Oracle Plus Sun: What does it mean?

I guess this is one way to start a Monday morning. After IBM decided to pass on Sun, Oracle decided that it would be a great idea. While I have as many questions as answers, here are my top ten thoughts about what this combination will mean to the market:

1. Oracle’s acquisition of Sun definitely shakes up the technology market. Now, Oracle will become a hardware vendor, an operating system supplier, and will own Java.

2. Oracle gets a bigger share of the database market with MySQL. Had IBM purchased Sun, it would have been able to claim market leadership.

3. This move changes the competitive dynamics of the market. There are basically three technology giants: IBM, HP, and Oracle. This acquisition will put a lot of pressure on HP since it partners so closely with Oracle on the database and hardware fronts. It should also lead to more acquisitions by both IBM and HP.

4. The solutions market reigns! Oracle stated in its conference call this morning that the company will now be able to deliver top to bottom integrated solutions to its customers including hardware, packaged applications, operating systems, middleware, storage, database, etc. I feel a mainframe coming on…

5. Oracle could emerge as a cloud computing leader. Sun had accumulated some very good cloud computing/virtualization technologies over the last few years. Sun’s big cloud announcement got lost in the frenzy over the acquisition talks but there were some good ideas there.

6. Java gets  a new owner. It will be interesting to see how Oracle is able to monetize Java. Will Oracle turn Java over to a standards organization? Will it treat it as a business driver? That answer will tell the industry a lot about the future of both Oracle and Java.

7. What happens to all of Sun’s open source software? Back a few years ago, Sun decided that it would open source its entire software stack. What will Oracle do with that business model? What will happen to its biggest open source platform, MySQL? MySQL has a huge following in the open source world. I suspect that Oracle will not make dramatic changes, at least in the short run. Oracle does have open source offerings although they are not the central focus of the company by a long shot. I assume that Oracle will deemphasize MySQL.

8. Solaris is back. Lately, there has been more action around Solaris. IBM annouced support earlier in the year and HP recently announced support services. Now that Solaris has a strong owner it could shake up the dynamics of the operating system world. It could have an impact on the other gorilla not in the room — Microsoft.

9. What are the implications for Microsoft? Oracle and Microsoft have been bitter rivals for decades. This acquisition will only intensify the situation. Will Microsoft look at some big acquisitions in the enterprise market? Will new partnerships emerge? Competition does create strange bedfellows. What will this mean for Cisco, VMWare, and EMC? That is indeed something interesting to ponder.

10. Oracle could look for a services acquisition next. One of the key differences between Oracle and its two key rivals IBM and HP is in the services space. If Oracle is going to be focused on solutions, we might expect to see Oracle look to acquire a services company. Could Oracle be eyeing something like CSC?

I think I probably posed more questions than answers. But, indeed, these are early days. There is no doubt that this will shake up the technology market and will lead to increasing consolidation. In the long run, I think this will be good for customers. Customers do want to stop buying piece parts. Customers do want to buy a more integrated set of offerings. However, I don’t think that any customer wants to go back to the days where a solution approach meant lock-in. It will be important for customers to make sure that what these big players provide is the type of flexibility they have gotten used to in the last decade without so much pain.

Oracle plus BEA…Sun Plus MySQL

Just when it began to look like BEA might take itself private, the company gave into the mounting pressure and became the latest Oracle acquisition. A few months ago I wrote about my thoughts on the potential acquisition. While on the surface it might appear that Oracle is going after the customer base, I think that the move is more significant in terms of the software assets including middleware and business process management software. An interesting and little discussed asset is the high end Tuxedo transaction monitoring software developed by Bell Labs in the 1980s and commercialized by AT&T Unix Systems Labs, then owned by Novell and finally sold as part of the formation of BEA.

So, I think that Oracle did the right thing in acquiring BEA to fill in its middleware stack. However, the real question remains: how will Oracle be able to rationalize all of the middleware components to create a platform. For example, I predict that it will take years for BEA to have a Fusion middleware stack that incorporates BEA’s value. The same issue will persist for business process software. The assets from various acquisitions will have to be sorted out. I thought that James Governor made some interesting observations in his recent blog on Oracle. Josh Greenbaum, as usual has some interesting thoughts about Oracle’s approach to the market…At least where Oracle is concerned, we won’t be bored.

Now, about Sun Microsystems. I have to say that the acquisition of MySQL left me scratching my head. Sun seems to have taken on the mantle of the place where software goes to die. Can you spell Forte (a development environment with $80 million in revenue that Sun acquired for $450 million — what a deal!)? How about other notable acquisitions like NetDynamics, and Netscape Application Server? There are others, of course, but I can’t remember their names anymore. Even with the Java franchise Sun hasn’t figured out how to make money on software.

So, what about MySQL which Sun payed $1 billion dollars for? Jonathan Swartz in his blog makes a case that Sun can win in the market though a focus on open source software. While commercial support of open source is important for customers I suspect that it won’t really help Sun’s revenue climb. Clearly, one of the reasons that MySQL has been successful is that it works and is open source — I can’t figure out how Sun will leverage this asset to build a successful commercial business.

Software development and the Nascar Business Model

I had an interesting meeting with a company called TopCoder the other day. The premise is actually quite simple: conduct contests with monetary prizes given to the software developer who writes the best programs. What started out as an academic exercise has evolved into an intriguing software company.

The idea behind the company is to leverage the social networking concept to build a software company based on the notion of component based development. Thus far the company has built a catalog of 900 components. So, what’s a component? It is an individually packaged piece of code written in Java, .net, Flash, Flex, or Ajax.

What makes this process intriguing is that TopCoder uses its network of 132,000 members in over 200 countries to vet quality of code. In essence, there is a peer rating process to determine which code is the best. The company has developed algorithms that are the secret sauce that determines which code is architected and written in the most efficient and innovative way.

How does the company make money? In essence, the company offers consulting services to its clients including companies like AOL, Fidelity.com, ESPN, Versign, and Google — to name a few. The project architect works with the client to spec out the project and breaks the tasks down into component parts. It is then put out to the network of developers. Each developer that is part of this social network has a history with the company based on how many times the developer has “won” an engagement and how complex the specific task was to accomplish. The methodology also takes into account the number of times a developer has been one of the top three finalists in a project. The winner gets paid for the code; in addition, the runners up also get some cash. The approach to paying developers is based on a complex algorithm that rewards not just one winner but the individuals that consistently do a good job. According to Mike Morris, senior vice president at TopCoder, the company borrowed ideas from the Nascar business model. He pointed out to me that often the same Nascar teams were winning every week. So, to keep things more exciting and to keep the runners up from leaving, they started rewarding the teams that placed fourth and fifth in races — after all, it isn’t much fun to watch only a couple of cars race. Therefore, Nascar created a point system so that everyone wins! TopCoder has done a similar thing. It creates a pool of $450,000 that it gives away every quarter in what it calls the “Digital Run”. When developers participate and do well in various coding tasks, they accumulate points and win money. This seems to add the incentives needed to keep the network of developers engaged.

The company’s business model is intriguing. They license their catalog of components, sell consulting services, engage in development projects that leverage this social network — without having to worry about salaries for the developers. They are also working on some intriguing new business models for next year that will leverage their IP even further.

The company’s founder and chairman, Jack Hughes had started a company called Tallan, a professional services company that was sold to CMGI for $920 million in 2000. Many of the members of the management team were part of the original Talon team. Armed with some cash, the company has the luxury of being self-funding.

I was intrigued by the business model. I think that this approach has real potential for the future of team collaboration and competition. This model also fits beautifully into the world of a service oriented architecture. I asked Mike about what the components in the catalog were like. He said that most of them were small grain components. I predict that before long the company will create a marketplace for larger grained business services.

I couldn’t resist asking about who these mysterious developers are that participate in the social network. The winner is Eastern Europe (Russia, Poland, and the Ukraine), China, followed by the United States and Canada.

I plan to continue to watch this innovative company as it grows. I think it has the potential to shake up the software development world.

Can developers use high level tools without lock in?

Last week I wrote about WaveMaker and its new Web 2.0 development environment comparing it to PowerBuilder. One of the big problems that someone pointed out to me is that PowerBuilder was proprietary. Because old software never dies, IT organizations are still coping with old PowerBuilder applications that they have to support. Does this mean that we should avoid all development environments that hide the complexity of traditional programming environments? In my view that would be unrealistic. While there are some very talented developers in the world who can do quick magic with Java, cSharp, and C++, etc.; a majority of developers need abstracted tools to do projects needed by the business on a moment to moment basis.

I remember many years ago when I spoke at a conference of developers. I told them (I think this was in the early 1990s) that whatever tools they were using would be obsolete in a few years. These guys were outraged. They did not believe me.

I think that the reality is that organizations need to use emerging development environments that offer innovation, ease of use, and sophistication that is out of reach with traditional programming languages. It is best if these emerging Web 2.0 tools can generate standard programming code (although I am skeptical that the code will represent the nuances that these tools provide). The reality is that IT organizations should understand that fads and tools will come and go. Change is a reality. Here’s a radical idea — how about retiring old code before it becomes a burden to the business.