Why Oracle and HP tied the knot

It took Carly Fiorina and a nudge from a rival company to get Oracle's Larry Ellison down the aisle.

So Larry Ellison, the Playboy of Silicon Valley, tied the corporate knot with the industry's $90m (£56m) woman, Carly Fiorina? Now that's a power couple.

The question is, what will it mean that Ellison and Fiorina pledged nuptials Tuesday on behalf of their respective companies, Oracle and Hewlett-Packard? Analysts say the deal, which will see Oracle and HP cross-sell, co-develop and also use each other's equipment and software, should yield good things for both.

"It was pretty obvious (Oracle) should do something with HP," said Kimball Brown, an analyst at Dataquest. Brown said that Oracle's current focus on Sun Microsystems left it out of a large number of buying opportunities. Meanwhile, Oracle's prominence in the Internet market will only help HP's efforts to win business there. "It puts HP on the map in these buying decisions. From Oracle's point of view, they don't want to simply ride Sun." About time Brown's only criticism: The deal should have happened earlier. "It's kind of puzzling why it took them so long," he said.

HP would agree. While Fiorina said that the deal was done in six weeks, one highly-placed source inside the company said HP has spent more than five years trying to get Oracle to develop applications on HP UX in addition to Sun's Solaris operating system. "When Oracle introduced its latest database or their ERP (enterprise resource planning) or whatever, they'd write it on Solaris and optimise it for Solaris. That was worth a fortune, because we were always having to catch up," the HP source said.

So what changed? Two things, insiders say. One was Fiorina's presence at the top of HP, and her willingness to do a deal that former president and CEO Lew Platt wouldn't have considered. The other: A quirk of business fate that underscores how personalities still drive deals in the Valley.

One HP source near the deal said the trigger came after Sun inked a deal to get Oracle arch-rival Siebel Systems to port its market-leading application software to the Solaris operating system and add Java support. Those products are due later this quarter. As part of the deal, Sun CEO Scott McNealy supposedly promised to make Sun the first customer for the software.

Ordinary business transaction, right? Not in the Valley. Siebel was founded by former Oracle supersalesman Tom Siebel, who jousts occasionally with his old boss, and whose company continues to best Oracle in the hot market for CRM (customer relationship management) software. Or as the HP source put it, "Larry (Ellison) hates Siebel, so when Scott McNealy implemented them" things started moving.

Michael Bohlig, director of Sun's Oracle business unit, said that "if anybody is saying we made a decision to go with Siebel, that's incorrect." He said the company does use some Siebel software, but that it has not made a commitment to a specific vendor for its sales force automation and marketing or call centre applications, all major CRM components. But Ellison, Oracle's chairman and CEO, didn't deny that the alleged Sun/Siebel deal had played a role in its deal with HP, smiling and telling ZDNN to "ask Scott".

Whatever the reason, it's the second significant agreement between HP and Oracle in the last six weeks. At HP World in mid-August, Oracle said it would work with HP to make HP's e-speak technology work with Oracle 8i.

It's also the first deal that has Fiorina's stamp on it. Insiders say that Platt would never have considered tying an internal application purchase to a development environment deal. They also say that where Ellison and Platt were near opposites, Fiorina and Ellison are relatively similar personalities, easing potential friction. The two certainly would make any list of the Valley's best-dressed. And while Fiorina isn't a billionaire, the deal was announced on the same day it was reported that HP gave her a $90m package.

Once the two started talking, the deal came together quickly. Fiorina, appearing in her first press conference since she took over the reins at HP on 19 July, said that it took them six weeks to make it happen.

Up in the air: How will Fiorina's pronouncement that HP is no longer Switzerland affect its business relationships? Sun officials say Oracle now has most-favoured-nation trading status, and wonder how it affects HP's relationship with other ERP and CRM vendors.

The deal may in the short term prove more valuable to Oracle than HP, one analyst thinks, since Oracle has landed what may be its biggest single deal for a CRM customer (Oracle called it only "one of the larger SFA deals" it has done). "It's a good win for Oracle in the CRM space," said Albert Pang, an analyst at International Data Pang said the Oracle/Sun relationship is an on-again, off-again one anyway, and will probably warm up again over time. But for Oracle's long-suffering CRM business, it's a huge deal, he said, and could hurt Siebel. "There's no question that Siebel is a little behind in the e-commerce applications arena, so I think Siebel is kind of in a tight spot right now."

Ellison called the deal "a massive change in the way we sell", and cited it as an example of the how "the Net changes everything."

Sm@rt Reseller's Deborah Gage contributed to this story.

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