Oracle says no to Itanium: Embarrassment for Intel, big problem for HP

Oracle announced that it is going to cease development for Itanium across its product line, stating that they believed, after consultation with Intel management, that x86 was Intel’s strategic platform. Intel of course responded with a press release that specifically stated that there were at least two additional Itanium products in active development – Poulsen (which has seen its initial specifications, if not availability, announced), and Kittson, of which little is known.

This is a huge move, and one that seems like a kick carefully aimed at HP’s Itanium-based server business, which competes directly with Oracle’s SPARC-based Unix servers. If Oracle stays the course in the face of what will certainly be immense pressure from HP, mild censure from Intel and consternation on the part of many large customers, the consequences are pretty obvious:

• Intel loses prestige, credibility for Itanium, and a potential drop-off of business from their only large Itanium customer. Nonetheless, the majority of Intel’s server business is x86, and they will, in the end, suffer only a token loss of revenue. Intel’s response to this move by Oracle will be muted – public defense of Itanium, but no fireworks.
• HP gets hit. Oracle’s database is a major workload on HP’s Itanium servers, with possibly up to 50% of HP’s flagship Superdome servers running Oracle. A public statement from Oracle that they will no longer develop their database software will be a major drag on sales for anyone considering a new Oracle project on HP-UX and will make customers and prospects nervous about other key ISV packages as well. We should note that this does not to equate to either wholesale abandonment of HP platforms or an immediate dip in revenue. Oracle versions tend to live for years after their successors are announced, so many HP customers with current Oracle versions (which Oracle will continue to support on HP-UX/Itanium) will still buy additional capacity for years after the next non-Itanium versions are introduced.
• IBM can potentially profit with a combination of their P-Series servers running AIX as an alternative to HP-UX. However, since they also compete with Oracle’s servers and their volumes are not that much different from HP’s, they could be the next victim. IBM will probably use this opportunity to ramp up their DB2 marketing on AIX as well.
• Major enterprise HP-UX customers will see their options constrained and will probably incur additional costs out of current budget plans. Since migrating from the Oracle database is difficult and expensive, many of them may be forced to prematurely refresh their systems if they need a newer version of Oracle under on a Unix platform. And guess who will be prepared to sell them such a system, on a CPU architecture that has even less market share than either Itanium or Power CPUs?
• Microsoft can come out ahead on this as well by aggressively pushing SQL server into the uncertainty caused by Oracle’s move.

All in all a very rough move on Oracle’s part. Oracle claims that the move was not motivated by competitive issues with HP, and HP has been very vocal in decrying it as destructive and unfair to major enterprise Oracle customers. While it is always difficult to unravel the decision process of major shifts like this one, my gut feel is that HP’s claim probably has some merit. Oracle was in a position where an  arguably reasonable decision on long-term strategy also had a potential negative tactical impact on a major competitor, and as such was probably much easier to make.

As a closing thought, note that I say “tactical” and not “strategic” in regards to the impact of this decision on HP. HP has the technology and the resources to port HP-UX to an x86 platform, and today even has x86 systems such as the DL980 that are worthy platforms for HP-UX, as well as the ability to build a Superdome variant based on x86. HP has resisted this move for many years as x86 matured and out of a desire to preserve Itanium system revenues. Oracle’s thrown gauntlet may be the trigger HP needs. From a customer perspective, there is no real need to consider abandoning a strategic HP relationship. The company has a good track record in bridging generations of hardware for its HP-UX users, and there is no reason to think that the transition to an x86 system would be different – current Itanium customers should expect multiple yeas of parallel availability, and HP has said they will support Itanium systems for at least a decade.