Oracle’s acquisition of Sun Microsystems goes a wee bit deeper than a simple M&A story about an enterprise software company adding a limping enterprise systems maker to its long list of conquests.
This deal, should it finalize this summer as planned, will directly impact a number of enterprise IT markets and a huge number of current users.
The markets that first come to mind are data center systems, database hardware and software, storage hardware and software, storage management software, server hardware and software, mobile networking software (through Java), smart cards, identity authentication, high-performance computing — the list goes on and on.
The only IT sector that won’t be affected all that much by this deal is networking, even though Oracle does get to pick up Sun’s small switch-designing group.
In this story, however, we’re focusing on how this will affect the data storage market, one that Sun has made no secret of cultivating since it acquired StorageTek for $4.1 billion in 2005.
Oracle Getting Some Cutting-Edge New Assets
How will Oracle’s entry into the data storage business by owning Sun’s X4500 Thumper (a powerful enterprise storage array), StorageTek’s highly regarded tape and disk storage products, the fast Zettabyte File System for storage, and the Fishworks (the Fully Integrated Software and Hardware group, which designed and built the Amber Road storage appliance) change the scenery?
“While it remains to be seen whether or not Oracle intends to fully commit to the hardware business — as it remains possible that they may spin those businesses off to other hardware players — it would represent a changing of the storage landscape,” Stephen O’Grady, storage analyst with Red Monk, told eWEEK.
“Sun would provide Oracle with assets both new and cutting edge [the Fishworks derived product line] as well as traditional [StorageTek]. This means that Oracle would have the ability to compete in the storage market on multiple layers.”
However, analyst Joseph Martins of Data Mobility Group disagreed.
“I simply don’t see Oracle changing the competitive scenery, certainly not in the way Cisco has,” Martins told eWEEK.
“In fact, I expect this acquisition to put a strain on Oracle — a distraction that storage competitors will undoubtedly exploit. I don’t expect to see any real storage innovations come out of Oracle over the next couple of years. After that is anyone’s guess.”
Off the top, the deal looks reassuring for Sun’s customers, because it gives the brand name badly needed financial backing. Is there any downside to having Oracle step in to take over these franchises?
“The primary potential downside of an Oracle acquisition for Sun customers is the impact it might have on portions of the portfolio,” O’Grady said. “In the hardware space, these concerns would manifest themselves as questions over Oracle’s commitment to this market and the products in general.
“The infusion of hardware and software assets that Oracle would achieve via a Sun acquisition have broad implications from pricing to product availability to strategic direction. It’s impossible to say what direction Oracle will take with these assets, but whatever happens Oracle is more relevant to that market than ever.”
How Will Customers View the Deal?
Martins said he wasn’t sure about how customers will view the deal.
“I’m simply not sure at this point,” he said. “We may see a mass exodus [of Sun customers] over the next couple of years, unless Oracle presents a clear and compelling vision for its customers.”
Martins also wondered about the value of StorageTek’s tape business.
“Sun’s tape [business] is now up in the air. I mean, really, what the heck is Oracle going to do with STK [SotrageTek] remnants in a market that’s not dead, but slowly dying?” Martins said. “I’d like to see those assets sold off to a company that is willing and able to actually support it over the next several years, but who?”
Enterprise Strategy Group storage analyst Brian Babineau believes Oracle has two options to choose from regarding its new storage products/services cache.
“They can go vertically integrated; i.e.: only sell storage with a database and server, and specialize [the solutions] with an application,” Babineau said. “Or they can maintain a horizontal business [i.e.: sell storage systems against EMC, NetApp, Dell, HP, and others] while building vertically integrated solutions.
“I’m betting that they do the latter, which would make this a very interesting market from a competitive standpoint. That being said, storage hardware doesn’t have the same margin profile as software — or integrated systems with software.”
An ‘Interesting’ New Market About to Emerge
What makes this a more interesting market from a competitive standpoint, when Oracle enters the storage sales competition?
“Most of the storage vendors’ sales people chase Oracle sales people around, because when a database is implemented, there is a high likelihood that new or incremental storage capacity will be needed,” Babineau said.
“If Oracle is now selling storage, this cat-and-mouse game could get flipped upside down, with the traditional storage vendors having to fight against a once easy-to-work-with ‘partner.’ “
If you chase a mouse long enough, you may not catch it, but are likely to find cheese, Babineau said. Thus, you get to eat your fair share.
“But, if you cannot catch the mouse, and it eats all the cheese, then you spend all your time running around — and you starve,” Babineau said.
Will Oracle become that uncatchable mouse? Lots of storage companies are wondering this right about now.