Covetus The Sun Installed Base

James Staten The value of Sun’s Solaris installed base proved its worth once again this week as Oracle found it too tempting to pass up and pulled the trigger trumping IBM. A large percent of Oracle’s most profitable customers run their Oracle wares on Solaris and for them to fall further into the hands of the mortal enemy alone justifies the purchase. Sure, Oracle gains complimentary IP in Java, MySQL, and a very competent services organization but most of the rest is likely to end up off Oracle’s books.

It’s not every day that we read about a software maker buying a hardware company and that in itself is perhaps the biggest sign of things to come from this acquisition. Oracle, like Microsoft, enjoys healthy profit margins from a software-only business model. While Oracle is far more consulting-heavy than its Redmond rival, it profits rise above IBM, HP, Cisco and others because of its low cost of goods. Sun’s server and storage businesses don’t fit with this model and certainly don’t justify the further investment in the SPARC microprocessor that will be needed to keep this business healthy. So despite Oracle’s statement that, “Oracle plans to engineer and deliver an integrated system -- applications to disk -- where all the pieces fit and work together, so customers do not have to do it themselves,” expect Oracle to shop these units tout suite. Dell and HP are likely to bid for these businesses and do a strategic alignment on product collaboration like HP’s last year on the Oracle Data Warehouse.

Sun’s tape products, picked up in the StorageTek acquisition will be especially appealing, but tape has become a far less important part of the storage ecosystem than it was when Sun made its initial purchase. EMC, NetApp, and Cisco could potentially bid but are less likely suitors.

Expect Oracle to continue to invest in Unbreakable Linux, too. While this strategy was Oracle’s move to gain an OS agenda, and Solaris gives it much stronger IP position, the migration from UNIX to Linux will continue unabated. Unbreakable Linux will become more about taking from RedHat.

On the virtualization front, Oracle becomes a bit more formidable player but still with a lot of ground to gain. Both OracleVM and Sun xVM are based on the Xen open source hypervisor but are different implementations. Expect these to come together and for Sun’s virtual machine management (and enterprise management technology for that matter) to be sucked into Oracle Enterprise Manager. Oracle has taken a tough stance against any hypervisor other than their own and this will simply make them more stubborn in this regard.

What strategy should enterprise Infrastructure & operations leaders take? If you haven’t started shifting your Solaris workloads from SPARC to Intel, what are you waiting for? We recommend staying the course on your virtualization strategy. It shouldn’t take that much work for Oracle to unify xVM and OracleVM but both need lots of business development help to gain traction with the greater ecosystem surrounding VMware and Microsoft Hyper-V to justify your investment.

By James Staten

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Comments

re: Covetus The Sun Installed Base

What is even more interesting is that the bulk of this install base goes end of service life at the end of the year. This gives Oracle a chance to adjust its pricing model to give Solaris 10 running on new Sun hardware a big competitive edge on the competition.