Oracle's top executives, oozing with confidence that the Sun deal will be closed within the month, spoke animatedly yesterday about the company's looming transformation from an enterprise software company into a full-fledged systems provider intent on competing head-on with IBM.
In particular, Oracle founder and CEO Larry Ellison spoke in considerable detail about how his vision of the computer industry of the future is centered on the idea of optimized systems that provide high value to customers because they don't need to do or pay for a lot of systems integration, and in return provide high margins to the providers.
Ellison also quite casually wove the terms "private clouds" and "cloud computing" into his strategic overview without lampooning them, which was a big step forward even though Ellison's discomfort with the term is shared by IBM CEO Sam Palmisano and Hewlett-Packard CEO Mark Hurd. It was a big step because whatever his personal misgivings over cloud terminology might be, it's a name and concept that has truly begun to fire the imagination of customers and industry players alike, and the combination of Ellison's new acceptance of the term combined with his ambitious plans for Oracle to become a major supplier of cloud systems can only accelerate that already forceful trend.
In a separate piece coming a bit later today, I'll offer some context on Oracle's earnings and related commentary from not only Ellison but also company presidents Charles Phillips and Safra Catz—but for the purposes of this column, I want to focus on the Ellison's view of where the IT business is headed for both customers and major vendors.
As one of the most powerful and influential leaders in not only the technology business but in the global economy as well, Ellison wields enormous clout in shaping strategic directions for products, technologies, terminology, acquisitions, and the general temperature of this far-flung business. His legendary competitiveness, ranging from his business battles against SAP and Microsoft and IBM to his status as a world-class sailor and racing-team leader, has helped to shape and will continue to shape the direction of this business for quite some time.
In Ellison's own words, transcribed from yesterday's second-quarter earnings call (the audio-archive link is live through Dec. 28), you'll hear his views on Oracle's future strategy and how it will take the company down a path that's similar to the one IBM is on but differentiated from that of HP and Dell; how Oracle will become a major player in cloud computing, particularly private clouds; how the Exadata database machine is fulfilling Ellison's predictions of being the most exciting new-product introduction in the company's history; the role of specialized and integrated systems in providing higher value to customers for everything from databases to transaction processing to data centers; and the unfolding strategy and promise of Oracle's Fusion applications.
1. Sun's Impact On Oracle's Strategy
"Since we're getting closer to closing the Sun deal, I'm going to talk a little bit about our strategy with Sun going forward: what we're not gonna do and what we are gonna do. One thing we recognize is that Sun does not really now and is never likely to have the volume to compete in the high-volume, low-margin business selling an Intel server with Windows on it or Linux on it one at a time. We think that high-volume, low-margin business is a good business, so long as you have high volume, and that's something Dell and HP are very good at and we're gonna avoid that business.
"Instead, we are pursuing the high-value, high-performance market: very large SMP machines like the Sparc Solaris M9000 which we will continue to enhance. . . . We'll not only be focused on SMP machines, which have been around for some time though we think Sun's SMP machines are best in class, but we're also gonna be building clusters of industry-standard machines and Sparc machines. And those clusters are now called private clouds—that's the more-fashionable term for clusters—and we're using our software, our operating system—both Solaris and Oracle Linux—and our virtualization—the ability to dynamically allocate and reallocate resources, which is essential for cloud computing—as well as integrated networking and integrated storage to deliver a complete private cloud to our customers.
"So customers will be able to buy high-end SMP machines that are high-performance and high-value, or a high-end private cloud, with all of the pieces including processing, storage, and networking integrated together with Oracle-slash-Sun software. We think that will heavily differentiate our offerings from the offerings of IBM, HP and Dell, and we think we're gonna be able to compete very effectively there and that will deliver high margins and allow us to deliver that $1.5 billion additional profit in our first full year of owning Sun."
2. Exadata Database Machine, And The New Systems Approach It Exemplifies
"We think the Exadata business is going to be huge—by huge, billions of dollars a year in new systems sales, not including the maintenance on those businesses. Now how long it takes us to get there remains to be seen but our overall view of the computer industry is we have been selling components to large customers and the customers have been hiring systems integrators to glue those components into complete systems." And here's his "overall strategy going forward":