Oracle lays out its vision for Sun: Will it work?

Oracle lays out its vision for Sun: Will it work?

Summary: Oracle CEO Larry Ellison provided industry watchers with quite a preview of the big plan for Sun.

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Oracle expects the Sun Microsystems purchase to be approved by the European Union and close in January with a formal outline of the master plan and financial outlook to shortly follow. In the meantime, Oracle CEO Larry Ellison provided industry watchers with quite a preview of the big plan for Sun.

As far as the vision for Sun, it has been common knowledge that Ellison wants to provide integrated hardware and software. Think T.J. Watson's IBM. Or Apple for enterprise-class gear. However, a bevy of questions loom. How serious is Oracle about hardware? What will Oracle do with Sun's commodity server and storage businesses? Can Oracle play the market share game (Sun is getting crushed)? And should Oracle even attempt to play the market share game?

Ellison addressed some of those questions on Oracle's fiscal second quarter conference call, which followed a strong earnings report. While analysts on Friday were still mixed on the Sun purchase, they seem to be coming around to Ellison's point of view. Here's the plan for Sun and what Oracle will---and won't---do with it, according to Ellison.

Sun won't play for market share. Ellison was pretty blunt about Sun's prospects as a massive server player. Sun doesn't have the scale and frankly getting it isn't worth the effort. Ellison said:

One thing we recognized that Sun just really does not now and is never likely to have the volume to compete in the high volume, low margin business of just selling an Intel server with Windows on it or Linux on it one at a time. We think that high volume, low margin business is a good business as long as you have high volumes. That is something that Dell and HP are very good at and we are going to avoid that business.

Sun will go with high-margin, high-performance hardware where the secret sauce is software integration and raw speed. Ellison said "we are pursuing the high value, high performance market." For instance, large systems like the SPARC Solaris M9000 (right) will continue to be enhanced and naturally they will be tuned to run Oracle databases at breakneck speeds.

If all of this sounds downright mainframe-ish well that's because it is. Not only does Ellison want to emulate T.J. Watson's IBM it wants to punch the present-day IBM in the gut (the core mainframe business). Deutsche Bank analyst Tom Ernst said "Oracle’s strategic focus to compete and displace IBM’s mainframe business in the high-end of the market."

Oracle will play the cloud game with the aim of growing share in the data center. Ellison is adapting Oracle's cluster pitch to a cloud computing world. Ellison said:

We are also going to be building clusters of industry standard machines and SPARC machines. Those clusters are now called private clouds. That is the more fashionable term for clusters. We are using our software, our operating systems, both Solaris and Oracle Enterprise Linux, our virtualization, the ability to dynamically allocate and de-allocate resources which is essential for cloud computing as well as the integrated networking and integrated storage to deliberately complete private cloud to our customers. Our customers will be able to buy high end SMP machines, high performance and high value for high-end private clouds with all of the pieces including processing, storage and networking integrated together with Oracle/Sun software.

Exadata is just the beginning of integrated enterprise machines. Oracle executives said Exadata demand is off the charts and the company is having trouble manufacturing enough of them. The master plan for Sun is to use it to deliver middleware and application machines. If Ellison is correct, you won't buy ERP buy itself. You'll buy ERP on a machine tuned for it. Ditto for analytics. Ditto for middleware. Ditto for cloud operating systems.

Here's the big vision, which would stink for systems integrators.

Our overall strategy going forward as I mentioned earlier, is not to sell these individual industry-standard components on their own but rather group them together into machines like Exadata where we have processors, networking, storage, storage software, database software, our Oracle Enterprise Linux operating system, all a complete database machine for both transaction processing and data warehousing.

We think that makes it much easier for the customer. They don’t have do all the system integration. They don’t have to buy a bunch of parts and glue them together but instead they buy the box. It is a high margin product for us and a high value purchase for them because they don’t have to spend a lot of money on system integration. We think that is the way customers are going to go forward as they build their data centers; not buying components but buying systems like Exadata.

One of the big reasons we bought Sun is that we wanted to apply that same strategy to middle ware, applications and to the operating systems themselves where we are not going to sell operating systems just for an individual computer but we are going to sell the next generation of Solaris is going to be a cloud addition to Solaris where it manages a group, a cloud, a cluster of these computers that we sell together as a unit. That is highly differentiated, high margin for us and no systems integration required for the customer. How big is that business? We think that is what the computer business is going to look like for large customers going forward.

If Oracle executes, Ellison reckons that Sun can differentiate itself from the likes of IBM, HP and Dell and make gobs of money too. Oracle reiterated its plans to deliver $1.5 billion in accretive operating income from the Sun purchase.

The larger question: Do you buy this vision? Analysts seemed to be coming around, but not completely. One big issue: Can Oracle get the hardware supply chain right? Indeed, Oracle had trouble manufacturing enough Exadata boxes to meet demand. JMP Securities Patrick Walravens said in a research note:

We like Oracle's vision of using Sun's assets to deliver unified solutions to customers to both power customer data centers and cloud provider data centers. With Sun, Oracle will have most, if not all, the tools needed to provide a full cluster, including processors, networking, storage, and database software. One area concern with Oracle's vision may be capacity constraints. Oracle will need to ensure it has both the hardware production capabilities and supply chain capabilities to make sure it is able to meet customer demand.

In other words, scale matters still and it's managing a hardware business is vastly different---and less lucrative---than consolidating the software sector and collecting maintenance revenue.

Other analysts such as Brad Reback at Oppenheimer question the long-term prospects of buying Sun, but generally seem more receptive of the purchase. Like his previous acquisitions, Ellison's chore will be proving skeptics wrong.

Here's a video of Ellison's big Sun plan:

Topics: Storage, CXO, Data Centers, Hardware, Operating Systems, Oracle, Software, IT Employment

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13 comments
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  • yes it will work if

    they can push and market enough ... They can and will . With Sun Oracle now is both a software and hardware company.

    You keep Open Solaris Free as a learning station More and more people will go toward it, Unix ... Is where the real power as a admin is .
    Sun Solaris 10 /opensolaris is a great OS.

    All the nice toy that Sun have it amazing.
    If the deal goes well in January we may witness a nice revolution and many big guy in the industry will start getting nervous big time.


    Now what Oracle Sun need is Application. They should buy Corel they could have a nice appz suite. Or They should make a deal with Adobe so Creative suite can work on Solaris .....

    What next Sun workstation and laptop with .. We live in a nice period for IT

    Microsoft may find that deal a bit hard to swallow
    Quebec-french
    • Innovation and leadership

      THis is what Sun products want from Oracle..so far we have a MD who has no idea except think conventional business approach with no innovation..There is a big learning curve for oracle now. Radical change is what oracle needs to do... roll on innovation as the futures bright.The SALESMAN are right there seems to be a very confused line up at this moment in time...get intergrading Oracle and see the rewards in 2010..
      The Management consultant
  • Ellison did not mention the secret stategy here

    Oracle secret is to Kill M$ and expand on desktops and former windoze servers with bundled Oracle solutions.
    The world would loook so much better without M$.
    Linux Geek
    • Secret?

      World would look better without Oracle too.
      jcschweitzer
    • You can always count on linux geeks to be dreamers...

      not dreams that are rooted in anything that does or ever will resemble reality, but dreamers none the less.

      And we need dreamers like that-- because a good laugh isn't always easy to come by :)
      ericesque
  • Vendor lock in.

    IBM has significant advantage once it gets a customer
    to buy a mainframe or any of its unique hardware (z, i
    or p series). While IBM has been open to others
    running their software on its hardware, it creates
    barriers to changing to other hardware and operating
    systems. When you purchase commodity hardware, you can
    change vendors with minimal pain. That is good for
    customers.

    Oracle wants to create that type of vendor lock in, but
    I doubt they will be as open as IBM is with some of
    their systems. The question is if customers who have
    experience with Oracle, will be willing to become
    Oracle shops?
    jcschweitzer
    • yes and no you see

      as long as Open solaris is open source and free
      . and as long as MYsql is out there ... Sun
      hardware is only sun hardware , if you don't go
      with sparc processor you just have a generic
      x86 hardware.

      The interesting part is if you wanna a no hassle bundle you pick a x86 or sparc system
      with both solaris and oracle. IF you are more adventurous x 86 with opensolaris or linux and
      mysql.

      Sun will provide as much choice as IBM and
      other .
      They offer best of both world
      Complete control bundle
      Or generic X86 hardware that you use as you see
      fit .


      What is the difference between IBM and generic
      x86 sun hardware ? until proven other wise ...
      there no difference.
      Quebec-french
      • They only care about $$$.

        I don't know if you ever worked with Oracle, but
        they only care about Linux as a platform to run
        their products on. They'll only care about
        MySQL to placate the EU now, or in the future to
        keep MSSQL off the low end servers.

        x86 servers are the same regardless of vendor.
        If Oracle can sell a large SPARC server with
        Solaris/Linux and Oracle software they will be
        happy because they locked in the entire stack.
        Same as IBM selling a p-series with AIX and DB2.
        jcschweitzer
        • ok but what make them any diffrent that lets say IBM, MS

          Perosnally i dont really care about Oracle or
          IBM what i want is alternative ....

          Hardware : ist all the same until you go with
          special processor ... you must pay for it its
          neither IBM HP DELL SUN

          Software is where the alternative goes MYsql is
          GLP And free you must pay for support if you
          need it .

          OS: there the second place where alternative is
          needed with a pure Unix or Unix/linux mix.
          There a good chance of a low cost or no cost (
          open solaris)alternative with out all the
          security and virus problem.

          IF oracle caught some idiot in a lock situation
          ... that there problem as long as low cost or
          no cost alternative .... Skill people inside
          skill enterprise will manage ...
          Quebec-french
          • Did you read the article?

            This isn't about free software. Its about
            Oracle justifying its purchase of Sun.

            They are going to leave the commodity hardware
            business and create vertical stacks. You are
            right that smart customers will avoid lock-in,
            but don't expect a lot of effort scaling MySQL
            up to large enterprises or OpenSolaris getting
            love if there isn't a viable business reason.

            Microsoft isn't even in this discussion.
            jcschweitzer
  • RE: Oracle lays out its vision for Sun: Will it work?

    All I can say is I sure it DOESN'T work. I've seen many attempts like this before. The problem with these all in one solutions is the lock-in. It becomes very difficult to get away from them in the future. When you first buy the box it seems wonderful, but 4 years down the road technology has gone a different direction and you're wondering how you're going to move to the next one.

    I feel pretty strongly that the building block approach, using commodity hardware purchased at the lowest price is the way to go. It gives you flexibility, nimbleness, and low capital costs. Yes, it may mean you need to have good people around to put things together, but that's where you should spend your money - not on semi-proprietary hw/sw solutions.

    In my opinion Solaris and SPARC have no real future. I hope that something like ZFS will become incorporated into Linux, but there's not much else there worth keeping.
    rossdav
  • Failure is complete....

    My rep and I watched this video over and over again at Starbucks this morning. We could not believe Oracle intends to deliver cloud services by buying this mess of a company. When I think cloud, I think Azure, the most open and robust cloud platform out there today. Like my rep says: "When it comes to clouds, Microsoft makes it rain!".
    Mike Cox
    • EC2 and Eucalyptus

      Amazon's EC2 and Eucalyptus have way more market
      than Azure. IBM and Rackspace are getting into
      the market in a big way. Who has actually
      deployed anything on Azure?
      jcschweitzer