The market is in the early stages of this vertical trend and the verticals at this point are neither well defined nor consistent. This will make it increasingly hard to competitively bid solutions in a market that generally doesnt like single source contracts.
In addition, two powerful horizontal vendors remain in the market in the form of Microsoft, and the merging SAP/Sybase.
IT moves very slowly in terms of the policy changes that would be needed to make what Oracle intends work in most of the enterprise markets. Which means that Oracle may, as part of the transition, be handing much of their existing market opportunity over to these competitors, because theyre better positioned for where the market currently is.
In other words, existing process favors bidding hardware and software separately and changing that process in a majority of the firms could take a decade or more.
In addition, IBM, which was built on this model and competes hard with Oracle in an increasing number of areas, already looks like they may be able to provide (particularly when you loop in Global Services) much of what Oracle is planning to deliver. The forward-looking IT buyer may decide not to wait for Oracle to finish their transition and may opt to go with a vendor who actually has it working.
By shifting to the more mature vendor (Oracle being in transition) IT buyers might appear to be able to get ahead of the curve, which would be a huge boon to IBM. If I were IBM, Id craft a solution based on IBMs technology that looked a lot like what Oracle is building under a campaign that focused on IBMs ability to deliver today what Oracle will eventually build tomorrow.
In effect, the tag line could be We Like Oracles Future, You can Buy it at IBM Today.
In short, Oracle appears to be building another IBM. If thats the case, wouldnt it be better to buy from the mature company than the one that is still gestating? With a conservative IT audience, this perception could pay decent dividends to IBM.
You have to admire Oracle for taking risks and making changes ahead of what clearly is a trend back to a model that more closely resembles IBM and reflects on the amazing success of Apple. However, the path they are on -- which transitions the firms basic business model away from the one that made it successful -- is littered with the blood of the companies that failed to make this transition.
Given software margins are significantly richer than typical hardware margins and Oracle is surrounded by competitors (both software and hardware), that will swarm on the opportunities this change will reveal, this move will not come without some substantial pain for Oracle.
Still, Oracle is one of the best run companies in the world and if anyone can pull it off, Oracle is on the short list. I just wonder if anyone can pull this off. In terms of degree of difficulty this looks vastly harder than Apples turn around looked. And while Larry Ellison is good, I wonder if anyone is that good. Well see.