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.

Why Sun Microsystems can’t go it alone

Like everyone else, I have been looking what would happen if IBM were to buy Sun Microsystems. I actually thought it sounded pretty good. IBM would get hardware, some database, virtualization, cloud, and operating system software. Oh, and did I mention that they would control Java. But it sounds (at least as I am writing this) the negociations have broken down. Greed is an interesting phenomenon. Prior to overtures by IBM, Sun’s stock price was around $3.00 a share. IBM was offering as much as $9.50 a share.  I actually thought that price was a bit high — but what do I know.

So, what happens now? I suspect this little drama is far from over. It is possible, if rumors are to be believed that Sun’s Chairman Scott McNealy will take over the reigns of the company once again to try to restore the company to its former glory. It has happened before. Steve Jobs returned to put Apple back on the right path. Michael Dell is trying to turn Dell into the innovator that it had been a decade ago.  Will it happen this time? I think that there are some difficulties with this plan, if it is indeed true. A lot has changed since Sun declared in the 1980s that the network was the computer. Clearly, the company leadership was right. I was an observer of the pragmatic and brilliant marketing company that Sun became in the 1980s, when I worked for its competitor Apollo Computer that was later purchased by HP.

Today, the market is quite different than the market Sun and McNealy had successfully finessed.  Today, the market is consolidating around either very strong global leaders such as IBM, HP, Microsoft, Oracle, Cisco, etc. There is a new generation of leaders emerging that had their start in the Internet era such as Google, Amazon, and Facebook and even Twitter. So, is there room for Sun to remake itself in this new world?

I guess that my take is that it will be very hard for Sun to resurface and remake itself. Here are the three main reasons that I have doubts and why I think that shareholders and board members should sell the company to IBM.

1. Sun Microsystems will have trouble regaining hardware leadership.  While it has some reasonable hardware assets, it is not big enough to take on HP or the emergence of Cisco as a hardware players.  Even companies like Google and Amazon play an important role in hardware — in the commodity relm.

2. While it owns some impressive software assets that it has bought over the past decade, Sun has never learned to leverage these assets to propel it into a leadership role.  It has further confused the market by opening sourcing its software. While this might be popular in a down market, it is not enough to create a repeatable revenue stream. I was watching a funny video of Steve Gilmore interviewing current CEO Jonathan Swartz (as a puppet) that I think captures part of Sun’s problems.

3. Is there a single area of technology where Sun can innovate and out shine its competitors? I imagine there might be some hidden jewels that are transformational and will turn the market upside down inside Sun — but I doubt it. I think that as Cloud Computing moves to center stage, Sun could be a player but not a leader. To be successful, Sun will have to find a way to lead in some area.

The bottom line is that I do not see a good future for Sun as an independent company.  I think that the damage has been done. Not only does the company have to regain shaky customer confidence but it quickly has to start making a profit. It is not an easy climate even for the strongest companies.  While it is possible that McNealy will surprise us all and turn Sun from a struggling player in a consolidating market to a leader but it is probably too late.  Customers who are watching this drama unfold will have to be convinced that Sun has staying power — not just for this year for future decades. If Sun tries to maintain independent, I predict a long and difficult path that will not necessarily end in success.

My Top Eleven Predictions for 2009 (I bet you thought there would be only ten)

What a difference a year makes. The past year was filled with a lot of interesting innovations and market shifts. For example, Software as a Service went from being something for small companies or departments within large ones to a mainstream option.  Real customers are beginning to solve real business problems with service oriented architecture.  The latest hype is around Cloud Computing – afterall, the software industry seems to need hype to survive. As we look forward into 2009, it is going to be a very different and difficult year but one that will be full of some surprising twists and turns.  Here are my top predictions for the coming year.
One. Software as a Service (SaaS) goes mainstream. It isn’t just for small companies anymore. While this has been happening slowly and steadily, it is rapidly becoming mainstream because with the dramatic cuts in capital budgets companies are going to fulfill their needs with SaaS.  While companies like SalesForce.com have been the successful pioneers, the big guys (like IBM, Oracle, Microsoft, and HP) are going to make a major push for dominance and strong partner ecosystems.
Two. Tough economic times favor the big and stable technology companies. Yes, these companies will trim expenses and cut back like everyone else. However, customers will be less willing to bet the farm on emerging startups with cool technology. The only way emerging companies will survive is to do what I call “follow the pain”. In other words, come up with compelling technology that solves really tough problems that others can’t do. They need to fill the white space that the big vendors have not filled yet. The best option for emerging companies is to use this time when people will be hiding under their beds to get aggressive and show value to customers and prospects. It is best to shout when everyone else is quiet. You will be heard!
Three.  The Service Oriented Architecture market enters the post hype phase. This is actually good news. We have had in-depth discussions with almost 30 companies for the second edition of SOA for Dummies (coming out December 19th). They are all finding business benefit from the transition. They are all view SOA as a journey – not a project.  So, there will be less noise in the market but more good work getting done.
Four. Service Management gets hot. This has long been an important area whether companies were looking at automating data centers or managing process tied to business metrics.  So, what is different? Companies are starting to seriously plan a service management strategy tied both to customer experience and satisfaction. They are tying this objective to their physical assets, their IT environment, and their business process across the company. There will be vendor consolidation and a lot of innovation in this area.
Five. The desktop takes a beating in a tough economy. When times get tough companies look for ways to cut back and I expect that the desktop will be an area where companies will delay replacement of existing PCs. They will make do with what they have or they will expand their virtualization implementation.
Six. The Cloud grows more serious. Cloud computing has actually been around since early time sharing days if we are to be honest with each other.  However, there is a difference is the emerging technologies like multi-tenancy that make this approach to shared resources different. Just as companies are moving to SaaS because of economic reasons, companies will move to Clouds with the same goal – decreasing capital expenditures.  Companies will start to have to gain an understanding of the impact of trusting a third party provider. Performance, scalability, predictability, and security are not guaranteed just because some company offers a cloud. Service management of the cloud will become a key success factors. And there will be plenty of problems to go around next year.
Seven. There will be tech companies that fail in 2009. Not all companies will make it through this financial crisis.  Even large companies with cash will be potentially on the failure list.  I predict that Sun Microsystems, for example, will fail to remain intact.  I expect that company will be broken apart.  It could be that the hardware assets could be sold to its partner Fujitsu while pieces of software could be sold off as well.  It is hard to see how a company without a well-crafted software strategy and execution model can remain financially viable. Similarly, companies without a focus on the consumer market will have a tough time in the coming year.
Eight. Open Source will soar in this tight market. Open Source companies are in a good position in this type of market—with a caveat.  There is a danger for customers to simply adopt an open source solution unless there is a strong commercial support structure behind it. Companies that offer commercial open source will emerge as strong players.
Nine.  Software goes vertical. I am not talking about packaged software. I anticipate that more and more companies will begin to package everything based on a solutions focus. Even middleware, data management, security, and process management will be packaged so that customers will spend less time building and more time configuring. This will have an impact in the next decade on the way systems integrators will make (or not make) money.
Ten. Appliances become a software platform of choice for customers. Hardware appliances have been around for a number of years and are growing in acceptance and capability.  This trend will accelerate in the coming year.  The most common solutions used with appliances include security, storage, and data warehousing. The appliance platform will expand dramatically this coming year.  More software solutions will be sold with prepackaged solutions to make the acceptance rate for complex enterprise software easier.

Eleven. Companies will spend money on anticipation management. Companies must be able to use their information resources to understand where things are going. Being able to anticipate trends and customer needs is critical.  Therefore, one of the bright spots this coming year will be the need to spend money getting a handle on data.  Companies will need to understand not just what happened last year but where they should invest for the future. They cannot do this without understanding their data.

The bottom line is that 2009 will be a complicated year for software.  There will be many companies without a compelling solution to customer pain will and should fail. The market favors safe companies. As in any down market, some companies will focus on avoiding any risk and waiting. The smart companies – both providers and users of software will take advantage of the rough market to plan for innovation and success when things improve – and they always do.

Sun Microsystems and Commercial software: postscript

I have had several comments on my posting about Sun and its acquisition of MySQL. While it is nice that Sun has a software strategy, I would like to point out an important fact — Sun Microsystems is a public company. As a public company, Sun’s management has a responsibility to its shareholders to make a profit. My key question is how will Sun make money from open source? Many of the customers who use MySQL use it because it works well and, most importantly, it is open source and free. While some of these customers will buy a maintenance license, many who have deep technical expertise will not need the help and will not spend the money. Is it possible that Sun will turn MySQL into the equivalent of a $1 Billion plus company? I am skeptical.

I do want to add that I think that open source software is extremely important. There are two primary reasons: open source allows the best minds in software to collaborate to create great innovation; and open source provides customers with the access to that innovation without having to make hard financial decisions at the start. However, with risk comes responsibility. Not all open source software is the responsibility — from both vendors to provide consistency, reliability, and innovation and from customers who need to pick open source software that will stand the test of time.

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.

Will Sun and SOA become a natural act?

Yesterday, I spent almost the entire day on the phone talking about Service Oriented Architecture…and then I got a headache…that is not a condemnation of SOA, it is just that too much of a good thing can make you sick (I guess). Anyway, one of the interesting meetings I had was with Sun Microsystems. I will tell you that my expectations were not especially high since I tend not to think about Sun as a software company and certainly not a company that focuses its energy on SOA.

Well, I was delighted with my conversation with two of the product leads. Sun has a checkered past in terms of enterprise software. Ironically, some of the early innovations in distributed computing came out of Sun Microsystems. I remember a project in the early 1990s called Neon (not the same as the middleware company). Neon was a distributed platform for applications development and deployment. It was quite ahead of its time. The only problem (there were probably others but it never got that far) was that it was designed to only work on a Sun operating system.

Fast forward another decade. Sun has made numerous attempts to get into the software business. The latest was a few years ago when it acquired SeeBeyond, a middleware based computing environment that was very popular in the financial services market. After the acquisition I assumed that SeeBeyond would go into the heap of other noble attempts to become a software heavyweight. In my conversation the other day, I was surprised to learn that, in fact, Sun has been hard at work creating a SOA platform based on SeeBeyond. It seems pretty complete. So, I guess I will be watching Sun Microsystems again.