Oracle and Sun - what does it mean for customers?

Does the $7.4bn acquisition mean more accountability, or too many eggs in one basket?
Written by Tim Ferguson, Contributor

Does the $7.4bn acquisition mean more accountability, or too many eggs in one basket?

Oracle, through its acquisition of Sun, is hoping to take away the headaches caused by technology integration for CIOs. But analysts warn that reducing the number of vendors IT chiefs deal with could bring its own complications.

Last week Oracle outlined its plans for the technology it has gained from its $7.4bn acquisition of Sun Microsystems and Oracle CEO Larry Ellison was quick to point out how he thinks customers will benefit.

"By having all of the pieces of the stack from the silicon all the way up to the application, we'll be able to deliver systems that run faster, are fault tolerant, that are highly secure, [have] much more performance, much more cost effective, much easier to use than we could have ever delivered by simply delivering components," he said.

Through the acquisition of Sun, Oracle is gaining both software and hardware: the Sun portfolio includes the Sparc chip technology, Java programming language, the Unix-based Solaris operating system and the open source database technology, MySQL. This is in addition to a range of servers, storage and desktop workstations.

With the acquisition, Oracle - already one of the biggest players in the enterprise software market - is aiming even higher, according to Ellison: "Our vision for the year 2010 is the same as IBM's vision for the year 1960, which was go ahead and deliver a comprehensive, integrated suite of technologies. So it's not like this hasn't been done before. This was done very successfully by IBM… and that strategy by the way made IBM the most important company in the history of the earth. So we kind of like that strategy."

Oracle's plan is to combine Oracle and Sun products so customers can buy their whole technology stack from a single vendor. And according to Oracle president, Charles Phillips, customers will see better accountability: one vendor takes responsibility for any problems.


Oracle's acquisition of Sun will mean customers have just one throat to choke
(Credit: Oracle)

"The ability to service these products is going to be completely different: instead of all the finger pointing when something goes wrong, you'll have one company to call for that entire stack. We'll take responsibility. The bottom line is we want to improve and change the way people buy systems, the way they run them and the way they manage them."

And while this simplification will hold attractions for some customers, it might not suit all.

Ovum senior analyst Roy Illsley told silicon.com: "The challenge that most organisations have is integration. Most organisations want to reduce the number of moving parts. Oracle can now, in theory, take away a lot of the issues that organisations have got."

But he warned this approach could cause some problems including potential price increases due to there being less of an opportunity to bargain with different suppliers.

"Some organisations are going to like it because it makes life simpler for them but others - the more cost sensitive ones or the more aggressive ones when it comes to dealing with vendors - are going to look at it and say: 'You know what, I'm going to have to go and talk to IBM now so I can give Oracle some sort of competition when I'm in negotiations about licence prices or whatever'," he said...

"If I was a CIO or an organisation that dealt with Sun and Oracle as two separate entities… I'm going to get the benefits of integration but I'm going to lose the flexibility to negotiate on the deal because I'm only going to be negotiating with one entity."

Illsley added that adopting a single tech infrastructure could also be problematic for companies when considering mergers or acquisitions. He said: "You have got to think about am I putting all my eggs in one basket and what's my exit strategy if I come out of this? Is this going to mean that the Oracle-Sun enterprise is not going to talk to the IBM one or HP or the Microsoft one?"

Andrew Butler, VP at Gartner, added that the change in approach from Oracle might concern some IT bosses in terms of their existing tech contracts.

He said: "I think the average CIO is a little nervous at the moment because they don't quite understand who's going to be their strategic partners of the future. Suddenly they're hearing all of this talk about converged infrastructures and effectively single vendors who will build most or all of their hardware components and maybe the entire software stack that will sit on top of it and I think the average [CIO] is thinking: 'What does this mean for all of the procurement relationships I've got?'"

Butler also suggested that the likelihood of businesses moving over to a single business infrastructure from their existing set up will be low, at least initially.

"While Oracle is going to be very capable of putting together a perfectly decent complete integrated solution, the fact is in the real world people will still keep running Oracle workloads on top of someone else's operating system and someone else's kit and they're not going to change that investment decision," Butler said.

Another big issue is what Oracle is going to do with all the different technologies it has acquired with Sun, Butler said: "What is quite clear is Sun has far more technology than Oracle needs and even the combined can truly sustain and promote as a truly strategic product. So there has to be rationalisation within the product portfolios for hardware, software, services."

For his part, Ellison said: "Sun has a fabulous installed base, a wonderful pipeline of technology and we just have to do a better job of taking this wonderful engineering output and delivering it to customers."

So where next for Oracle after this? Ovum's Illsley predicts that in order for the combined Oracle-Sun business to really compete with the likes of HP and IBM it will need to beef up its consulting services.

He said: "Services from IBM and EDS that HP have got are really big, capable service brands on their own that add to the stack. Having that Global Services team does give IBM some real extra clout and it gets them into boardrooms and gives them a flexibility that EDS gives HP now and I wouldn't at all be surprised if that's something [Oracle and Sun] will certainly be working on."

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