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There are several paths that Oracle could take to fully utilize the assets they are acquiringfrom Sun to become more dominant.
The most obvious is to simply become a platform vendor and sell off the hardwareto HP, Dell, or Lenovo in exchange for cash and a stronger strategic relationship with the company they chose. The most powerful result would come with HP. And - combined with a reinvigorated Unbreakable Linux, Oracle and HP could effectively take control of much of the corporate market.
However, what if Oracle wanted to make a play to become as strong as IBM was when it was at its peak? Could they parley this acquisition into something vastly greater? Let’s explore that today.
When IBM was at its peak of powerin the 60s they leased hardware, and software was provided for free. This locked in their customer base and there wasn’t much of a market for any other vendor. IBM broke this first with a consent decree that forced them to unbundle the software, and then by selling the hardware and eliminating the hardware lock. Microsoft rose to dominate a larger market but without the near absolute control that IBM had.
To do this again hardware is the key, not software, and that’s where Sun comes in. Unlike the old IBM, and in line with the new IBM, Oracle recognizes that software and services are where the value is and that hardware is the new commodity.
Oracle could take the Sun hardware and bundle it with their offerings, effectively giving the hardware away for free as part of an extended software and services contract. Over time, it could gain control over the IT environment consistent with what IBM enjoyed in its prime and effectively lock out everyone else.
Unbreakable Linux is the Key
The primary issues with UNIX and Linux were and are too many versions/distributions, and with Linux, a lack of scale in the distribution owners in line with a large enterprise player.
As a result Microsoft was able to easily move against UNIX, and Linux has not been able to effectively move against Microsoft. But Oracle is also a distribution owner. They are fully enterprise class in scope and reputation but they simply didn’t have the stature as a platform vendor.
Solaris and Java help with that a great deal and while Solaris will likely be sacrificed to validate Unbreakable Linux, Java remains a bona fide platform in its own right and the combination should make Oracle a true player in this space.
Eliminating Red Hat then becomes relatively easy for them as they consolidate the market around their offerings and Novell is reduced to a minor player that Microsoft and IBM may not be able to defend properly, primarily because they can’t cooperate in the effort and are likely to get in each other’s way.
In this scenario it is likely that IBM might buy Novell to block Oracle but by the time IBM reaches this conclusion Oracle will probably be too dominant to stop. It seems unlikely that Microsoft would be able to go down the acquisition path here both because of regulatory issues and the Linux GPL.
Could Google be the Keystone?
Where this strategy falls short is that to own the segment, Oracle must have a desktop component. There is only one other credible desktop vendor at the moment and that is Google.
There is no significant overlap between Oracle and Google and both have a deep-seated desire to take Microsoft out of the market, suggesting a foundation for a strong alliance.
On the other hand neither company is known to partner well. Both are focused on control and neither is likely to want a subordinate position. So while there is a good foundation, making this partnership actually work would be problematic. The word “disaster” comes to mind.
However, this may be the only way either company can accomplish their shared goal of displacing Microsoft and the partnership could hold long enough to put together a credible threat. In effect, Google would own the user, Oracle would own IT, and both would embrace this heavily subsidized hardware model that would be nearly impossible for Microsoft to counter.
The End Game
If this scenario came to pass there would be two viable enterprise Linux-based products that would mirror Microsoft’s. Unbreakable Linux Server, holding the Server back end, and Android on phones and PCs tied to users.
It would actually be simpler than Microsoft’s current offering. And the related license and advertising-subsidized financing plans and the appearance of free hardware provide a powerful TCO proposition and a customer lock in that we haven’t seen since IBM.
If the two firms merged successfully, which is at least possible given Larry Ellison is getting close to retirement; we’d have our new IBM.
Oracle/Google Unlikely But Possible
While the degree of difficulty with this effort would be very high, it isn’t any higher than that which created IBM or Microsoft in the first place. And it appears the only remotely reasonable path for Larry Ellison to play a role in taking out Microsoft before he retires.
Everything else simply takes too long.
This last is what makes this path worth talking about even though I actually think Oracle more likely will divest the hardware portion and follow the path I initially spoke of. Something to think about as we continue to experience what will likely be a pivotal year for the technology market.