Analysts: Be cautious on Oracle-Sun merger

Acquiring Sun elevates Oracle to "powerhouse" status, but CIOs should wait for its hardware and middleware roadmaps before deciding on license agreements.
Written by Victoria Ho, Contributor

Acquiring Sun Microsystems elevates Oracle to "powerhouse" status, but CIOs should wait for it to announce hardware and middleware roadmaps before deciding on their license agreements, say analysts.

Gartner sent out a statement saying the merger marks the first time a large software company has bought a large hardware company, positioning Oracle as a "powerhouse" vendor targeting IBM and Hewlett-Packard.

It said the two vendors' combined product sets will give it a vertical "integrated" stack to offer customers, but customers should wait for Oracle to lay out its hardware road map before any long-term plans.

Customers on Sun's Sparc hardware should protect their investments by locking in longer support agreements of five- to seven years, said Gartner.

The analyst firm also recommended CIOs stay cautious before committing to Sun middleware products. It added: "As a precautionary measure, current Sun middleware customers should begin to evaluate alternatives and, if appropriate, develop a migration strategy."

IDC said Oracle's lack of hardware experience may see it eventually spinning off Sun's hardware business, which consists of servers, storage and tape.

A Technology Business Research (TBR) analyst too said the software giant will have to invest "significant sums of money to continue the hardware business as-is".

TBR said it may have to streamline the Sun server product line as a result, and focus on x86 machines. It also listed likely purchasers of Sun's hardware business: Fujitsu, EMC, Dell and HP.

Vendor consolidation: what CIOs should expect
The Gartner report also noted Oracle faces a challenge with customers who may not want to source for their enterprise stack from a single vendor.

Ovum's senior vice president of IT research, David Mitchell, however thinks that companies may benefit from Oracle's vertical offering.

In an e-mailed statement, Mitchell said: "Historically, it may have been prudent for CIOs to spread their spending across multiple suppliers, using competition between suppliers to keep prices keen."

However, the wide portfolios of giant vendors such as IBM, HP, Microsoft and Oracle may present CIOs with better bundled enterprise licensing agreements, he said.

Mitchell said CIOs resistant to procuring from a single vendor may have to accept that the IT landscape is consolidating, and that dealing with single vendors may be a trend that continues to gather momentum.

He said: "We are now entering a market context where the 'big four' will equate to IBM, HP, Microsoft and Oracle.

"These suppliers will, between them, define a significant proportion of the IT market landscape for the next 10 years or more."

As a result, other vendors need to focus on specialization, rather than try to scale to match the four, he said.

TBR said Oracle is in a good position to provide unique combinations of Oracle and Sun's products.

One potential appliance could fuse Sun server and storage hardware with Solaris and Java software, together with Oracle's database and Fusion middleware, it said. This "unique" offering would enable Oracle to "rapidly penetrate the small and midsize (SMB) market", said the report.

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