An Industry Redefined: Analyzing Oracle-Sun Transition

It is now common knowledge that Oracle announced its intention to buy Sun Microsytems for $7.4B. The acquisition will be completed in the next 3-5 months.  Speaking from the viewpoint as an ex Sun employee, I think this move makes lot of sense.  At the same time I was very surprised at this turn of events.
The Oracle-Sun acquisition has a lot of implications for the IT sector as a whole. In the next paragraphs I’m going to attempt to analyze this event on two levels:  political and technological.

1. Oracle-Sun Transition:  Political Analysis

   There is no doubt that Oracle’s culture is much more similar to Sun’s than IBM’s.  Both companies

   are  products of Silicon Valley, Scott McNealy and Larry Ellison have been friends for quite a while, and there is a long history of mutual collaboration between Sun and Oracle. Having said that, all is not wine and roses between these two IT giants.
   In past years, as Sun expanded its software portfolio, it’s products and services were often in  direct competition with those of Oracle. Case in point:  the Identity and access Management suite (AIM), MySQL versus the SOA (JCAPS) line of products. Also, since Jonathan Schwartz took over from McNealy in 2006, Sun has changed significantly.
   If we dig deeply under the surface, we can see that there are major differences in the ways Sun and Oracle operate:

   • Sun is a company where the CFO has a big influence. The accounting and finance departments have strong voices in how things are run. This has positive and negative results:  on the positive side, Sun has a very strong balance sheet and has never been implicated in any accounting scandals. On the negative side, sales are bogged down by endless processes that few really understand which makes Sun a difficult entity  to do business with and delays the sales cycle.
   • The Sun sales culture is not as aggressive as Oracle’s. From what I was told, Oracle’s sales force uses a less than gentle approach where business results matter the most. This will be a very rude awakening for many Sun sales reps.
   • Sun decision making is a collegial process. Decisions are mostly driven by consensus. This can (at times) develop an over politicized atmosphere not conducive to fast and aggressive business action.
   • Sun is predominantly an engineering dominated culture. Oracle is a sales oriented company. Both approaches have pros and cons but are very different.

   Since this is an acquisition and not a merger I expect Oracle’s culture to trump Sun’s (with some exceptions). This will be a major change for the Sun employees and will translate into massive layoffs and resignations and the consequent IP drain.

2. Oracle-Sun Transition:  Technology Impact

   The impact of this acquisition on the IT sector is massive. Oracle has already 3,500 products, and the Sun acquisition will just add more to what Oracle has to offer.

   The Sun Hardware line (intel/AMD and Sparc alike) will be completely new to Oracle. If Oracle wants to keep the hardware line(modeling themselves after IBM) they’re going to need all of Sun’s expertise and engineering IP to succeed. For now, all  official communication out of Oracle stresses the company’s  commitment to maintain all Sun product lines and customers. Only time will tell. It is not far fetch to expect Oracle to divest itself of the hardware business in the long term.

   Things are much clearer when we analyze the software stack.  Let’s take it one product at the time:

   • JAVA

     This is a great asset for Oracle and almost worth the acquisition in and of itself.
     Java opens new doors and new possibilities for Oracle to extend its business reach in areas (such as cellphones) in which it was not operating. This is a win-win situation for Oracle.  I’m confident that Oracle will be aggressive in trying to monetize as much revenue as it can from Java.
     Judging from past performance I would bet Oracle will be more successful than Sun.

   • IAM (Identity, Access and Role Management)

     In this case, Sun and Oracle have directly competing products. In the IAM (Identity and Access Management) space Oracle and Sun are both in the Gartner Magic Quadrant. Both companies expanded  their offerings via acquisitions (see Acquisition History below), and are #1(Oracle) and #2(Sun) in the market. The products are pretty much equal in functionality but diverge quite drastically in the way they’re architected and implemented (see the Oracle-Sun Difference Matrix below).
     Without entering into a “religious war” regarding which is the better product (they both have pro and cons), I have to say that Sun’s IdM product is more flexible than Oracle’s, but Oracle’s IdM does a better job when it comes to user interface and usability.
     It is safe to assume that Oracle wants to maintain Sun’s customer base and therefore in the short term ORA will support all of Sun’s IAM products. Since Oracle acquired Sun (and not vice versa) I assume that in the long term Oracle IAM will prevail.
     It makes a lot of sense for Oracle to support all the IAM products in the short term and start working for a migration path to a unified release in the next 18-24 months. The new offering should have some additions from Sun’s IAM like the Role Manager (ax Vaau) and some other functionality “borrowed” from Sun’s IdM (debugger, load balancer).
     Since the products are very different at the “core,” it’s going to take some time to merge them into a Oracle “13g” version that unifies the two products.
     It will certainly be a substantial engineering challenge to do so, but Oracle has both the IP and the resources to accomplish it. Execution will be the key to success.
     If Oracle is able to pull this off, it can own the IAM market for years to come.

     
     
     

   • Directory

     Sun definitely has a leg up. Sun Directory Server Enterprise Edition is a good product with widespread  support, high market penetration  (Telco market especially) and a substantial share of the Enterprise Directory market. The best thing Oracle could do is to maintain thisproduct and gradually integrate it into its product line.

   • MySQL

     This database is Oracle’s bread and butter, and Oracle’s core business and MySQL will make it even better.  It would be very hard (if not impossible) for Oracle to dismantle MySQL since it’s Open Source.  I believe Oracle will be better off by maintaining MySQL rather than killing it.
     Oracle already owns a very important add-on component of MySLQ:  InnoDB. This component is necessary for financial transactions and it’s already widely used.  Furthermore, MySQL gives Oracle “potential” access to many hot startups (I.e.: LinkedIN, Facebook). It’s a fact that major IT players like Google, Apple, and Yahoo use the MySQL database as a foundation of their business.
     Oracle will be strengthened by MySQL in a lot of ways. In my opinion, the future of MySQL is very bright.

   • Solaris OS

     This is a great opportunity for Oracle to own a state of the art OS that is enterprise ready, tested, is stable, and has a lot of good features (ZFS to mention just one). There is a long history of Oracle DB on Solaris and I don’t expect that to change in the future. Business wise it makes a lot of sense for Oracle to keep Solaris as is and to increase the integration resulting in an Oracle DB  “optimized package” OS+DB+Services which not only promote its own stack  but promote enterprise class applications like SAP as well.

   • SunRay Server, Secure Global Desktop and Virtualization

     I feel strongly that this is a hidden gem and another great asset for Oracle. This is a brand new sector for Ellison and company. SunRay Software and SGD (former Tarantella, former SCO) is a true thin client solution that can serve a multi OS Virtual Desktop. It works well and is gainingpopularity in the market. As far as I know, Oracle does not have anything of this sort in their current offerings. Plus, it’s a software play. If Oracle plays its cards right, it can own the entire thin client and VDI market in a relatively short time.

   It is impossible to predict what will happen but one thing is for sure: this is a tectonic shift in the market. The Oracle-Sun transition won’t be easy, and Oracle itself will be a different entity when it’s all said and done.