Government // Enterprise Architecture
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9/6/2009
06:10 PM
Bob Evans
Bob Evans
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Global CIO: Oracle Nailed By EU Protectionism As HP And IBM Raid Sun

The European Commission says it's investigating Oracle's acquisition of Sun to protect consumers. That's nonsense--they're doing it for one and only one reason: because they can.

Like every big and successful company, Oracle has made its share of enemies, has bruised some competitors' egos, has negotiated aggressively with customers, and has lobbied for policies and regulations that will help the company. So when Oracle gets roughed up a bit, as is happening with the ongoing delays in its attempt to complete its acqusition of Sun, I'm sure a number of folks are smiling as they say, "Nothing like a taste of your own medicine, eh?"

But I think such a reaction—even from competitors—is misguided, short-sighted, and dangerous. Because what is at play in the latest delay is nothing short of naked protectionism on the part of the European Commission on behalf of its constituent member countries across the continent. In the absence of legal standing or business rationale or technology understanding, the EC resorts to an activity that no free-market believers should endorse or, indeed, wish on their worst enemy: the EC is making Oracle twist in the wind and lose tens of millions or perhaps even hundreds of millions of dollars in Sun's value for one reason, and one reason only:

Because it can.

In the Commission's shameful attempt to derail Oracle's acquisition of Sun, the EC bureaucrats can continue spewing their uninformed drivel about the resultant higher prices and fewer competitors, but the only rational and logical explanation for their mindless foot-dragging is provincial protectionism. Let's take a closer look at some of the EC's grandiose claims, and contrast those to actual reality:

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CLAIM #1: From the EC's press release about its "in-depth investigation" into Oracle's proposed acquisition of Sun: "The Commission’s preliminary market investigation has shown that the Oracle databases and Sun's MySQL compete directly in many sectors of the database market and that MySQL is widely expected to represent a greater competitive constraint as it becomes increasingly functional."

REALITY: From a news-analysis piece by my colleague Charles Babcock: "But [Ingres Corp. Roger] Burkhardt said MySQL rarely competes head-to-head with Oracle in the existing database market. "Oracle makes money by being the corporate transaction processing system, the mission-critical production system. It's not realistic to say MySQL is a competitive database with Oracle. It's not like the commission can make that argument," he said.

Ingres has no specific dog in this fight—rather, Burkhardt was just offering some rational and clear perspective on a case that the EC is trying to send into never-never land. And to further buttress that case, InformationWeek's Babcock also cited this comment from his discussion with Burkhardt:

"Burkhardt said MySQL produced $40-$50 million in revenue a year at the time of its acquisition by Sun. That is less than one percent of Oracle's total. Unless the European Commission decides to count numbers of users as part of MySQL's value, it's difficult to construct a case that either existing or future commercial database users will be impacted competitively by the deal.

CLAIM #2: Quoted in the EC's press release, commissioner Neelie Kroes says, "In the current economic context, all companies are looking for cost-effective IT solutions, and systems based on open-source software are increasingly emerging as viable alternatives to proprietary solutions. The Commission has to ensure that such alternatives would continue to be available."

REALITY: Wow—talk about unbridled bureaucratic arrogance! Whatever in the world it is that "the Commission has to" do, ensuring that open-source alternatives are available is surely not one of them: that's what the free market is for, and it's what lots of great software developers have been doing for quite some time with absolutely zero involvement from Kroes and her fellow EC throne-sniffers. In the specific case of MySQL, the code exists within a general public license so that even if Oracle decided it wanted to conquer the universe by stifling MySQL, that would be a fool's errand because Oracle does not and cannot control MySQL code, says Babcock in his excellent analysis:

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