Friday, June 14, 2024

IBM and Oracle: Love at First Fight

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There’s an interesting subtext to this year’s spate of acquisitions by Oracle, a subtext that will shortly move front-and-center in the software industry. The subtext is the IBM connection, and in a fascinating case of opportunity creating strange bedfellows, Big Blue’s latest romance is with none other than archrival Oracle.

This isn’t yet a taking-a-trip-to-the-altar kind of romance, it’s more in the dating and “seeing others” phase. But there’s no doubt that things are starting to heat up between IBM and Oracle, and in a number of key ways, this relationship already has been successfully consummated. And it wasn’t just a one-night stand.

In fact, when you look at Oracle’s recent acquisitions, it looks more like the companies have already eloped. Because behind all three major Oracle acquisitions this year – PeopleSoft, ProfitLogic, and Retek – is a close IBM connection. Add the recent controlling stake in Indian banking firm i-Flex, and the pattern becomes unmistakable: IBM has its hand in every deal.

In the case of PeopleSoft, that company’s embrace of IBM’s technology product lines – WebSphere and DB2 – and PeopleSoft’s own acquisition of J.D. Edwards and its plethora of IBM iSeries customers single-handedly made Oracle the number one IBM software partner. That status, of course, only enhanced the position of the Oracle database in the eyes of IBM Global Services: despite IBM’s preference for DB2 and its on-going battle with Oracle for database supremacy, Global Services has always done what was good for Global Services, and that has made the Oracle database an important product, IBM Software’s revenues be damned.

Repercussions for SAP

Over at ProfitLogic, the IBM relationship has also been strong. ProfitLogic made a major announcement last year that it was joining IBM’s Industry ISV program, and in the process itself made a major move to IBM technology. Retek, of course, was once part owned by IBM, and both Retek and ProfitLogic have benefited from IBM’s historical strength in retail. Same for i-Flex: strong IBM partnership in a key market, with every intention of growing the relationship despite – or, I would argue, because of – the Oracle deal.

The growing IBM factor isn’t just interesting for what it means to Oracle, it also has tremendous repercussions for SAP. This “friend or foe” relationship with SAP has been going on for some time. In the run-up to SAP’s major partnership announcements this past spring, there was a lot of question about how close SAP and IBM could get. The result was SAP’s swooning embrace of IBM – and other new partners like HP, Cisco, and Microsoft – all designed in part to help isolate Oracle in the market. Ironically, Oracle’s unplanned bonus for its acquisitions may have been to trump the IBM part of SAP’s isolation strategy. Touché, Larry.

As I mentioned in the “friend or foe” column, IBM’s services business is so much larger than its software business that one has to wonder how long IBM would want to keep plugging away at a business unit (software) that is undermining the real cash cow, services. If you look at IBM’s product and services portfolio, it’s hard not to wonder how sacrosanct any of the software products can be.

Take WebSphere, for example. As a percent of overall software revenues, WebSphere is small compared to DB2. As a percent of the trouble IBM has with partners like Oracle and SAP, it’s huge: Both Oracle and SAP have bet their futures on service architectures that, at least nominally, compete with WebSphere. Whereas at IBM, the future is clearly about services. One wonders how long IBM will continue to stand in the way of its biggest ISV partners’ hugely important future plans in order to make relatively small beans on WebSphere. If money could do all the talking, and it often does, the answer would be “not long at all.”

IBM and Oracle still have their database rivalry to resolve, and to a certain extent that places a limit on how far they can both go. For now. But watch this space, and keep an eye on the IBM factor next time you try to second-guess Larry Ellison’s next move. So far IBM is four for four in the Oracle camp. And counting.

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