What does Oracle plan for Sun’s SPARC and x86 server lines? It seems easier to understand why Oracle, as a business software company, values Sun’s software assets. Java and Solaris are clearly important to the success of Oracle’s middleware and database products. However, during the call to announce Oracle's acquisition of Sun, Larry Ellison specifically highlighted integration of software and hardware as a competitive advantage offered by the combined Oracle/Sun. An article in the upcoming April issue of IDEAS Tech Trends Monthly, “Is Oracle Really Entering the Server Hardware Business?” explores our thoughts on what the future holds for Sun’s $8 billion hardware business.
By offering an end-to-end, vertically integrated platform including hardware and software, Oracle seeks to achieve a stronger bond with its customers, and higher profits. However, most of the major server vendors in the industry support Oracle’s database software to some extent, and if Oracle now promotes its own hardware platform based on Sun’s technology, other hardware vendors may become increasingly hesitant to encourage their customers to deploy Oracle’s software offerings, for fear of drawing their attention to Oracle’s competing hardware.
Oracle’s announcement FAQ indicated that “Oracle also intends to focus the server and storage businesses on our common enterprise customers”. Today, that set of customers clearly represents the users of Sun’s SPARC systems. By contrast, Sun’s x86 systems business overlaps much more with the business of Oracle’s key partners, including HP and Dell, and it represents less than 13% of Sun’s hardware business. Therefore, Oracle may be much more hesitant to promote these systems, and it will likely continue to encourage other x86 vendors to adopt the x86 versions of Solaris and OpenSolaris.
For twenty years, the IT industry has gravitated towards disaggregation, whereby enterprise IT solutions were typically assembled from collections of industry-standard components. Now, the industry is entering a phase in which the server side of IT infrastructure is increasingly delivered in proprietary, vertically integrated forms (of which cloud computing is perhaps the ultimate manifestation). Customers who deploy servers on their own premises expect solutions consisting of differentiated software that is integrated directly with the hardware platform.
With the acquisition of Sun, Oracle expects to deliver such a solution at the high end, consisting of the Oracle database, SPARC hardware, and the Solaris operating system, which it can position as an end-to-end, integrated alternative to IBM’s mainframes with z/OS and DB2. For now, the margins at the upper levels of the server market will be most appealing to Oracle as it seeks new ways to expand its business. Sun’s assets targeting the lower end of the market, including its commodity x86 hardware and even the MySQL database, are not yet likely to represent a high priority for Oracle. Its ownership of these assets will serve defensive purposes in the short term, keeping them away from the hands of competitors.
Regardless of its ultimate plans for Sun’s server products, Oracle’s entry in the server market will change the balance of power in the IT industry, and it should not be taken lightly.
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