Oracle with Linux is doing the inevitable -- a business model mash-up

This is not, by the way, an assault on Linux. It's an assault on the providers of Linux support tied to a particular distribution. Linux should be just fine. And Oracle's influence on Linux may make it even better for use as the underpinnings of datacenters and applications-as-services stacks.
Written by Dana Gardner, Contributor

I can see why folks are throwing brickbats at Oracle for their latest Linux move, which seemed to be long anticipated. So I hope the brickbats were long in the making and not the result of shock or knee-jerk reactions.
Oracle is doing the absolute rational and predictable thing here. People may not like it, but this is the next ongoing chapter in the saga of commercial and/or open source software. This is the equivalent of cutting off the oxygen, but directed at the new business model: subscription fees for services and support.
In many ways, this is Larry Ellison and Oracle doing to the open source (or should I say commercial open source) vendors what they did to Sun, Microsoft, HP and IBM. Sun decided to usurp open source by trying to out open-source open source, to mixed results. Larry is going to the mattresses using the same logic as the open source huns (in the nicest possible meaning).
If Oracle can subsidize the offering of subscription services to an acceptable and open (not too forked) Linux distribution (and these need to happen) through its commercial products' revenues, it will. It was okay for open source service providers to undercut Unix and Windows via their low-cost development and distribution means, right? What's good for the goose ...
This is not, by the way, an assault on Linux. It's an assault on the providers of Linux support tied to a particular distribution. Linux should be just fine. And Oracle's influence on Linux may make it even better for use as the underpinnings of datacenters and applications-as-services stacks. You still pay the piper (Larry) for the apps and databases (although the assault on the pricing in DBs is building). Larry foots the bill for the integration, distribution, support, and more database and applications innovation. He prices at the apps mostly, and also at subscriptions up and down the stack. As long as the TCO and manpower issues are even or better in real dollars than other open source pricing approaches, then Oracle's plan will succeed.
By the way, I don't recall all sorts of crying for Oracle when open source databases started to encroach on the lower end of the DB market? Indeed, this move by Oracle was inevitable. It was just a matter of the right timing.
What's more critical now, are the next logical moves on the chess board. If Oracle's tactical embrace of Linux and support-based pricing is successful, then where to go next? Red Hat's purchase of JBoss points in the right direction. Larry can usher along the lower packaged support costs model to middleware, Java stack, and -- you betcha -- SOA over the next few years. Tools is already hollowed out. He can help manage the conversion of DBs to subscription, and at least keep the accounts, even as the DB margins alone decline.
This is what Sun tried to do but lacked the critical mass in the market to affect it. Oracle has that critical mass. Sun and Oracle should be getting closer, as long as Sun can tolerate having Larry on top. Also, how much Fusion will Larry let go of for an open sourse alternative?

And by hollowing out next the business model for licensed middleware and SOA infrastructure, who gets hurt? IBM, Microsoft, BEA. Who does Oracle compete with below the business apps? IBM, Microsoft, and to a lesser extent, BEA.

IBM, however, has its own power-plays here. It can turn on the spigot and pour out more open source, while preserving their high-end commercial software revenues. IBM can also play the open source DB2 card against Oracle and hasten the revenue pressure on them. Oh, my.

Who might see Oracle's latest move as a complementary model? The non-IBM global systems integrators, who know that even an Oracle-blessed open source stack will need plenty of professional services, especially on the road to SOA. And then there are all those other open source stacks partnerships that will spring up, needing a helping professional services hand. Whoopee!

And who might outright gain by Larry's move up the stack (sidestepping the DB, of course) on the road to lowest-cost support of myriad open source configurations? HP, Sun. Fortunately they have hardware business to help them along, and they will be just fine, especially HP, which can easily partner more with Oracle and keep Red Hat in play. Sun might even find more partners for its open source and JES configurations, among the likes of Oracle, Novell, Red Hat, SAP. Nearly everyone will need to follow the IBM-Red Hat-Oracle-Sun's model on open source support, no? Yes.

And what will all this mean for SAP? They will need to compete on the TCO angle, too, to themselves bring a better open source support story to their business applications and NetWeaver. This is where Red Hat needs to go. And they probably will have to walk up and over Sun's back to get there. IBM?
So we are now entering an era of intense partnering on the slippery slope to the lowest-cost, open source middleware and platform stack with accompanying services and support. Very few can cobble it all together, so they will pick their battlegrounds on their high-value territory and partner appropriately for the rest. They can go to SpikeSource (for best of breed but configured open source), Red Hat, Sun, IBM, and -- now -- increasingly Oracle. I suppose that SpikeSource et al can't lose in all of this, being sort of Switzerland amid the warring factions.
The biggest loser (they will be just fine medium-term, of course) is Microsoft. How will they price for all their core, non-PC-based stuff? They do not have the business applications or hardware revenue -- or Saas vis a vis Live (yet) -- to see them through this hollowing out process of pricing for software below the business applications, SOA, and management/governance layers. Microsoft will, more than ever, need that advertising revenue. But then there's that Google problem... Such a squeeze play!
Disclosure: HP is a sponsor of BriefingsDirect podcasts.

Editorial standards