In part one, we went through the setup to Oracle’s Sun acquisition, and the delays caused by the European Commission. In this post, we’ll be taking a deeper look at the impact of the Sun acquisition on today’s competitive landscape
There was a time pre-2009, before the acquisition, where IBM, Sun and HP would vie to be Oracle’s best alliance “partner” and their sales people would often promote Oracle software ahead of their own products, such as DB2 (in the case of IBM).
As the market leader in enterprise data-centre database software, many felt that Oracle entered the Sun deal as a knee-jerk reaction to IBM’s interest in Java. Even more assumed that Oracle would ditch the hardware business.
However, Oracle saw the full competitive advantage of controlling the stack and has continued to develop and market the Sun product portfolio.
Today, the competitive landscape looks much different. IBM and HP compete with Oracle and no longer vie to be its best alliance “partner”. It’s also thanks to market trends and the approval of the Sun deal, that Oracle’s leadership position in database software is about to make it the prevailing force across the whole data-centre and then the whole of the enterprise IT market.
The true impact
Sun’s sales have made a u-turn since the acquisition, particularly with the current Oracle Exadata and Exalogic marketing drive. Oracle finds itself with huge power and influence in data-centre price wars.
Oracle’s enormous margins and lock-in on software maintenance combines effectively with the compelling marketing pitch for Exadata. Its “integrated Red Stack” is designed to be one for price performance. This all comes together in such a way that Oracle can tweak competitive price sensitivity to disadvantage its rivals when it feels like it.
In today’s market, the real issue has become the commoditisation of server technologies. This has seen price and performance soar while unit prices and vendor margins plunge to the point that software licensing and support costs typically exceed the hardware costs in the data centre.
Another reason is the way database software is often priced by processor. This means that nuances in core factoring pricing policies will have a dramatic impact on the total cost of ownership, in, for instance, a server refresh business case.
It’s the changes in commoditisation of server technologies, which have enabled Oracle, with its huge installed base, to have massive influence over the relative competitiveness of server vendors.
We saw this in December 2010, when a tweak to the Oracle core factor pricing table suddenly found Platinum 9300 processor servers - mainly HP UX, significantly disadvantaged compared to Sparc T3 based machines.
At Rocela we are increasingly finding that in certain situations it can be easier for businesses to reduce total costs with server migrations and refreshes than by renegotiating. Sometimes, the best way forward is often in restructuring and optimising Oracle support costs. This is especially true if trapped in restrictive Oracle ULAs.
Did Neelie crack it?
Looking back, Kroes was right. The Sun acquisition did and will continue to reduce competition in the market, but not so much in the Open Source arena as in the actual enterprise server market itself. It’s here that competitive control has shifted to Oracle in a big way.
Perhaps it goes without saying, but the Sun acquisition may well be the defining point where Oracle took its market dominance in database and cemented it into enterprise data centre IT and then the cloud.
Let’s catch up again this time next year.
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