Oracle's move for Sun poses tricky questions for CIOs

Oracle snaps up Java

The news of database giant Oracle's proposed offer to buy troubled enterprise hardware and software vendor Sun Microsystems for $7.4bn (£5.1bn) caught many market watchers off guard. IBM had been in the running to buy Sun, but failed to agree a price. But what will the deal mean for IT chiefs, especially those Sun customers who have invested heavily in its hardware and software?

One of the major attractions for Oracle is the potential to offer enterprise buyers an integrated end-to-end system, a point underlined by its chief executive Larry Ellison: "Oracle will be the only company that can engineer an integrated system – applications to disk – where all the pieces fit and work together so customers do not have to do it themselves," he said in a conference call to discuss the deal.

So why is Oracle paying $7.4bn for Sun?

One major reason is that Sun had some valuable technology that Oracle could get for a reasonable price, said Quocirca principal analyst Clive Longbottom.

"They bought it to get their hands on Java, not Ultrasparc," said Longbottom.

"Oracle is in a far better position to optimise the whole Java stack from the virtual machine to the language as well, but remember Java is much broader than enterprise middleware," he added.

Sun's Ultrasparc customers probably have the most to be concerned about regarding the proposed deal, said Longbottom, given Oracle's previous enthusiasm for commodity hardware.

"I think that Oracle will go over to an Intel-based approach and use Solaris as a cloud-based OS for massive grid-type compute clusters."

Longbottom said Oracle could give people a future path off Ultrasparc, "but will still be based on Solaris, because it makes sense for Oracle to tune up Solaris as a database application server," he added.

What Oracle intends to do with the open-source databases, MySQL, that acquiring Sun will deliver, is less clear.

There may be some synergies between MySQL and Oracle's own proprietary database, said Datamonitor supply and demand analytics senior analyst Vuk Trifkovic.

"MySQL's potential is enormous, and it is perhaps the fastest-growing database platform around. I see MySQL and Oracle as highly complimentary, although Oracle may use it as a cross-sell and up-sell play," he said.

However, Quocirca's Longbottom disagrees.

"Don't expect Oracle to start saying, we've got this really great open-source database that anybody can have and use in any shape or form, and if you don't like it you've got Oracle 10G, which is incredibly expensive, complex and requires 140 people to look after one row on a table."

While it may be too early to predict how the Sun acquisition will play out, the deal represents yet more consolidation among IT vendors, which in itself is forcing IT leaders to re-evaluate their buying strategies.

"They want a more consolidated vendor landscape with easier purchasing options, that is, to invest in specific ecosystems rather than in best-of-breed technologies. So CIOs might get a better deal, but the opposing argument says their choice will be reduced," said Trifkovic.

For Trifkovic, it all boils down to what firms' IT requirements are, and how well their business strategies align with those of the big consolidated vendors – such as an Oracle-Sun fusion.

"If the two fit well, there could be huge potential for efficiencies and consolidation, if not, there could be some friction between the direction these conglomerates are taking, and the direction your IT department is taking," said Trifkovic.

After years of intense consolidation among IT vendors, CIOs may gain from reducing supplier management costs, but this needs to be balanced against the risks of being locked in, said David Mitchell, research senior vice president at analyst group Ovum.

The acquisition is expected to close some time in the summer, subject to the usual regulatory reviews.