Oracle’s purchase of Sun is set in the known logic of the large global IT providers’ growth. If an opportunity of this nature arises and the cash is available, pulling off an operation of this type allows a company to broaden its value chain, eliminate competition, gain market share, increase economies of scale, get rid of overlapping products, and reduce and concentrate operations, with the corresponding cost reductions.
It is a process that large technology brands undertake with great regularity, and this is especially true for the four primary global IT providers: HP, IBM, Microsoft, and Oracle. The latter of these does it the most. Since 2005, Oracle has invested over 35 billion dollars in the acquisition of 50+ technology companies. Their tenacity is also unmatched, as witnessed in their conquering the stubbornly resistant People Soft and Bea Systems.
What makes the result of Sun’s purchase so interesting is the important role that Sun has had as a motor for IT innovation. In 1984, the company launched nothing less than its revolutionary “the network is the computer” concept, aimed at undermining the reigning model based on desktop computers upon which Microsoft had historically based its power. A quarter of a century later, this revolutionary concept has become reality in the form of “Cloud Computing”. In these three decades of existence, the Californian company has created products as important as its operating system, Solaris, and the Java language and platform. It has made a decided commitment to open code by launching its own version of the offimatics suite, OpenOffice, and it has bought and promoted the MySQL database.
Some of these products have been ahead of their time and have not been able to reap their full benefits due to Sun’s financial weakness, which has been an anchor since the end of the Internet bubble.
In the case of Java, the story is well known. Faced with this technology’s enormous success, Microsoft tried to undo it, which led to Sun’s eternal legal battle with the software giant. This sapped much of Sun Microsystems’ energy. The progressive conversion of Java to free software helped its popularity, but Sun was never able to amortize its investment.
Given all this, it now remains to be seen whether Oracle, with its major financial muscle, will be willing and able to encourage the innovation capacity that Sun had.
The challenges they will face are many. The company run by Larry Ellison will be very busy restructuring and avoiding overlaps while integrating different corporate cultures without losing clients. This will undoubtedly be a complex and painful process, about which some analysts are predicting between 5000 and 10,000 possible layoffs. In this dance, Oracle will need to be very skilful in order to retain enough Sun talent to ensure the continuity of their extraordinary innovative capacity. The possibility of failure in this aspect cannot be discarded.
The IT market is full of brilliant and promising products that have gone the way of dead ends after being acquired by larger companies. IBM, which was one of the candidates to buy Sun, boasts several such cases. Oracle, for better or worse, is now a giant. The answer, as in the case of “Cloud Computing”, is in the clouds.
Oracle’s acquisition of Sun gave Oracle, what the Shaolin Masters would call, the Great Solar Stance, the unbeatable Kung Fu added to its arsenal of the “unbreakable linux with db”. Oracle acquired the hardware platform of the SPARC, a server operating system , Solaris, that would soon replace the server operating system of choice. The programming language of Java, the application tier of J2EE, the open source database of MySQL, the office application suite of OpenOffice! Everything you need to run a corporate enterprise system and ofcourse, if enterprises so wish it, the cloud infrastructure to run everything off the internet!!
With the trustworthy Oracle Support and the highly regarded Oracle Consulting, companies would flock to Oracle for the complete enterprise package with a single holistic maintenance contract for your entire IS system.
In our class discussion today with Prof. Gabriel Giordano, we were analysing what it would take to break the inertia of Microsoft windows on the enterprise user. What could break up the network effect? Well, this could be a huge step towards just that. With Larry Ellison and his vivacious anti-MS spirit, he now has everything he needs to purge an entire enterprise of Microsoft products.
Now, where does Linux come in? Linux can and will mostly now dominate the small scale company infrastructure and the medium to large scale company’s desktop needs along with the personal computer market for the really picky ones (like me).
This in many aspects is an industry changing acquisition, with Microsoft now going to be forced to compete more fiercely with Apple on personal computer sales and Oracle with its ERP and CRM slowly weeding out Microsoft from the enterprises if Oracle plays the cards right.
The aggression with which Larry has pursued Microsoft is noteworthy. I trust him to take Sun from an almost failure to an absolute power helping Oracle to rival IBM in all avenues. I am expecting Oracle to expand it’s consulting wing, especially in India where they already have a big consulting setup. IBM is going to have to depend hugely on its partnerships with SAP to compete. Having worked under a Larry organization for over three years, Sun has got just the man to kick it back on the innovation track.