Monday, April 20, 2009

Oracle to buy Sun: mixed news for customers

Oracle has stepped in to buy Sun, and Sun's board agreed this morning, nearly ensuring the deal with go through. The total deal value is $5.6 billion.

Oracle's move looks good for Oracle. It now gives Oracle pieces of the entire technology stack, including hardware, which it formerly lacked. It also gives Oracle a lesser but important player in the operating system market: Sun's Solaris. Historically, Solaris has been the primary OS on which Oracle deployed its database and applications software, though in recent years, Oracle has positioned Linux as its preferred OS (as a low-cost platform, Linux allowed Oracle to save more of the customer's budget for its own products). Oracle also gets mySQL, the leading open source database, which Sun acquired a couple of years ago. But most importantly, I think, Oracle now gets ownership of Sun's Java, one of the leading programming languages.

Whether Oracle's move is good for enterprise buyers generally is another question, and here there is a mixed picture.
  • First, Oracle now commands a larger percentage of the IT budget in many organizations, especially large companies. Although there may be some small benefit in CIOs having fewer vendors to deal with, many organizations have been trying recently to reduce their total spend with Oracle, not increase it, as Oracle has shown itself to be particularly aggressive in maintaining and increasing its maintenance revenue. Having a larger share of the customer's budget only strengthens its position of power over the customer.
  • Second, Oracle's ownership of mySQL is particularly troublesome, as it competes with Oracle's database at the low end. Don't expect Oracle to make the sorts of investments needed in mySQL to allow it to move up market where it will be more of a threat. I was much more comfortable with Sun's ownership of mySQL, as Sun could be seen as having an interest in investing in it. I doubt Oracle will kill mySQL outright, as it does give Oracle an entre into small businesses. But rather I see Oracle limiting it to applications where it doesn't compete with its own database offering. Oracle has been deeply involved in the open source movement, with its heavy commitment to Linux development. On the other hand, Linux does not compete with any of Oracle's own products, as mySQL does, or could if given adequate resources.
  • The factor that is a bit more difficult to evaluate is Java, a leading software development language and SOA framework that Sun invented and recently moved to an open source license. On the one hand, Oracle has deeper pockets than Sun and may be in a better position to promote it. On the other hand, it spreads Oracle's influence further into the R&D efforts of many other organizations, many of which are already writing to Oracle's database and middleware offerings.
However, our research at Computer Economics shows Java lagging Microsoft's .NET recently, especially in smaller organizations. I seriously doubt that Oracle is thrilled with the outlook of Microsoft's .NET being the dominant framework for SOA development. So, maybe Oracle will put a more concerted effort in strengthening Java as a platform. If this turns out to be the case, Oracle's acquisition of Sun could have a silver lining.

Vinnie has a decidely downbeat view of Oracle's bid for Sun.

Update, Apr. 21: For an extensive analysis of what Oracle's takeover of Sun could mean, read Michael Coté's post, Oracle Buys Sun Omnibus

And, Josh Greenbaum points out that Oracle is already trash-talking mySQL!

Update, Apr. 22: As usual, Bruce Richardson has good insight. He thinks Oracle will immediately sell off Sun's hardware business but will keep mySQL viable but in a minor role.

More from Josh Greenbaum: head-spinning speculation on IBM actually favoring Oracle's takeover of Sun and the threat this poses for SAP, which might be motivated to revive talks of a merger with Microsoft.

Michael Fauscette
reports on his conversation with Oracle's co-President Charles Phillips and what Michael thinks the prospects are for Oracle's use of Sun's hardware expertise in Oracle's nascent appliance business. He is also more optimistic than most concerning the outlook for mySQL.

Related posts
Sun to acquire open source database vendor MySQL
Oracle does the right thing with open source acquisition
The disruptive power of open source
Oracle bid for Innobase a threat to MySQL?


Anders C. Madsen said...

"Oracle has been deeply involved in the open source movement, with its heavy commitment to Linux development."

Excuse me - they have WHAT?

I'm sorry but apart from OCFS2 and btrfs I only see Oracle contributing drivers and stuff that will help customers run Oracle systems on Linux - and it's not entirely wrong to argue that the two filesystems serves the same purpose in this respect since Oracle needs a stable FS for local servers and clusters in order to run their applications.

And no, I don't consider ripping RHEL off and repackaging it as "Unbreakable Linux" as a "heavy commitment". Oracle is only serving the interest of one entity with its involvement in OSS, and that is Oracle.

Frank Scavo said...

Anders, my understanding is that Oracle has several developers working full time on the Linux kernel.

A list of Oracle's contributions is here:

However, perhaps my use of adjectives "deeply" and "heavy" were overstating the situation and I will edit those out now.


Matthew King said...

Yes this will strengthen the java runtime environment against the .net runtime environment. But what I find most interesting about this is the potential impact on SAP's committment to java. On the one hand it might encourage SAP to move from java to .net making a merger with Microsoft more attractive. On the other hand if SAP has already travelled far enough down the java road, a change to .net is unlikely. If the latter holds true Oracle has made a smart move, effectively blocking a merger between Microsoft and SAP.