Oracle Vs. IBM,: Desperate Measures, Desperate Times - InformationWeek

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9/18/2009
06:57 PM
Charles Babcock
Charles Babcock
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Oracle Vs. IBM,: Desperate Measures, Desperate Times

In the Sept. 11 story, "Oracle Fights IBM Poaching With Ad," I wrote that Sun used to lead the Unix server market, now IBM does, with HP second. That was once true but the reality is more complicated. HP has slipped to number three, and Sun is number two; therein lies a tale.

In the Sept. 11 story, "Oracle Fights IBM Poaching With Ad," I wrote that Sun used to lead the Unix server market, now IBM does, with HP second. That was once true but the reality is more complicated. HP has slipped to number three, and Sun is number two; therein lies a tale.In January 2006, InformationWeek produced a cover story, "What's Left of Unix?" As the story pointed out, it was still a big marketplace, nearly equal to Windows Server in terms of revenues, despite its legacy trappings.

In the third quarter of 2005, the most recent figures available at the time, Sun had reached its nadir in terms of market share at 26%; it and would soon start climbing out of third place and become number two in 2007, future IDC numbers would show.

HP was in the lead in the third quarter of 2005 with 32% market share but about to drop back into second, as IBM began a long climb from third place to second and then first, later figures would show. IBM never looked back and has had the market share lead in Unix ever since. Today the disparity is greater than before. The numbers are IBM, 41.4%; Sun, 27.3%; HP, 24.8%, according to IDC's "factory revenue" figures, hard numbers on the value of Unix servers shipping from their manufacturers.

In other words, for a long time IBM has been taking market share from both Sun and HP in terms of revenues. When Oracle announced it was acquiring Sun, I felt that announcement would accelerate, not decelerate the trend. That's because the Unix market is a software market married to hardware. The purchaser needs to have confidence in both the operating system and the server architecture it's slated to run on in order to stay in the fold.

No such issue plagues Windows or Linux, where x86 hardware is both plentiful at multiple performance levels and available from two primary suppliers. In acquiring Sun, Oracle appeared to be doing another of its customer base acquisitions--it gained huge numbers of new customers by buying up PeopleSoft, Siebel Systems and J. D. Edwards. Why couldn't it succeed in doing the same by acquiring Sun? But it may not have been in the cards for this deal to work out that way.

Oracle announced the acquisition at a time when Sun's customer base was already considering its options. After the recessions of 2001 and 2008, telcos and Wall Street firms -- major Sun customers -- have few ties of nostalgia to their hardware. They are under cost pressures and cannot afford to guess wrong when they buy a lot of new hardware. Many had been voting with their feet and choosing IBM's Power architecture and AIX because IBM continued to update Power with relentless regularity. The next generation of UltraSparc, on the other hand, was up in the air. Unconfirmed reports said Sun's Rock Project, expected to produce the next line of advanced Sparc servers, was dead. Sun was cutting employees and expenses, and designing next generation hardware is a huge expense. Despite all this, Sun is still the number two Unix vendor. That's because HP has also had its share of problems holding onto HP-UX customers as acceptance of its new Integrity servers, based on the Itanium architecture, faltered.

If you're going to demand high prices for high performance Unix servers, you will need a strong version of Unix and a convincing hardware story.

Oracle CEO Larry Ellison is trying to beef up the Sparc roadmap by talking about how Oracle will invest in Sparc. He says Oracle will invest more in Sparc than Sun does, but customers have been showing they didn't have a lot of faith in what Sun has been investing. How much more is Oracle's "more?"

By focusing attention on IBM's success at wooing Sun customers, Oracle may find more Sun customers considering IBM as the acquisition drags out. Ellison as much as anyone knows this. But he can't really answer the questions about Sparc until he owns it.

So instead Oracle calls attention to its own predicament through ads in the Wall Street Journal and Web site challenges to IBM. Desperate times may breed desperate measures, but somehow, it doesn't feel like these moves are boosting confidence in the underlying architecture--the one thing needed to sell more Unix.

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