Sun goes down: Larry Ellison disrupts the software landscape again

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There were two business models for the software industry, and now once again, there are two respective champions of those models: In one corner is the undisputed master of the "embrace and extend" principle, perceived worldwide as looking after itself and its own interests, while recently opening up its communications protocols to free licenses, supporting developers with free tools, and giving away the software needed for users to build its platform. In the other corner is a seasoned dealmaker, stalking after prey sometimes for years before trapping it into a deal it can't refuse, preaching the principle of openness while clearly and even transparently acquiring the components for a comprehensive platform where all roads lead through the company and into the company, not even hiding the fact that it rarely creates its own technology.

Pop quiz: Which one's Microsoft and which one's Oracle?

There is nothing the least bit secret or fuzzy about Oracle CEO Larry Ellison's business strategy. He is plain, simple, even brutal, but in recent years very effective. In a 2006 interview with the Financial Times Richard Waters, Ellison was asked point-blank whether he believed the open source business model would be disruptive to Oracle's plans.

Point-blank question, point-blank answer: "No. If an open source product gets good enough, we'll simply take it...Once Apache got better than our own Web server, we threw it away and took Apache. So the great thing about open source is nobody owns it -- a company like Oracle is free to take it for nothing, include it in our products and charge for support, and that's what we'll do. So it is not disruptive at all --you have to find places to add value. Once open source gets good enough, competing with it would be insane."

Waters' interview was ostensibly about whether Oracle would acquire Linux maker Red Hat -- something which Ellison most obviously considered for a time. Though Oracle ended up spitting out Red Hat after a taste, Ellison stated at the time -- once again, without hesitation -- that he was looking for something called a stack, a complete system that he could sell to customers ready-to-go, top-to-bottom. Red Hat may have been one way to acquire such a stack. But what would he do with Red Hat after he got it, Waters asked? The answer at the time was to fill the stack with the last component he'd require for a straight flush:

"If I were running Red Hat, the first thing I'd do is bring in MySQL," Ellison told Waters, straight up. Then he pre-empted Waters' next question: "This is a two-edged sword: You further alienate IBM, you further alienate Oracle by doing all of this, but then you get your stack."

Another reason why he'd go after MySQL? Simple: To keep IBM from doing the same thing.

Like Babe Ruth pointing at the spot on the outfield wall where the ball would be streaking over, Ellison called his play before he made it. And while analysts today struggle with reconstructing some kind of near-term strategy that deals with the cloud, Ellison's swoop kept IBM from making a key play that would have given it a more competitive position against Oracle -- and Ellison's reasoning was probably pretty much that simple, just as he explained it three years ago.

As our independent analyst Carmi Levy told us today, now Ellison can start grinding it in: "Hardware-software customization is a huge draw for enterprises looking for turnkey solutions that don't require extensive in-house tuning. Oracle puts itself in position to take on IBM -- which uses its own server lineup as the basis for tweaking database and business intelligence solutions -- and other vendors that have tightened their partnerships in this area in recent years," Levy told Betanews. "More tightly integrated offerings allow Oracle/Sun to target not only the enterprise market with higher performance offerings, but also the mid-sized enterprise space with more cost effective solutions that were previously the exclusive domain of larger shops."

The deal also keeps IBM from getting Java -- which would have been a powerful combination -- while giving Ellison something to fuse with his Fusion middleware, which is Java-dependent anyway.

"Java could potentially be the issue that either makes or breaks this deal," stated Levy. "It's easily the shining light that attracted Oracle to Sun in the first place. The question revolves around how willing and able Oracle will be to invest the resources necessary to bring integrated solutions to market. The acquisition theoretically points Oracle toward end-to-end domination of the Java space, but execution remains the major sticking point. It's too early to tell whether Oracle has what it takes to ensure Java's relevance going forward."

Yet Oracle President Charles Phillips, in this morning's joint announcement, made it clear that his company does have a plan in mind for Java...even though the "Java space" to Oracle may not be the "Java space" as Sun had envisioned it:

"Last week, we held our CIO advisory board [comprised of] our largest customers...and they applauded our move into database machines and storage vis-à-vis our recent Exadata announcement. But now they're asking us to step into a broader role by delivering a highly optimized stack from app to disk, based on standards. The general feedback was that they wanted more than standard components," stated Phillips. "They now want standardized deployments and configurations, and fully and consistently instrumented software and hardware to manage their systems, diagnose issues, and audit uses."

Too much of Oracle's money is being spent on diagnosing software/hardware compatibility issues, Phillips went on, which would not be a problem if the software came pre-configured to start with. In other words, if Java would just find its proper place in the stack, everyone would be happy because costs would be structured lower.

"With this acquisition, we can engineer a true system with consistency across all of these products...Oracle already has a successful embedded software business, with the number one embedded database in the world," said Phillips. "Java is embedded in over a billion devices. We will also now have the largest software development community in the industry, and...Java is also the platform for future applications."

Larry Ellison wanted a stack, and now he's got one. And IBM doesn't -- at least, not this one. Typically, fuzzier company strategies with two or three possible outcomes make for more intriguing analysis stories. This time around, the handwriting was on the wall for several years, and this morning, the handwriting is on the dotted line.

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