Posted by Tom Grant on April 20, 2009
Ever since the IBM offer to acquire Sun fell through, we've been waiting for the other shoe to drop. Apparently, we didn't have to wait very long.
Honestly, I'm surprised at the strongly negative tone to many of the responses I've read or heard today. You expect to hear a lot of snarky sniping on Slashdot, but come on, Infoworld, do we really know that Oracle is going to lay off 10,000 Sun employees? (Which is a highly misleading headline, since in the last sentence of that article, you'll discover that Sun was already planning to lay off 6,000 people.)
Every deal has its pros and cons. Since other observerss have been focused on the potential downsides for Oracle, Sun, or their customers, let's leave those aside for the moment. Instead, let's talk about the waysin which this deal make sense.
Sun was on the path to be acquired by someone. Sun was struggling, and finding a buyer was a good way out of their business dilemmas. Once the IBM deal fell through, the big question was, how many other companies were in a position to acquire them? If not Oracle, then who?
Oracle needs to extend its platform. Oracle's strongest card has been its ability to get its platform technology--in particular, its database--into IT centers. Just as many companies have discovered how slippery a concept "platform" can be, Oracle long ago realized that its business depended on expanding that definition beyond just the RDBMS.
Oracle realizes that it can't build everything. On the other hand, as big a company as Oracle is, and as many developers as it employs, it came to a realization--not immediately, and not easily--that it couldn't build everything. You might quibble whether Oracle should develop certain point capabilities, such as workflow, or let someone else build it. When a company of Oracle's caliber finds it difficult achieve the success it thinks it deserves at a line-of-business, major platform component level, then people need to stop quibbling and get serious. To its credit, Oracle realized that it needed to stop trying to build its own version of every technology out there. (Anyone remember Oracle PowerBrowser?)
Oracle has been successfully acquiring platform and application technologies. To get serious about the application server market, Oracle acquired BEA. To overcome the hurdles entering the enterprise content management market, it gobbled up Stellent. And most famously, to get applications technology, solutions expertise, and customer lists, it bought Peoplesoft and Siebel. All smart moves, compared to rolling a big Sisyphus-sized rock up hills where Oracle couldn't bring its strengths to bear.
At key points of contact, Oracle and Sun's businesses mesh. The best way to describe Oracle's business culture is, "Techie on the inside, techie on the outside." If you're a component technology company, you'll find it easy to fit into the Oracle organization. If your customers are DBAs, developers, or sysadmins, the transition will be that much easier. The congruence between Sun and Oracle works at other levels than products and customers too. Oracle's salesforce now has more enterprise-scale technology to sell. Oracle's very genuine investment in building a community of technologists just got a huge boost, too.
Oracle has not raped, pillaged, and burned its acquisitions. Remember when Oracle announced its intention to buy Peoplesoft, and everyone acted as though Viking longships would soon be coming through San Francisco Bay? Oracle has not cleaved savagely at the organizations it acquired, nor at the customers who came with them. Was everyone happy with the results? No, of course not--but how different was that from other acquisitions in this industry? Particularly since the priorities of the larger company (for example, having everything work within the current versions of Oracle's platform technologies or management tools) naturally take preference?
Oracle needs a stronger cloud story. Oracle is still the odd platform company out in the cloud market. Larry Ellison might go to extremes in decrying the hype about cloud computing, he's right to be careful. Oracle might fit into the cloud already, since there are multiple layers of the cloud computing platform, without making major changes. However, if the shift to cloud-based services, something that does play strongly to Oracle as a platform company, does require investments in technology (yes, perhaps even hardware) or expertise, then the Sun acquisition may help.
Oracle's freedom of action expands with Sun. Depending on how the technology market expands, with or without respect to cloud computing, "the Oracle platform" might need to include an operating system, greater optimizations to work on particular hardware, or more direct influence over the future of Java and related technologies. In that case, the Sun acquisition might be strategic, even if the short-term benefits aren't altogether clear. (And it's worth noting Oracle's existing investments in some of these platform-defining technologies, such as Linux.)
Yes, of course, there are potential downsides. Perhaps MySQL won't die immediately, but it might suffer malign neglect. On the other hand, as long as its fortunes were tied to a struggling company, its future was in doubt for other reasons. Maybe other people's favorite technologies will get the axe. And maybe some of them, such as the-serious-challenge-to-Microsoft-Office-that-never-was, should get the bum's rush. Whether that means selling these technologies, putting them into RDB-like semi-retirement, or completely retiring them, remains to be seen.
[Cross-posted at The Forrester product management blog.]