IBM the Winner in the HP-Oracle Fight: Analysts
Hewlett-Packard recently filed suit against Oracle over the software giant's decision to end support for Intel's Itanium platform, which HP officials characterized as a cynical move by Oracle to force customers to adopt its struggling SPARC hardware.
The lawsuit was only the latest step in the ongoing drama about the dissolving relationship between the two one-time partners. The friction started with Oracle's $7.4 billion acquisition last year of Sun Microsystems, and followed with some skipping around of executives-former HP CEO Mark Hurd going to Oracle, former Oracle executive Ray Lane jumping onto HP's board of directors, and Leo Apotheker, an Oracle nemesis from his time as CEO of SAP, taking over for Hurd at the top of HP.
Oracle's Itanium decision, announced in March, and HP's subsequent reaction only ramped up the animosity.
So, in this back-and-forth between the two tech titans, who is the ultimate winner? According to two analysts, that would be IBM, which already has seen success in convincing HP and Oracle Unix customers to move to its own Power systems, thanks to its aggressive migration programs. The sense of instability around both HP and Oracle due to their ugly breakup will only serve to drive away enterprise customers who are uncomfortable with uncertainty, the analysts said.
"Rather than providing what Oracle likely hoped would be a competitive edge for its Sun hardware solutions, the company's battle with HP has instead given IBM an unprecedented opportunity to move on HP/Oracle accounts with migration programs designed to remove forever the discomfort and dangers of warring vendors putting mission-critical systems at risk," Rob Enderle, principal analyst with The Enderle Group, said in a June 22 report.
Roger Kay, principle analyst at Endpoint Technologies Associates, agreed. "This beef has been a windfall for IBM, which, amid the uncertainty surrounding Itanium's future, is picking off HP and Oracle (former Sun) customers right and left," Kay wrote in a June 22 column on Forbes.com. "IBM has institutionalized this process, creating what it calls the STG Power Migration Factory to bring its competitors' customers over to Power-based systems. IBM has been extending its lead in UNIX servers steadily in the past several years, taking out hundreds of its competitors' systems per year. Even if Oracle caves and restarts [Itanium] support, customers will remain uncomfortable about the depth of that support. If the suit goes to trial, even if HP wins, support will come too late. Enterprise customers don't like uncertainty."
Oracle officials announced in March that they would no longer develop software for Intel's Itanium platform, saying that they believe Intel is winding down development of the controversial chip technology in favor of its x86-based Xeon processors. In doing so, Oracle became the third major software maker to pull support for Itanium, following Microsoft and Red Hat.
Intel officials quickly disputed Oracle's contention, saying they have a years-long development roadmap for Itanium. HP, by far the largest buyer of Itanium processors, blasted Oracle, accusing the company of jeopardizing its customers' IT infrastructures in hopes of propping up its own struggling SPARC hardware business, which it inherited from the Sun deal. HP and Oracle share about 140,000 enterprise customers-many using Oracle database technology-and in the lawsuit filed June 15, HP said Oracle's Itanium decision represented a breach of contract.
Enderle seems to fall into HP's camp, saying that "Oracle pulling the plug on Itanium ... appears to be a breach of enterprise practices that typically require a vendor in this class to support a technology for 10 years after it has been discontinued-something both IBM and HP regularly do. While Oracle could have changed their support policy 5 years after HP and Intel discontinued Itanium, to do so before any such decision was officially announced or made is unprecedented, and results in the impression that Oracle may no longer be considered a true -enterprise' vendor."
Kay isn't so sure. Since the first chip in the family-"Merced"-showed up three years late in 2001, "Itanium was a humiliation, the butt of industry jokes and a source of embarrassment to the analyst firms that predicted a large market for it," he said. "That market never materialized, and gradually, the industry began to withdraw support."
Intel must keep developing Itanium for HP's sake, but given the high-end features in its latest Xeons, it's obvious that Intel sees its x86 chips as the future. "Although its demise has often been predicted and yet it survives, Itanium is going down at some point," Kay wrote. "Oracle would be foolish to throw precious resources down the drain to support it."
Regardless of which vendor comes out on top, both Enderle and Kay say that enterprise customers may eventually decide that the drama between HP and Oracle is too much, and switch instead to IBM and its Power platform. "While not caused by HP, the continuing discord with Oracle also works to IBM's advantage, making the company appear to be the most mature and stable enterprise vendor," Enderle wrote.
And the Unix market is an important one. While the x86 server space is the fastest growing, demand for Unix servers continues to increase. Unix server revenue grew 12.5 percent in the first quarter, to $2.6 billion, and represented 21.8 percent of all server revenue, according to market research firm IDC.
In addition, a June report by Gabriel Consulting Group indicated that most enterprises use Unix servers from a number of different vendors. Only 20 percent of those surveyed said they had standardized on a single vendor.
"The big three vendors-HP, IBM and Oracle-are constantly trying to entice customers into standardizing on their brand of Unix, but we still don't see this having much effect," Dan Olds, principle analyst at Gabriel Consulting, said in a statement. "Most customers have at least two Unix brands in their data centers, and almost half have all three."