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.

SAP’s Journey: SOA By Design?

I am attending SAP’s “Industry Influencer” conference this week. It is clearly an interesting time for SAP. The company’s platform is evolving both in scope, architecture, and markets. SAP is a company that likes control and likes to control its own world and the world of its customers. The message was clear. The customer is best served by adopting a homogeneous platform based on a business process layer and a repository based on SAP’s Netweaver. This is true whether you are a large enterprise or a mid-market customer.

SAP’s view of the world is quite interesting. It has appeal in many ways. If a customer buys in, they buy into a neat and clean view of the world where they can link into their accounting, CRM, multi-channel applications, logistical, shipping, etc. and have a process centric comprehensive view of the world. If the customer buys into the platform it does help the training and management of a very complicated world.  I can see how a customer that buys into an SAP centric world could find the strategy compelling.

What is impressive about what I am hearing this morning is that SAP has a well thought out architectural plan that integrates a business process platform with the application platform, with a repository and a meta data and master data layer. The idea is that the customer interacts with an underlying platform that they never touch. Rather, the customer composes work flows at the upper layers of the platform to create composite applications.

So, why does this bother me? I think that because that the strategy and platform assumes that customers will be willing to adopt a single vendor platform that everything in their enterprise will flow through. To its credit, SAP does expect that third party applications and environments can be integrated through well defined interfaces. These outside resources would be integrated through the repository. However, will a customer want to give a single vendor that much power? Perhaps? Will most customers overcome the internal political issues to have everyone agree on a single platform across departments, subsidiaries, and even partners? I would say that I am skeptical.

If this is indeed a pure service oriented architecture platform as SAP claims, where is the loose coupling of services that offers the customer the flexibility and modularity that encompasses a heterogeneous environment?

So, how would SAP react to a situation where the customer doesn’t buy into the grand vision? What if a customer wants two or three SAP ERP applications but relies on some Oracle applications, some IBM middleware and services, and a bunch of home grown solutions? Can that customer make use of the end to end process platform? Or is it all or nothing? Right now it feels like if you don’t buy into NetWeaver you can’t play in an SAP SOA world.

I will write some other entries over the next day or so as I get more insight into what I am hearing.

The Oracle Syndrome: why there are no big bangs

I was thinking this week about Oracle. You remember them. The big database company that decided that it would be a big packaged applications company and a big middleware company. I have to give them credit for swooping in and buying their way into a leadership position. While it is hard to buy companies and keep them going, in the packaged software arena it isn’t as hard as it looks. For example, customers who buy a PeopleSoft HR application are not going to dump it just because the company was purchased by Oracle. Software is a funny thing — it lingers for decades after everyone assumed that it would be dead. As I always say, old software never dies.

So, what is my point about the Oracle Syndrome? The reality is that Oracle is not about innovation. It is about leveraging a captive installed base. It is about stitching together packaged applications with business process connectors so that one package can send an piece of data to another application.

Therefore, forget about Fusion middleware. Rather than a big bang common platform under all of Oracle’s packaged applications, it is a slow methodical revamping of small components of Oracle’s applications. It will take decades before Oracle could claim to have a common infrastucture under its applications.

I think that this is the future of software. No big bangs. Incremental business focused innovation will be the rule — not the exception. Does this mean that there will be no unexpected innovations? Of course not. There will be innovations that come out of nowhere and transform the world of software. However, they will not be overnight wonders — the most important innovations take years even decades before they mature and change the world overnight.

Will Oracle win BEA? And what next?

It has been quite a week. First, SAP sets its sights on Business Objects and now for about the same amount of money, Oracle is ready to swallow BEA. Indeed, it looks like the world of enterprise software is continuing to consolidate. So, what do I think? I actually think that Oracle’s decision to buy BEA is a smart move. Oracle needs the depth of middleware and business process software that are two strengths of BEA’s platform. I have spoken with Oracle customers who have not been happy with Fusion middleware. Therefore, the BEA acquisition should strengthen Oracle’s infrastructure assets. Remember that one of BEA’s original assets was AT&T’s Tuxedo distributed transaction processing software suite.

AcquaLogic , BEA’s services integration and business process management platform is well regarded among customers. A few years ago BEA bought Fuego, a very well designed business process management engine.

I could go on for a long time talking about the depth of the BEA software environment. Both its transaction management and business process platform are the jewels in the crown that will benefit Oracle — especially in its Service Oriented Architecture (SOA) strategy.

So, let me get to the bottom line. Here are my conclusions about the Oracle move:

1. Oracle is moving to pick up a strong middleware platform. It has the potential to fix some of the problems with the Fusion platform.

2. It will be a more complicated integration task than some of Oracle other acquisitions. Oracle will have to rationalize its work on Fusion middleware with BEA’s offerings. This will take some time.

3. The comparison between Oracle and SAP’s acquisition moves are very interesting. While SAP has bought a BI platform that will have to be kept separate from its ERP business, Oracle’s purchase will be much closer to its core strategy. The money isn’t that different.

4. BEA was in an uncomfortable position in the market. It has been a player with some impressive acquisitions and leadership. However, it was never able to break out as a leader in terms of revenue. It made its mark with WebLogic — the leading application server. However, it was never able to break out to be viewed by customers as a overall leader — despite some very nice acquisitions.

I expect that this acquisition will go through. I do not expect any other company to come up with an offer. HP, for example, that has been mentioned as a suitor, is unlikely to move in this direction.

I thought that Dana Gardner’s blog today was a well constructed analysis. I agree with many of his points. But don’t think that an HP counter offer is likely. I do think that his view of the interactions between other players will be impacted by this move.

My bottom line: I think that there will be major ripples from this move by Oracle. IBM will not sit still for long. Will IBM increase its alliances with other players — I think so. What does this mean for Tibco? I have talked to customers lately who have been buying Tibco for both its business process and scalable SOA middleware platform. Is Tibco in play? Will SAP and IBM strengthen their relationship?

The Future of Enterprise Software: who gets the power?

I recently attended an industry conference called Software 2007 and was struck by the different approaches articulated and advocated by three very different industry leaders. What stood out from the conference and from the discussions by the leaders of these three companies were the dramatic changes happening in enterprise software. In this column I will use presentations by leaders of SAP (Hasso Plattner), Microsoft (Steve Balmer), and Salesforce.com (Marc Benioff) to explain the nuances that are impacting enterprise software. Each of these companies represents an inflection point of an era. Each of these companies gained leadership by innovating in a specific area that defined its market dominance.

• SAP gained market dominance by creating a complex all encompassing enterprise process environment that gave birth to the tight partnership between enterprise software and systems integrators

• Microsoft transformed the desktop and the office application into a dominant development and runtime platform for the masses

• Salesforce.com took the idea of timesharing applications from the 1960s and 1970s combined with the Application Service Providers (ASP) of the 1990s and brought a new level of commercialization leading to a new generation — software as a service.

All three companies are now at a cross roads. The question in my mind is how will these companies transform themselves to adapt their platforms and strategies for the next generation of computing? We are at a new inflection point for software that will test these and other industry leaders to adapt to the new economic and technological challenges that are starting to impact the market. The speeches by these three executives were emblematic but for what they said and what they did not say.

SAP’s journey to a flexible platform

Let’s start with Hasso Plattner, the co-founder of SAP who has been instrumental in proposing new thinking about enterprise computing. SAP was a revolutionary departure when it sprang onto the market. SAP took the concept of packaged enterprise applications and turned it on its ear. Rather than creating a package with a model for a single industry, SAP created an extremely complex and detailed model-based packaged environment that supported a broad set of enterprise functionality with more depth and breadth than other packages of its day. It offered two innovations – first, its software enforced predefined processes and second, it relied on systems integrators to do the implementation. With predefined processes, customers let SAP determine many of their business processes. Rather than following the traditional approach of owning both the applications and the implementations, SAP partnered with the big systems integrators that it trained to deliver services to its prospective customers. The depth and complexity of the environment combined with the business process reengineering wave catapulted SAP into a leadership role. It was a new and revolutionary model.

Over the years, SAP has moved to create much more than a collection of packaged applications. It has attempted to lead the enterprise software market by creating an underlying enterprise infrastructure — a middleware platform (NetWeaver) to create a platform that would serve a broad partner and customer ecosystem.

Plattner, one of the founders of SAP, is fully aware of the dramatic changes happening in enterprise computing and he is trying to ensure that his creation remains a major player as we move into the later half of the decade. His vision is good. He proposes a next generation platform that includes a modular design where there are exposed interfaces to the more-than-2000 services that define the SAP environment. Each service is a closed black box. The objective is clear: keep the inside functionality intact but make it easier for customers to use the services they need. While the process of modularization will help SAP’s complex development process, it will not dramatically change the complexity of the environment for customers.

While the modularization of SAP is designed to keep current customers leveraging the existing platform, Plattner understands the need to adapt to changing enterprise software requirements. Rather than trying to reconcile the existing platform with a radically new one, a new proposed software as a service model, the foundation for SAP’s future direction, will be targeted at an untapped market for SAP – the mid-market. In addition, he advocates for such innovations as in memory databases, incremental software releases, and a variety of user interfaces and navigation choices. All of these are good ideas and will help SAP to some extent compete in the future.

However, there is a catch. First, SAP’s installed base is a leg iron that will hold the company back. The company’s installed base of customers has invested a fortune in implementing and more importantly customizing its mammoth application environment. Each new release often involves a six months to upgrade, because of the complexity of the environment. This is despite the fact that SAP has done much work over the past decade to add more modularity to its code base. However, at the end of the day, the SAP environment will continue to be a complex and tightly integrated set of capabilities. I am skeptical that SAP can make enough progress in the mid-market with its next generation to make up for the complexity of getting a large installed base to move.

Microsoft: evolution not revolution: can it hold onto the franchise?

Like SAP, Microsoft is at a turning point. It came into the market as a maverick, attacking the status quo by pushing its dozens of office computers off the cliff and establishing its operating system platform as a defacto standard for end users. At the time that Microsoft began its climb; the traditional computing platform was monolithic and inflexible. Microsoft offered a level of accessibility and pricing that helped revolutionize the market. As the years have past, Microsoft has taken advantage of emerging technology trends and has managed to continue to assert its market might into areas ranging from database, to collaboration, and of course the office and windows franchise. But like SAP, Microsoft is at an inflection point.

During his talk, Steve Balmer, Microsoft’s CEO seemed to recognize the impact of this transition time in the industry. Balmer admitted that the company is in the process of an important change. The original desktop-based model is evolving to encompass online services. This is where Balmer departs from some of the upstarts: he predicts that it will not be based on a pure Software as a Service model but rather a software plus services model. It is not surprising that Microsoft holds onto the desktop franchise model for both pragmatic and financial reasons. First, until we have a model where applications that live on the web can be used without connectivity, the desktop model will be essential. But, at the same time, it is clear that Balmer is feeling the pressure of both Google and Salesforce.com. Ironically, both companies look a lot like the Microsoft of the 1980s as it challenged IBM’s dominance in computing.

What will distinguish Microsoft in the emerging world of software? If you listen to Balmer, the differentiation will be on two fronts: providing customers with what he calls the “rich customer experience” – based on the requirement for a familiar and comprehensive end user desktop platform (i.e., Microsoft Office). Integration between Microsoft Office applications and back end applications has been a Microsoft’s objective since the mid-1990s when it began proposing that office applications become the integrated platform for a variety of desktop and server applications. This strategy has continued to evolve. For example, the joint venture with SAP has produced a front end environment called Duet that ties Microsoft applications into SAP’s backend platform. In essence, Office becomes a very rich and very expensive runtime environment for enterprise applications. The next frontier for Microsoft is trying to take this franchise and expand it to process and collaboration. Balmer sees this area as the white space in the market that Microsoft can call its own. Creating an environment that allows for ad hoc business process collaboration between the rich client environment and the backend business applications. Balmer points to the value of SharePoint and Exchange as Microsoft’s foundation platforms for collaborative business process management. And of course, Microsoft hopes to win some of that back-end application business with its Dynamics Platform (including offerings in ERP, CRM, and finance).

Like SAP’s Plattner, Balmer is focusing his strategy on evolution – not revolution. Balmer needs the Microsoft office and windows platform to remain strong and dominant to keep the revenue machine moving in the right direction. A radical departure would not be in the best interest of shareholders.

Salesforce.com’s goal of world dominance

While I saw many direct similarities between the positions of Plattner and Balmer, Marc Benioff comes at the software market from a totally different perspective. Simply put, he has nothing to lose. In 1999, Benioff left a comfortable position at Oracle to make his solo journey in the world of enterprise software. Benioff focused his aim at the idea of “no software” which of course isn’t true – it is very much software – just a different platform and business model. What made the SalesForce.com model was a combination of a different model for software that appealed to smaller companies that were happy not to have to buy a server and worry about support combined with the ease of use and navigation that set this software apart from other low end CRM products such as Act that had dominated the market for years. Without a legacy to protect, Salesforce.com was free to move in a revolutionary direction. Ah, but things have changed since those early revolutionary days. Now that Salesforce.com is a public company with revenues over $500 million, it is a solid and growing presence in the market. Benioff made it very clear in his sales pitch that he wants to follow in the footsteps of Microsoft and begin building a franchise around the Salesforce.com platform.

Watching Benioff at this stage in the company’s evolution was fascinating. The road forward is quite clear: Benioff is encouraging software vendors to build their own software on top of Salesforce.com’s infrastructure (why reinvent the wheel). The benefit to software vendors is clear to him – the vendor does not invest R& D in infrastructure or distribution. The vendor then markets its software from within the Salesforce.com ecosystem and pays a percentage of revenue back to Salesforce.com. The implication is quite significant for the independent software vendor who might use the Salesforce.com development environment including a language that looks like a traditional procedural programming language. It is no coincidence that Benioff’s ambition is to build a platform for computing that would rival Microsoft’s own. The danger, of course, is that Salesforce.com moves to fast out of its niche while reaching for the highest levels of platform leadership. Clearly, Salesforce.com has made a remarkable climb through its business model. However, it is still early days for the Software as a Service model. I expect that the company will face a broad set of competitors – both the traditional platform vendors as well as the revolutionary players who have nothing to lose.

So, who gets the power?

I was struck by the commonality of these three software power houses and how they each see their future. Although no one would mistake SAP with Salesforce.com or Microsoft, the companies are more similar than different. Each has created a dynamic franchise based on shrewd business planning and a little luck. All have recognized the value of their platforms and the potential for world dominance. The same power and depth that has led to their dominance can challenge their future. It is not easy to be revolutionary while keeping an installed base happy.