Why Oracle Bothered Taking on Another Storage Provider

By Chris Preimesberger  |  Posted 2011-07-01 Print this article Print

Analysis: There are at least three good reasons: The IP is good, Larry Ellison can afford it and egos wanted to avoid bruising.

REDWOOD CITY, Calif. -- Twenty-four hours after Oracle made the acquisition of struggling new-generation storage provider Pillar Data Systems, it called customers and partners together here at its headquarters campus on the shores of San Francisco Bay to explain why.

After all, Oracle is still ingesting Sun Microsystems' extensive enterprise disk and tape storage businesses and has been running them for a year and a half. These aren't trivial business units.

So why buy a small, 10-year-old storage company with good product reviews but with only marginal success in a marketplace full of large sharks named EMC, HP, Dell and IBM?

We can think of at least three good reasons.

Company Line: Pillar Fills a Need

The company line, as put forth June 30 by co-President Mark Hurd and Senior Vice President John Fowler, is that Pillar Data brings new storage IP options to the company's overall product set. No argument there; nothing in the former Sun catalog has the software agility and ease of use that Pillar owns. Customers, especially those in the mid-range and SMB markets without a lot of on-site IT help, tend to like "easy" and "quickly deployable."

Reason No. 2 Oracle did this transaction is that CEO and co-founder Larry Ellison -- who owns Pillar Data through his equity firm, Tako Ventures -- just can. He made the deal with a flick of his pen and the blessing of his legal folks, not even needing a down payment. After all, he was buying the company from himself.

Thirdly, Ellison couldn't have been too excited about possibly seeing another of his ventures continue to flounder and perhaps go under. Remember his TV set-top box maker Liberate and the Oracle Network Computer? Say there's no hint of ego involved here and you'll hear laughs from those in the know.

All that aside, the fact remains that Pillar Data's IP is well worth continuing to develop, and Oracle as a company knows it.

Pillar Data, based in San Jose, Calif., has attracted about 600 customers in its 10-year lifespan and has them spread across 24 countries. It was originally backed in 2001 by a $150 million investment by Ellison. The company launched its first product, Pillar Axiom, in July 2005.

The main idea behind Pillar's hardware and software product portfolio is to provide highly scalable SAN Block I/O storage systems that can unify and manage SAN (storage area network) and NAS (network attached storage) environments together or separately on a single platform. Versatility, ease of use and deployment, and scalability are its key attributes -- and those are important attributes.

At the time Pillar Data came into the market, no other company was doing this. This is still unique in many ways and can fit well into almost any legacy IT system. It's designed in a modular fashion and has been described by a number of users as "one of the easiest storage systems to get up and running" they've ever deployed.

Deal Keeps the IP Alive

So Ellison and Oracle have found a way to keep this IP alive, in house, and in development. It takes a burden off Ellison's equity firm, which can now look for new investments. Plus, Pillar was saved from regulatory scrutiny by not being sold to another investor or IT company -- even though it would have been a plum pickup.

And now Ellison can focus on sponsoring the 2013 America's Cup, being held on the Bay right outside his office window.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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