Commentary
1/28/2010
08:12 PM
Bob Evans
Bob Evans
Commentary

Global CIO: Oracle's Ellison Challenges IBM, NetApp And—Well—Everyone

Is Larry Ellison's silicon-to-application strategy the next wave, or is he 50 years out of phase?



It was not a coincidence—nothing Larry Ellison does is by coincidence—that early in his rollout of his Oracle-Sun vision on Wednesday, Ellison brought up IBM and his intention to adopt the strategy that he said made IBM, 50 years ago, "the most important company in the history of the Earth."

A close analysis of that plus other key parts of Ellison's 12-minute unscripted remarks reveals a fundamental challenge that he and Oracle are issuing to every significant company in the IT business: you can bet that Larry Ellison's integrated systems strategy is way off base and thereby choose to stand pat; or, you believe that Ellison's sweeping plan will fundamentally reorder the IT landscape that has been shifting and changing in subtle and not-so-subtle ways for the past year.

Think about it: the new BFF relationship between Microsoft and Hewlett-Packard—is that a coincidence? How about the cozy partnership evolving between Dell and Salesforce.com? Or SAP and Microsoft? Or IBM and SAP? Or Intel and SAP?

And while the IBM of 1960 personifies the model of the company Ellison wants to emulate, he doesn't feel quite the admiration for the IBM of today and talked about how Oracle-Sun systems "crushed" IBM's in recent in-house tests. Ellison also singled out NetApp with a specific challenge, saying that Oracle-Sun has already created what should be the next-gen product for NetApp. (More on those a bit later.)

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No, the game has shifted from checkers to 3D Risk, and whether you admire him or can't stand him, whether you want to do business with his newly constituted company or stay as far away from it as possible, you cannot dispute the fact that Larry Ellison has been the primary change agent behind much of this.

Can he deliver on all the big and sometimes-outlandish promises? That remains to be seen. But few executives have single-handedly wielded such staggering influence on the IT business as Ellison, and with Sun almost formally a part of Oracle, he seems intensely committed to making all his prior moves look like nothing more than head fakes.

"We're excited to be in all of these new businesses with this fantastic group of people from Sun combining with the people and technology from Oracle, and we think we will be very competitive in delivering complete business systems to our customers, starting with the chip, where we can do clever things like put encryption and compression and all sorts of interesting things right down in the silicon," Ellison said, fairly glowing about the prospects of deeply coordinated and optimized engineering efforts.

"A lot of stuff that used to be done in software is going to find its way into silicon, and some stuff that used to be done in the database will find its way into the operating system."

And then he turned his remarks away from that vaguely esoteric philosophy to the very tangible world of customer impact and customer value:

"By having all of the pieces in the stack—from the silicon all the way up to the application—we'll be able to deliver systems that run faster, are fault-tolerant, are highly secure—much more secure, much more performance, much more cost-effective, much easier to use than we ever could have delivered by simply delivering components."

But two SAP executives have countered with strongly expressed opinions that Ellison's packed-stack approach is out of date in the age of mobile devices and the cloud, and that it's a misguided attempt to hogtie customers.

SAP executive board member John Schwarz said this in a Barron's article yesterday:

"I have a hard time understanding why they did this," [Schwarz] said, "in a world where mobile devices are moving to the cloud, where mobile devices are more important, and where the infrastructure on which an application runs doesn't really matter. Why have a full stack in that world? We see having heterogeneous, multi-platform capacity as being a more flexible, powerful economically reasonable strategy than Oracle with Sun."

And as we wrote earlier this week, SAP CTO Vishal Sikka, without referring by name to Oracle, said this:

"Lately we are hearing a lot about the resurgence of 'the stack' and how as an IT vendor some companies think you have to own not just the application but also the middleware and the database and you need to own it all right down to the hardware," said Sikka.

"But we've always believed that for customers with heterogeneous environments—and that's what they all have—it's all about interoperability and helping everything work together, rather than making lots of acquisitions and buying more and more pieces and cramming it all down their customers' throats."

But Ellison—not surprisingly—takes a different view of CIO priorities in a business era requiring them to overcome two dramatically different challenges: first, to lower the cost of infrastructure to be able to liberate precious IT funds for growth-oriented projects; and second, to meet today's high-performance need for blazing speed and vast storage capacity. And it was in laying out his plan for putting those capabilities into the hands of CIOs that Ellison conjured up his 50-year-old vision of IBM's supreme reign:

"The notion of vertical integration, we think, delivers huge value to customers, giving them systems that cost less, run faster and more reliably, and are more secure. And that's our goal, and in a way it's kinda 'back to the future'—our vision for the year 2010 is the same as IBM's for the year 1960, which was to deliver a comprehensive, integrated suite of technologies," Ellison said.

"So it's not like this hasn't been done before—this was done very successfully by IBM under T.J. Watson Jr. in the '60s and that strategy, by the way, made IBM the most important company in the history of the Earth. So we kinda like that strategy, and we're gonna simply adopt it."

The key to making it work, Ellison said, is leveraging the opportunity to optimize how everything works together by coordinating the efforts across a giant engineering team working toward common purposes and goals.

"Now, in the past 50 years, a lot has happened, and technology has moved along, but still, the basic architectural notion that you can do a better job by having all the pieces being designed by one large team of engineers who talk to one another—the silicon guys talk to the operating system guys, the operating system guys talk to the database guys, the database guys talk to the silicon guys—and everyone talks to middleware and the applications guys talk to everyone so again we think that gives us a huge advantage and the proof will be in the pudding: the integrated products that we deliver to our customers."

And then came his challenges to NetApp and IBM. Describing how the former Sun 7000 has been renamed the ZFS Storage Appliance and rebuilt to optimize Oracle's software with Sun's hardware, Ellison said, "We think if you're a NetApps user, you should look at the ZFS Storage Appliance: it's kind of a next-generation NetApps box: it's faster, it costs less, it has more snapshots—orders of magnitude more snapshots capability—it's a very interesting next-generation file-serving box."

On the IBM side, Ellison said that back in April when the acquisition was announced, he pushed a project to "look at Sun's current Sparc and Solaris technology, and our current database technology, and marry them up and see how we compared to IBM's largest and fastest servers. IBM was then the record-holder in TCP database performance."

The result, he said, was that "we blew the doors off of IBM. We crushed them. In a machine that takes up less than 10% of the floor space of IBM's record-setting computer, we ran faster—a lot faster—using only a tiny fraction of the floor space, a tiny fraction of the power, and it costs less.

"And that's just an example of what we could do in the nine months from when we announced the merger until today. If we can do that in a short period of time, think of what we can do in 12 months. Or 24 months. Or 48 months. So it's gonna be very exciting."

Two thoughts on that: no big surprise that he claimed his system whipped IBM's—I mean, we didn't really expect him to say that IBM trounced the Oracle machine, did we? But the larger point is that Ellison is attempting to exert his enormous leverage to shift the balance point in customer conversations about potential vendors, and in the approaches that IT vendors take toward how they present and position themselves to increasingly demanding customers. Has he nailed it with his new integrated strategy? Or will he in turn get nailed by offering an antiquated approach to a vastly different world?

Second point: as I said at the beginning, I don't think Larry Ellison does anything by coincidence or happenstance. And so note the timeframe he expressed in his last comment: "…think of what we can do in 12 months. Or 24 months. Or 48 months. So it's gonna be very exciting." Sounds to me like anyone who was hoping that one of the world's wealthiest men who's now in his 60's might decide to spend most of his time leading the fastest sailboat on the planet is going to be very disappointed.

Game on.

RECOMMENDED READING:

Global CIO: Oracle CEO Larry Ellison's Top 10 Reasons For Buying Sun

Global CIO: Oracle CEO Larry Ellison On The Future Of IT

Global CIO: Oracle-Sun A Bad Deal? Only A Fool Would Say That

Oracle Sees Unconditional EU Approval For Sun

Global CIO: Why Oracle's Larry Ellison Will Tell The EU To Pound Sand

IBM CEO Sam Palmisano Talks With Global CIO

Global CIO: An Open Letter To Oracle CEO Larry Ellison

Global CIO: Where Do Oracle's Profits Come From?

Global CIO: Oracle Dumps HP After Co-Creating 'Most Successful Introduction Ever'

Global CIO: Sam Palmisano's Grand Strategy For IBM

Global CIO: In Oracle Vs. SAP, IBM Could Tip Balance

Global CIO: Upheaval In The IT Industry: The End Of The World As We Knew It

Global CIO: IBM's Game-Changing Plunge Into Predictive Analytics

Global CIO: An Open Letter To Hewlett-Packard CEO Mark Hurd

Global CIO: Hewlett-Packard CEO Hurd's Strategy: The Infrastructure Company

GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at [email protected].

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