissance Worldwide.