It wasn't supposed to be this way: Sun's hardware was supposed to let Larry Ellison and Oracle extend seamlessly and appealingly from the data center to the desktop. Sun's customers were supposed to feel safe and nurtured in the bosom of one of the world's most powerful technology companies. Oracle's new competitors like Hewlett-Packard and IBM, which itself had considered buying Sun, were supposed to be sent scrambling for alternative deals. And antitrust regulators were supposed to be mollified by Oracle's promises that it would play nice with competitors using Sun's Java and MySQL, allowing the deal to close by summer's end.
After all, you don't pay $7.4 billion for a head-case fixer-upper with commitment issues, do you??
But regulatory hangups are dragging out the completion of the deal at least until Sept. 3 and possibly until January, and until that completion is achieved, Sun has to operate as a fully independent company. That means that all the extensive plans for offering customers software-optimized hardware and the full shooting-match of products from applications to disks must remain on hold until European Union regulators decide on Sept. 3 whether to approve the merger or demand an additional four-month review.
But IBM and HP, however, face no such lockdown on their activities and both say they are feasting on apprehensive Sun customers as Oracle stews in legal limbo. As we noted last week, an IBM VP says Big Blue has racked up more than 250 customers wins involving Sun customers in the past six months, and during that same time HP says it has bagged more than 100 Sun customers for servers and storage products. Worse yet for Oracle, those haven't been random cutovers that happen all the time in the broad and often-cutthroat IT marketplace: They came about as the result of very specific and richly detailed migration plans that HP and IBM have launched to decimate Sun's customer base while the regulators keep Oracle on ice.
And while at least some Sun customers seem to be loving the results of the current impasse, the situation's not going to get better for Oracle anytime soon: Because regulators in the U.S. and particularly in the European Union might very well commit to nothing short of a comprehensive proctological examination of Oracle and its intentions (real or imagined) with Sun that could take until January to resolve, the highly motivated sales teams at HP and IBM and Dell and EMC have unleashed extremely aggressive recruitment campaigns that are so tantalizing and wide-ranging that even college basketball coaches could learn a thing or two from them.
The regulatory issues, which are a part of many same-industry acquisitions, have become particularly pressing in the case of Oracle/Sun due to regulators' concerns over Oracle's plans for Sun's widely used Java programming language and related technologies; a particularly nettlesome point for the regulators is whether Sun will seek to limit Java's availability to competitors. And with each passing week and possibly each passing month that regulators on both sides of the Atlantic ponder and speculate and probe and parry and go on holiday and consult fortune-tellers, the Sun customer base for which Oracle is willing to pay dearly will be hammered relentlessly by HP and IBM sales teams sent out with orders not to take "no" for an answer.
In the meantime, Oracle is soldiering on without so much as a blink. Late last night as this column was being written, a look at the Oracle Corp. homepage revealed a giant boldfaced headline across the top of the page shouting "Oracle Buys Sun." Adjacent are links to a wealth of information about all the good things the purchase of Sun is supposed to portend for the company and its customers and partners: a transcript of an interview with CEO Larry Ellison about the deal; a letter to customers and partners from president Charles Phillips outlining the benefits of the acquisition; and a collection of favorable comments from Oracle and Sun customers.
Dell has also gotten in on the efforts to woo Sun customers although, consistent with Dell's low-key approach to the enterprise market, it has eschewed any catchy slogans and instead simply promises "a comprehensive set of services, as well as tools, guidelines and other resources to help businesses effectively migrate from RISC-based systems.
HP has dubbed its campaign the Sun Complete Care program, and if HP's delivery sounds even half as good as its promise, it can expect to see its number of Sun recruits jump significantly.
HP says it's offering Sun customers "... a wide variety of specialized services, support programs and financial incentives. These include business case development, assessment, design, migration and support to financing options, as well as education programs and trade-in opportunities on hardware and software. Additionally, as part of the company's 'green' initiative, HP will dispose of customers' retired or obsolete technology assets."
In addition, HP trashes the pricing and performance of some of Sun's products, particularly with respect to how they perform running Oracle databases: "On average, Sun customers are paying up to 80 percent more in total cost of ownership (TCO) for Sun SPARC servers than customers using HP Integrity servers. Many applications are also significantly more expensive to run on SPARC servers compared with HP servers. It costs 50 percent more per core to run Oracle’s database software on SPARC than on HP Integrity."
Now, that's tough talk, even if those numbers can be replicated in every example. And you have to wonder if that type of eye-gouging will have any impact on the cuddly relationship Oracle and HP seem to have with their new Exabyte database machine, which Ellison has referred to on more than one occasion as the "most exciting product the company has had in many, many years."
Just a thought: Exabyte is an example of Ellison's concept of "software-optimized hardware," which he has said would become a huge benefit of Oracle's acquisition of Sun. In partnering with HP exclusively for the Exabyte machine, Oracle has had to work on an extremely intimate basis with HP engineers and developers. Will such intense collaboration be able to continue after the Sun deal is consummated and Oracle's sales team finds itself in frequent and intense competition with the HP sales team for server and storage business?
How about with HP's EDS services business: Will it be able to offer and support Oracle products when they are clearly the best solution for customers? Again, I'm just asking.
On the other hand, IBM has long been accustomed to slogging it out to the death with Oracle in databases, middleware, and other fronts. IBM's message to Sun's current customer base about "Don't settle for an uncertain future" is, like HP's, backed with a dazzling array of offerings that only the two largest IT companies in the world could provide. And IBM begins its offer with a swift kick at what is now a very vulnerable area for Oracle:
"The undefined future of Sun's hardware plus Oracle's lack of experience in running a hardware business puts your infrastructure at great risk for forced migration and increased cost," IBM says. "But don't worry, IBM has migrated 5,000 customers worldwide in the last 4 years from competitive platforms, and we offer a clear, cost-effective roadmap for Sun customers like you. Let us prove it. Join the Movement."
IBM then offers "two great reasons to migrate now," featuring deep technical rationale with the "IBM Systems Migration Assurance" and financial/merchandising incentives with "The Sun-Set Special." That Sun-Set Special says, "Migrate from Sun servers to IBM by December 31, 2009 and you can earn up to 8,000 Power and zRewards points per core. Those points can be redeemed for selected services and software products from IBM and our partners."
But if it's true that one man's ceiling is another man's floor, then Oracle's tribulations in regulatory hell could well be a tremendous boon for CIOs. Because in these rough economic times, when CIOs are loath to spend but IT vendors are desperate for sales, the programs that IBM and HP have laid out could well become the baseline by which those and other companies will agree to deal with all customers, not just Sun's.
And that could be extremely vital for CIOs who must find creative ways to begin to reverse the 80/20 ratio (80% of IT budget sucked up by internal requirements, leaving only 20% for innovation) in order to be able to fund growth-oriented projects that will be indispensable when the economy turns around.
As JPMorgan Chase CIO Guy Chiarello, one of the world's top CIOs, recently described the opportunity to InformationWeek's Mary Hayes: "For Chiarello, these are good times to get work done, even with the "tremendous pressure" on his IT budget. Chiarello doesn't know how long the vendor price competition of this economy will last, but the company's positioned "to make it last forever, because I won't pay a dollar more [than I paid] for the last thing I bought." "
Bob Evans is senior VP and director of
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