Posted by Richard Fichera on June 16, 2011
On June 15, HP announced that it had filed suit against Oracle, saying in a statement:
“HP is seeking the court’s assistance to compel Oracle to:
Reverse its decision to discontinue all software development on the Itanium platform
Reaffirm its commitment to offer its product suite on HP platforms, including Itanium;
Immediately reset the Itanium core processor licensing factor consistent with the model prior to December 1, 2010 for RISC/EPIC systems
HP also seeks:
Injunctive relief, including an order prohibiting Oracle from making false and misleading statements regarding the Itanium microprocessor or HP’s Itanium-based servers and remedying the harm caused by Oracle’s conduct.
Damages and fees and other standard remedies available in cases of this nature.”
While we are certainly not lawyers, and were not privy to any of the thought processes that went into this decision, several things jump out at us, none of them particularly positive for the long-term outcome for HP or its joint Itanium-Oracle customers:
- This situation is serious for HP, and discussions leading to an amicable resolution with Oracle have not worked out.
- The claim of 140,000 joint customers puts some numbers on the magnitude of the problem. If each customer is worth $250,000 (and I think this is a conservative revenue figure for lifetime HW, SW and support - HP implied that the average hardware purchase was $250,000 in the redacted copy of their filing that they made available), even assuming that HP loses only a fraction of their installed base, the numbers work out to billions of dollars of high-margin revenue at stake for HP. On the Oracle side, the numbers are also high, but Oracle is making a probably correct assumption that for each dollar of revenue lost on an HP Itanium system they will get a very large fraction of that dollar back on another platform.
- For HP-Oracle customers, the lawsuit probably will not help them resolve their own uncertainties – throwing this into the legal system means that customers may have to wait for a decision, and a rapid decision is not in Oracle’s favor, so Oracle will probably attempt to delay proceedings for as long as they can. Even with a finding in favor of HP, the establishment of damages and subsequent appeals can add years to the process absent a settlement.
- Even given a positive finding for HP, the outcome may not be clear. This is not like the antitrust case against Microsoft, where the goal was (among others) to compel the early disclosure of interfaces and other IP. In this case the court would be compelling future performance, and this is difficult – I have a vision of an unwilling dev organization turning out late and buggy releases of Itanium code, and/or an ugly and cumbersome process of monitoring compliance, none of which will work to give HP customers a warm and fuzzy feeling.
At this point, the only really win-win situation is for the two parties to come to terms quickly and amicably, but the reality is that Oracle is playing for higher stakes than a win-win because of the potential benefits to their own hardware business if HP is not competing as a platform for Oracle workloads; my opinion is that they will play this out to the bitter end.
Sadly, along with HP’s server business, a whole pile of customers are caught in the middle of this controversy, potentially facing a disruptive forced transition that will add little business value at substantial unexpected cost.
Am I wrong? I’d love to hear your feedback on this.
Additional coverage of this controversy see Oracle Says No To Itanium – Embarrassment For Intel, Big Problem For HP and HP And Oracle Customers React – Not Happy, But Coping.
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