Biggest deal of our times
Probably ranking as one of the most important IT Industry deals in our time, software giant Oracle has received the green light from the US Department of Justice to go ahead with the $7.4 billion-acquisition of hardware company Sun Microsystems. The deal is however yet to receive go ahead from the European Commission, says Craig Moir, Managing Director of MyDBA.
Why is this deal so important?
There are three aspects of this deal that make it significantly more important than any other purchase Oracle has made in the past few years. The primary importance of this deal is that Oracle now owns Java. Probably the second most important result of this deal is that Oracle gets its hands on open source database MySQL. On top of this Oracle gets a hardware company as well as owning the Solaris and Open Solaris operating systems.
What else does Oracle get with this deal?
Oracle will now be the only company that can engineer an integrated systems from application to disk. They will also become a player in cloud computing, the next big computing opportunity. Oracle will also own OpenOffice.org.
Why is owning Java so important?
According to Oracle, the acquisition of Java "is the most important software Oracle has ever acquired." This is certainly no understatement since Java is the programming language standard of the computer industry and is one of the best known brands worldwide. Java is also one of the most widely deployed technologies, running on over 800 million PCs and 2.1 billion cellphones and touching nearly every business system on earth.
Besides such massive deployment, Java is the building block of Oracle's fastest growing business, Oracle Fusion Middleware. IBM and SAP have also built their key business software offerings around Java so the acquisition of Java by Oracle is certainly not going to make them happy and could have far reaching consequences for them later on. Owning Java also puts Oracle in more direct conflict with Microsoft's middleware efforts with the .Net framework.
Oracle's biggest prize - MySQL
MySQL is growing very rapidly. MySQL is getting tens of thousands of downloads every day and currently enjoys an install base of over 12 million. Oracle tends to be for older, legacy applications while MySQL works well for Web-based applications which is why you won't find Oracle in most of the new Web 2.0 companies.
MySQL was Oracle's number one database threat. Through the purchase of Sun, Oracle gets to eliminate its biggest threat, acquires a massive database install base, enters a market segment that they were typically not strong in and significantly increases their competitiveness against Microsoft in the SME database arena. Not bad at all most would say.
Application to disk engineering
"The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems," said Oracle CEO Larry Ellison. "Oracle will be the only company that can engineer an integrated system - applications to disk - where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up."
"More Oracle databases run on the Solaris Sparc than any other system," said Ellison, noting Linux was second. "We'll engineer the Oracle database and Solaris operating system together. With Sun we can make all components of the IT stack integrated and work well."
Oracle and Sun have been industry pioneers and close partners for more than 20 years," said Sun Chairman Scott McNealy. "This combination is a natural evolution of our relationship and will be an industry-defining event."
Oracle and Sun have been close partners for two decades. Oracle's biggest install base is on Sparc systems, so the marriage of the two seems inevitable. The biggest advantage for Oracle will be the ability to created integrated systems that will work better, faster and more reliably than ever.
Oracle also gains access to Sun's large non-database install base, a nice opportunity to upsell applications into.
This could be bad news for HP as developing integrated systems will leave them out in the cold. Oracle being a hardware vendor will also directly compete with HP who may no longer want to push Oracle's software and could be driven towards a tighter relationship with Microsoft. Oracle owning Sun may not bode well for Sybase either who have a lot of customers running Solaris.
The ability to build integrated systems which will range from business applications to middleware, databases, operating systems, servers and storage platforms is an appealing vision but also presents significant technology and business challenges, including whether customers desire to source from a single vendor.
Cloud Computing
This is the next biggest computing opportunity of which Oracle was the odd one out. As a platform vendor they had no offerings in this arena while Sun and IBM are both working with startups to provide an open cloud computing platform. Sun is also working on cloud based storage. Although Larry Ellison has remarked "The computer industry is the only industry that is more fashion-driven than women's fashion" and believes that cloud computing is just the latest fashion. Some experts may think this worrying seeing as Google, Microsoft and Amazon already have cloud computing deployments and one would wonder why Oracle was down playing it so much.
The Sun deal has enabled Oracle to move into cloud computing and as a platform company, Oracle can look at the opportunity to move into cloud-based services as well.
OpenOffice
The acquisition of OpenOffice gives Oracle a valuable weapon in its never-ending war with Microsoft. The latest version, OpenOffice 3.0, has been downloaded more than 50 million times in its first six months of being released. Owning OpenOffice give Oracle massive inroads into Microsoft's desktop hegemony and many experts believe that Larry Ellison will want to turbocharge further development of OpenOffice.org into becoming a much stronger competitor of Microsoft's Office, not something that is likely to make Bill Gates very happy.
Conclusion
Buying a large storage, hardware and operating systems company, and simultaneously acquiring industry software giants such as Java, MySQL and OpenOffice must rank as the greatest deal of Larry Ellison's career to date.
There is a lot of speculation in the market place as to what Oracle plans to do with Sun, but one can't deny the massive opportunity that lies ahead for Oracle. You can be sure that Oracle will not be shy to turn Java, MySQL and OpenOffice into massive revenue streams while giving them greater leverage over their arch rival, Microsoft.
Let's wait and see what happens.
References
http://gigaom.com/2009/04/20/oracle-to-buy-sun-for-74-billion/
http://www.businessweek.com/technology/content/apr2009/tc20090422_467791.htm
http://www.gartner.com/DisplayDocument?id=945412
http://www.techspot.com/news/34399-microsoft-questions-oraclesun-deal.html
http://www.computerworld.com/s/article/9131871/One_winner_in_the_Oracle_Sun_deal_Microsoft_
http://www.linuxworld.com/news/2009/042809-oracle-sun-deal-renews-calls-for.html
http://download.oracle.com/docs/cd/B28359_01/install.111/b32002/pre_install.htm
http://blogs.forrester.com/product_management/2009/04/how-the-oraclesun-deal-makes-sense.html
http://pcworld.about.com/od/officehardware/Oracle-Sun-Deal-Who-Stands-to.htm
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