There has been much speculation in the news about Oracle buying Sun today. Unlike the potential IBM acquisition, this seems like a better, if unexpected, fit.
For a number of years now, there has been a large amount of consolidation in the tech business. The goal of most of these consolidations has been to create vertically integrated companies that were capable of meeting the end-to-end needs of their customers. Novell had this idea years ago when it bought Cambridge Technology Partners, but the ball really got rolling when Compaq bought Digital, largely for it’s consulting business. More recent consolidation has seen HP buy EDS, but this has not been the only way vertical integration has been created. Microsoft followed the route of expanding it’s software offerings to the high-end, while IBM built a large services business.
The net-net of this has been the reversal of almost 30 years of broad horizontalization in the tech business. Vertical integration was the norm in the 1960′s and throughout much of the 1970′s. The introduction of PC’s and other technologies led to a layering approach where integrators could mix and match hardware, operating systems, middleware and other components, to build sophisticated combinations that solved business problem. The downside of this approach, at least for technology providers, was that most of the value was in integration, not components. “The people with the glue guns”, as Larry Ellison once derisively called integrators, were making more money than the component makers.
In response to this, large tech vendors started to build or purchase large professional services organizations to provide better integration and IBM was among the first to adopt this approach. Coupled with the rise of the internet and web browser as an application delivery platform, the momentum started to shift away from best of breed to pre-integrated component stacks on which applications could be built. Further abstraction and platform independence through interpreted languages like Java made it clear that real value was not in integration but in novel and unique solutions at the top level. The commoditization of lower parts of the stack by open source solutions like LAMP further accelerated the trend.
Having failed to make the transition, all of this left Sun largely without a growing market and largely adrift. Oracle’s purchase gives Sun the opportunity to be relevant again, this time as the foundation for a vertically integrated set of solutions around Oracle’s technologies. Coupled with innovations like Sun’s BlackBox datacenter in a container, it’s possible to see high-end, high-availability, enterprise scale solutions being delivered as appliances rather than the traditional piece parts. Indeed, Larry Ellison hinted at this this morning, saying that Oracle can finally deliver “a complete industry-in-a-box”.
For most enterprise customers, having witnessed vendor consolidation over the last 15 years, the Oracle/Sun combination creates a new, 3rd competitor (beyond IBM and HP) with a viable set of end to end solutions. Those happy with the glue gun approach will stick to large integrators like Accenture and Cap Gemini.
All-in-all, this is possibly a better outcome than IBM buying Sun.
P.S. I would note that Oracle is likely to focus on support as it has huge margins in this area. Funny enough, Dave Dargo, former VP of Open Source at Oracle, pretty much outlined a strategy around broad support of open source apps like mySQL years ago….