IBM's $1.78 billion bid for Netezza makes a great deal of sense for IBM for many reasons and here are the top two: it extends IBM's already-deep product business-analytics product line, and it also reinforces IBM's mission to be a world leader in what it calls workload-optimized systems.
But as we saw in the recent bidding war between Hewlett-Packard and Dell for 3Par, the rapid consolidation in the IT industry, and the fervent quest by the major players to pounce on smaller and highly innovative suppliers, could toss some sand into the Vaseline.
And I wouldn't be surprised to see Larry Ellison holding a huge bucket of sand.
There's been some interesting history between Ellison and Netezza, as the latter's innovative approach to pairing up hardware and software in a highly engineered system pushed beyond the extremely high-end paradigm set by Teradata and kicked open a lower-end and easy to use market that Oracle simply could not serve.
In fact, Ellison has given major credit to Netezza for helping to inspire his development of the Exadata Database Machine, which is now on an annual revenue run rate of $1.5 billion—almost as much as IBM is offering for Netezza's entire business.
In late January of this year, when Oracle held a day of presentations to lay out its strategy for Sun, Ellison described the broad market Exadata would address and credited the much-smaller company for its earlier innovations—here's how Netezza itself recalls Ellison's comments:
"Netezza was part of the inspiration for Exadata. Teradata was part of the inspiration for Exadata," acknowledged Larry Ellison on January 27, 2010. "We'd like to thank them for forcing our hand and forcing us to go into the hardware business." While delivered with Larry Ellison's customary pizzazz, there is a serious point to his comment: only the best catch Oracle’s attention. Exadata represents a strategic direction for Oracle; adapting their OLTP database management system, partnering it with a massively parallel storage system from Sun."
Last night in his opening keynote at Oracle Open World, Ellison emphasized repeatedly that this new model of highly optimized hardware-software combinations is the future for his company.
So is it unreasonable to think he'd want to add a feisty young company that helped inspire him to develop that vision? And that has lots and lots of big-company customers of the sort that are Oracle's primary targets?
The thread between the two companies goes back even farther. Three years ago, Philip Howard of Bloor Research had this to say about Netezza and Oracle (the article is dated Oct. 9, 2007):