Oracle has a lot of processing-intensive applications, from financial software to industry-specific apps such as Oracle Transportation Manager, that look like prime candidates for appliances. Transportation Manager calculates shipping options across many factors, such as whether to use truck, train, or ship; which suppliers to consider; and delivery times. These kinds of CPU-hogging apps might lend themselves to the hardware appliance format run on premises.But companies such as Con-way--a freight manager that uses Oracle databases, Financials, Transportation Manager, and PeopleSoft--show how cloud-based options will compete with appliances. "Cloud computing is interesting to us," says Maja Tibbling, Con-Way's principal enterprise architect. "Rather than migrating to an appliance for our ERPs, we would probably go toward either hosted or on-demand in the future." Tibbling considers hardware appliances more attractive to smaller businesses.
That's not Oracle's vision. Co-president Charles Phillips, at the Jan. 27 session explaining Oracle's Sun strategy, presented the appliance as a high-value product for customers that can afford Oracle's premium technical support. Oracle will sell plain UltraSparc hardware if companies want it, but Oracle executives have said something Sun would not have. "We're not interested in the commodity Windows, x86 market," Phillips said. "There are other people doing that, like Dell, whatever. Let them do that."
Yet Oracle CEO Larry Ellison's ambition isn't for Sun to hold merely a high-end niche. Ellison vowed to boost Sun's share of the server market and augment it with appliances. "We think Sun's a growing business," he said. "We plan to take share in servers, storage, and tape."
How do those two visions square up? At the event, Mark Kamlet, provost and senior VP at Carnegie Mellon University, came on stage to strike just the right notes for how Oracle could broaden Sun's appeal. "The technology stack has gotten very, very complicated for us," he said. "It's an immense hassle trying to get everything to work. ... We want integrated solutions. We want appliances that we can plug in and they work."
Oracle must capitalize on the overlap of its Oracle and Sun customer bases. Oracle estimates about a third of its customers are also Sun customers.
Getting Sun profitable while investing in the design and production of new UltraSparc servers will be a challenge. UltraSparc's current T2 Plus UltraSparc chip relies on 65-nanometer circuits, and Oracle plans to move to 45 nanometer with the T3, due later this year. Oracle says it's committed to the next generation beyond T3.
Ultimately, Oracle is likely to push UltraSparc forward just as long as it aids its larger goal of selling more Oracle software. If hardware appliances catch on, they'll bolster profit margins and investment will keep flowing into UltraSparc. If not, UltraSparc will drag down Oracle margins. Oracle has a lot of work ahead to convince customers of its vision for a high-value, premium-priced integrated stack of software and hardware. It doesn't have to win every customer over. But it does have to win over the biggest.