Commentary
12/2/2010
07:10 PM
Bob Evans
Bob Evans
Commentary

Global CIO Top 10 Stories: Oracle Buys Sun For Systems Push

More than a simple linear takeover, Oracle-Sun has accelerated some widespread transformations in the IT business—can Larry Ellison take full advantage?



While Larry Ellison's dogged persistence in closing the acquisition of Sun will be remembered for many peripheral things—including the shameful 8-month kabuki exercise staged by the European Commission that cost many hundreds of Sun employees their jobs, the mockery by Ellison of former Sun CEO Jonathan Schwartz for blogging instead of selling, and the silly predictions that the two companies' wildly different cultures would make the deal into a disaster—the Oracle takeover of Sun will ultimately be remembered for one big thing: it gave Ellison the platform from which to mount simultaneous assaults on both IBM and SAP, two of the most successful business-technology companies in the world.

But win or lose, we are seeing that the effort alone is accelerating huge transformational forces in the IT industry: the promise that an all-Oracle, single-vendor stack can be more effective than the traditional heterogeneous approach; the surging demand for deeply integrated and optimized systems precipitated by Ellison and reinforced with Sun; and the notion that for most IT suppliers, the formerly impenetrable silos segregating hardware vendors from software vendors had come crashing down.

I'm not trying to say that those developments would never have come about were it not for Ellison—but I am saying that they're all vital and valuable changes for this industry and particularly its CIO customers to evaluate, and that Ellison—whether you love him or hate him—deserves credit for triggering and/or accelerating those innovations.

Before outlining why that's the case, here's a quick recap of the Top 10 Stories Of The Year that have preceded this one to give you some context of how this one at #4 stacks up:

THE TOP 10 TECH STORIES OF THE YEAR, #10 -- #5:

10) Global CIO: Top 10 Stories Of 2010: New Strategies, Platforms, & CEOs

9) Global CIO: Top 10 Stories Of The Year: The CIO Transformation

8) Global CIO: Top 10 Stories Of The Year: The Mobile Revolution

7) Global CIO:IBM Leads IT Industry With Surge In Analytics & Hardware

6) Global CIO: SAP's Turnaround Sparked By Customer-Centric Strategy

5) Global CIO: Rise Of Analytics Triggers Fall Of The Tactical CIO

Almost exactly one year ago today, in a quarterly earnings call with financial analysts shortly before Oracle received formal approval from the EU ninnies to close the Sun deal, Ellison offered the following vision as noted in my contemporaneous column called Global CIO: Oracle CEO Larry Ellison On The Future Of IT:

Exadata And Optimized Systems: "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":

"Our overall strategy right now going forward is not to sell those individual industry-standard components on their own but rather group them together into machines like Exadata, where we have processors, networking, storage, storage software, database software, our Oracle Enterprise Linux operating system—all as a complete database machine for both transaction processing and data warehousing. We think that makes it much easier for the customer—they don't have to buy all the individual parts and glue them together—but instead they buy the boxes: a high-margin product for us and a high-value purchase for them because they don't have to spend a lot of money on systems integration. "We think that's the way customers are gonna go forward as they build their data centers: not buying components but buying systems like Exadata. And one of the big reasons we bought Sun is that we want to apply that same strategy to middleware, to applications, to the operating system itself: we're not gonna sell operating systems just for an individual computer, but we're gonna sell the next generation of Solaris that's gonna be a Cloud Edition of Solaris, where it manages a group, a cloud, a cluster of these computers that we sell together as a unit.

"That's highly differentiated: high-margin for us, and no systems integration for the customer. How big is that business? We think that's what the computer business is gonna look like for the largest customers going forward, so we think that's billions and billions of dollars. That is our business in the future." (End of excerpt.)

Ellison spoke in detail about his desire to exploit Sun's high-end engineering prowess rather than try to slug it out at the lower end of the market—and please note how he describes that Sun's technology provides the opening for Oracle to become a full-fledged player in the cloud-computing market:

"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."

While you can find more than a dozen closely related analyses of the Oracle-Sun impact below, let me share one more overview from Ellison that underscores how dramatically the deal changed not only Oracle but the thinking among other big-time players about what they'd need to do to survive and thrive in a rapidly changing market.

This is from a January 26 column called Global CIO: Larry Ellison's Top 10 Reasons For Buying Sun, and while I've offered the short list below, you can get the full analysis at the link above:

10) Lots of customers seem very excited and optimistic about the deal's potential.

9) Sun will contribute an additional $1.5 billion in non-GAAP operating income in the first full year after the integration.

8) To rattle the tech industry and force a series of changes based on Ellison's own terms.

7) Ellison wants to save or revive or restore Sun's reputation and capabilities.

6) Ellison loves Sun's technology—ALL of it.

5) Ellison wants to push Oracle/Sun into growth markets and recast its entire image.

4) The Exadata experience.

3) Ellison's stealth endorsement of the—sshhhh!!—"cloud computing" business.

2) Ellison's passionate obsession with IBM. (Sneak peek: "We've already beaten IBM in software—on modern systems. And now, if everyone will let us, we'd like to see if we can beat IBM in hardware, or systems.")

1) It's an expression of Ellison's deepest nature: an intense competitor seeking his limits.

In framing out the Top 10 stories for this list, I almost made this acquisition the #1 story of the year. But whatever its ranking, the Oracle-Sun deal continues to have profound impacts on products IT vendors make and the solutions CIOs are deploying.

RECOMMENDED READING:

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

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

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

Global CIO: Oracle Needs More Than Ellison's Talk To Beat IBM's Systems

Global CIO: Oracle's Larry Ellison Declares War On IBM And SAP

Global CIO: Oracle's Larry Ellison Embraces Cloud Computing's 'Idiocy'

Global CIO: Larry Ellison's IBM-Slayer Is Oracle Exadata Machine

Global CIO: Larry Ellison's Hardware Boasts Are Nonsense, Says IBM

Global CIO: Oracle Reveals Strategy And Customers For White-Hot Exadata

Global CIO: Larry Ellison And The New Oracle Rock The Tech World

Global CIO: Oracle's Fowler Says Systems Performance About To Explode

Global CIO: Larry Ellison's Top 10 Priorities At Oracle Open World

Global CIO: Larry Ellison Swaps Cloud Rants For Cloud Love With Exalogic

Global CIO: Larry Ellison's Acquisition List: Who's #1?

Global CIO: Larry Ellison And IBM Lead Surge In Optimized Systems

Global CIO: Larry Ellison Is Rewriting The Gold Rule Of IT Strategy

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].

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
Copyright © 2020 UBM Electronics, A UBM company, All rights reserved. Privacy Policy | Terms of Service