Updated 18-Apr-2006, 13:30: Added the postscript on the Boston Globe quote.
This morning saw reports in the Financial Times that "Oracle considers venturing into Linux". This was picked up by CNet (via Reuters) which set up the discussion about Oracle's desire to deliver a entire stack of technology to customers, and then drew attention to the quote that Oracle has even "considered buying Novell." And thus are rumour mills fed. Let's actually look at the discussion in a business context:
In an interview with the Financial Times, Mr Ellison said that Oracle wanted to sell a full “stack” of software that, ... included both operating system and applications. “I’d like to have a complete stack,” he said. “We’re missing an operating system. You could argue that it makes a lot of sense for us to look at distributing and supporting Linux.”
Not an unreasonable opinion. Go all the way back to Geoff Moore and Crossing the Chasm (1991). You want to present a "whole product" solution to your customer, i.e. your core revenue driver and all the complements you can reasonably provide that your customer perceives as the complete solution to their problem. If to sell an Oracle "solution" today means Oracle licenses and Oracle vertical specific applications, AND an expensive operating system on expensive hardware, AND an expensive application server, then reducing the overall cost to the customer while driving the core revenue generators would seem to be A Good Idea.
As part of a recent study of the open source software market, Mr Ellison said that Oracle had considered buying Novell, which after Red Hat is the biggest distributor of Linux. “We look at everything, play this thing out,” he added.
This statement should not surprise anyone that has worked in a large enterprise with a view of the executive offices. Companies explore ideas on paper constantly in their corporate/business development offices. Lot's of "what if" scenarios are played out, and numbers crunched without anyone ever committing to doing something. Companies even pay good money to the McKinsey's of the world for this sort of analysis even if they have their own inhouse "business consulting team". I'm sure Oracle has also run the numbers on Red Hat and SuSE (before the Novell acquisition) and developing their own distribution at various times in the past, and will do so again.
“Now that Red Hat . . . competes with us in middleware, we have to re-look at the relationship – so does IBM,” he said.
This last quote is the troublesome one (or maybe it's a misquote without context). Oracle is the enterprise relational database company. It's been expanding its brand with vertical specific Oracle applications. It needs middleware (i.e. an app server), like it needs an operating system on which to run, but it isn't a middleware company.
Go back to the original business goal expressed in the article, that Ellison wants to provide a complete stack or solution to his customer. Good idea, but he has better ways to spend shareholder dollars to solve customer problems than acquiring the stack outright, and then living with the cultural consequences and long term engineering expenses of becoming an "operating system company" and an "app server company" as well as their primary focus as the enterprise database company. Spending good money to get into other rapidly commoditizing businesses, rather than serving your customers needs by supporting companies like Red Hat with its JBoss acquisition that already know how to make money in a different margin business seems a waste.
As I suggested Friday, Oracle should be hammering down Red Hat's door to expand the relationship with all the money they saved by not acquiring JBoss, or in this case (hopefully) Novell.
P.S. You have to love news editors. I was interviewed by Hiawatha Bray from the Boston Globe yesterday. The quote as it appeared:
But Stephen Walli, vice president of Optaros Inc., an open source consulting firm in Cambridge, said buying Novell or Red Hat would be a mistake for Oracle.
''They would have to carry all that cost on their balance sheet," Walli said. ''I think it would be a really bad idea."
This is why I blog the whole idea. While accurate, the quote could mean it was a mistake for Oracle's business to carry the engineering expense compared to the value to their solution to their customers (which was meant), OR that Novell or Red Hat are dogs that one wouldn't want on one's balance sheet (which wasn't meant). Maybe I'm being overly sensitive.
Oracle could license OS X now that it can run on both Macs and Intel. Plus you get the OpenDarwin community...
Posted by: Ed Dodds | 18 April 2006 at 14:41