“Oracle-Sun Strategy Update” Update

Oracle completed its acquisition of Sun Microsystems this week and had an extensive strategy update yesterday.  I attended, at Oracle headquarters.  FIRST COMMENT: wildly impressive.  SECOND COMMENT: if they can keep all the promises they made.

Great news for one and all - Oracle “gets it” on many dimensions…..

• Simplicity - Data centers have become far too complex.  Oracle’s goal is to provide a pre-integrated, appliance-like stack for customers - applications, middleware, database, OS, virtual machine, servers and storage.  And all under a single systems management umbrella and a single support infrastructure.   One admin screen to watch.  One throat to choke in the event of trouble.
• Make the tough decisions - Oracle made very clear decisions about which products to save and which to simply support for legacy customers, a refreshing change for Sun folks.  And saying no to some initiatives provides the capital to invest appropriately in others.
• Get more connected with customers - Oracle will now take its top 4,000 customers direct (for orders and fulfillment), as a means of getting more direct customer feedback and accelerating product improvement.  Anybody reading this blog would guess that we would support this initiative.  Understanding customers’ lives is the best path to strategic insight.  Some channel partners will be less than thrilled with this part of the plan, but it’s great for Sun/Oracle customers and great for Oracle.

Employees, customers and shareholders have every right to be excited about the possibilities of this new partnership.  It has the potential of changing the world order in systems.  But that is not to say that success is inevitable.

• Can Oracle become a successful hardware company by acquiring one that has lately been ….. less than successful?  Fortunately, Sun’s long-time focus on raw performance is a good fit with the singular enterprise app that most values this focus.  Oracle will need to add missing business disciplines, and they certainly know how to do so with software.  Supply chains and repair services, however, will be new experiences.
• Can Oracle turn a company that was losing $100M/month into a money-maker next month?  Larry Ellison claims they can and that Sun will contribute around $1.5B (with a B) of operating profit in the first fiscal year.   That may require some draconian actions and would otherwise sound like fantasy, but Oracle has a successful history of doing this, as outlined by Jeff Epstein, the CFO.  In spite of Jeff’s comments, I would expect to see a decrease in operating margins as hardware enters the mix.
• Although these two companies have a lot in common, significant Sun anti-bodies will resist changes that must inevitably be made.  Can Oracle successfully hold it all together and retain the best people through these changes - and Sun does have some great people?
• The fully integrated stack sounds terrific…..until we walk into an existing data center and see non-Sun hardware and software everywhere.  Wintel, Lintel and other Unix variants are still useful to IT; they don’t wish to toss them while taking advantage of the new Oracle stack.  Will Oracle embrace third-party additions to the stack through both the management suite and certifications of other pre-built stacks, in order to protect IT investments in these technologies?  Will Oracle Virtual Machine (OVM) recognize and embrace a multi-hypervisor environment through single-screen management of the entire data center - nirvana?  Or will this in the end be just one more island of functionality for IT to manage?
• Finally, in order to fill out the total Oracle offering and be a legitimate player among the other Big 3 systems providers (HP, IBM and recently Cisco), will Oracle continue on its acquisition run and scoop up a great services player?  Candidates abound.  And will they bring the network infrastructure in-house as well?  Great dance partners will be tougher to find.

Oracle convinced me they have the capability to execute on their plan, in spite of the large questions above.  If they do, the world order in IT has changed significantly.