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Oracle made an astounding move that will surprise most of its direct competitors. Since Monday, many articles and blogs have been analyzing this $7.4 billion deal, and while it is going to take a while to see the complete story unfold (including antitrust discussions), Pierre Audoin Consultants (PAC) would like to summarize a few key points that strike us thus far.
New York – April 23, 2009
1. There is no question that it’s tit-for-tat (as usual) between Oracle and IBM. Both vendors have been building a very impressive software portfolio, and more than ever, they are competing fiercely with each other. If IBM can be considered the loser at first, only time will tell if Oracle can digest such a bold acquisition. Of course, its track record with Peoplesoft, BEA, and Siebel speaks for itself, but Sun could be another story, especially during this downturn and with its hardware legacy…not to mention that IBM may have many other tricks up its sleeve thanks to its own pile of cash.
2. On the infrastructure software side, Oracle will strengthen its position thanks to many Sun’s products, but above all, four fantastic assets are addressing several competitive issues in the short term.
3. On the ecosystem side, it is important to stress that Oracle and Sun have been working together for a long time; despite this, however, the ecosystem side is a mixed bag. After being caught off guard by the acquisition, the preliminary feedback of channel partners seems very positive, because many can see additional opportunities to sell integrated Oracle+Sun solutions, especially in the data-center space. They will have to make choices as large players such as IBM, HP, Oracle+Sun, and newcomer Cisco Systems are positioning themselves. According to PAC, despite Oracle’s stricter enterprise license system, customers will benefit from this increased competition on many fronts (price, features, ease of use, etc.). Of course, global alliances (such as the ones with HP or Dell) will be jeopardized and may even force a few of Oracle’s top partners to think out of the box, potentially limiting collaboration in the future.
4. Oracle has been very good at acquiring companies and getting value out of them. But, like many other analysts, PAC is puzzled by the hardware side of this deal. How will Oracle manage all these server and storage boxes, especially during this downturn? No disrespect to Oracle, but if its legendary sales execution could benefit Sun’s offerings, it remains to be seen how this low-margin business that was declining sharply can really boost Oracle’s bottom line in the mid term. A lot of hopes have been placed on smart appliances (illustrated by the HP Oracle Database machine), but PAC remains cautious about such opportunities.
5. PAC’s wild guess: why not consider virtualization and its counterpart, cloud computing, as a rank outsider in this acquisition? In this space, Sun has some interesting solutions (mixing software and hardware) that could fit right into Oracle’s stack. Oracle is claiming to be able “to go to the next phase of computing” with improved integrated or bundled solutions (from CPU to enterprise applications). Of course, as far as virtualization is concerned, VMware remains the uncontested leader, while Microsoft is entering this market very aggressively (as usual), but Oracle+Sun could surprise us in the future as virtualization and cloud computing gain more and more traction. Not only does it help companies to make the most out of their IT investments in the current economy, but it will keep growing because cloud computing and the data centers of the future in all flavors (SaaS, PaaS, IaaS, etc.) will be largely based upon these technologies. Therefore, could this be the “Sleeping Beauty” that Larry Ellison would like to awaken in order to beat everybody on the line?
6. Last but not least, even though this seems like common sense, more than ever in this challenging economy, cash is king. PAC strongly believes that other major acquisitions could unfold in the next months as industry leaders such as IBM, Microsoft, Cisco, HP, and SAP try to use their cash stash to outpace competition. In fact, all of them can invest to be ahead of the curve at the end of this downturn. So…things will get better, stay tuned!
Please note that this analysis will be part of the upcoming Sun worldwide company profile published within “SITSI® Companies”, one of the five modules of the SITSI® program of off-the-shelf market research, produced and published by PAC. For more information on PAC and SITSI®, please visit www.pac-online.com
About Pierre Audoin Consultants (PAC):
PAC is a global market research and strategic consulting firm for the Software and IT Services Industry (SITSI). PAC helps IT vendors, CIOs, consultancies and investment firms by delivering analysis and advice to address a range of growth, technology, financial and operational issues.
Our 30+-year heritage in Europe – combined with our US presence and worldwide resources – forms the foundation of our ability to deliver in-depth knowledge of local IT markets, anywhere. We employ structured methodologies – undertaking thousands of annual face-to-face interviews on both the buy and sell side of the market, as well as a bottom-up, top-down approach – to leverage our research effectively.
PAC publishes a wide range of off-the-shelf and customized market reports – including our best-selling SITSI® program – in addition to our suite of strategic consulting and market planning services. Over 160 professionals in 16 offices – across all continents – are delivering the insight that can make a difference to your business.
For more information on the article, please contact:
Author:
Olivier Nguyen Van Tan
Managing Director
Tel: +1 (646) 277-7255
o.nguyen@pac-online.com
Press Contact:
Shelly Wills
Tel: +44 207 553 3965
s.wills@pac-online.com