Why couldn't MySQL endanger Oracle's sales?
It's over at the end of the year. Then the headquarters of Sun Microsystems in Germany, inaugurated in 2000, will be history. The workplaces will be relocated from Kirchheim-Heimstetten to Oracle's Munich headquarters. In the USA, Facebook moved into the almost 24 hectare former Sun campus in Menlo Park, California, in the middle of the year.
These two events underline the impression that many users and partners gained shortly after the takeover by Oracle a year ago : Sun Microsystems is a closed chapter in the increasingly extensive book of IT history. Because with no grace period and regardless of customs and traditions, the Californian software company set out to impose its business model on the workstation and Unix pioneer.
Ultimately, the purchase price of 7.4 billion dollars or 5.6 billion dollars after deducting cash and liabilities will be financed. The measures that were promised at the time, such as downsizing the system portfolio, concentrating on high-margin high-end systems, streamlining the supply chain, eliminating warehousing and standardizing support structures initially sounded no different from other takeovers. In the course of the past twelve months, however, they have taken shape - with sometimes unpleasant consequences for customers.
At the time of the takeover, Oracle boss Larry Ellison had promised loudly, as usual, to lead the loss-plagued computer manufacturer and Java owner out of the red immediately under the management of his company. It should be noted that Ellison was apparently right again. Because the Sun purchase has so far not turned out to be the financial disaster for Oracle, on which the competition from HP and IBM have been secretly betting. On the contrary: Already in the first half of the 2011 financial year (June 1 to November 30, 2010) the “new” hardware division of the US company earned almost 3.5 billion dollars, around 1.3 billion dollars more than in the second Half of the previous year (see table "Oracle's half-year balance sheet"). Even the profit side increased, even if the increase of 25% was less than the increase on the income side of 47%. According to its own information, Oracle was able to increase the gross margin on hardware to 53%.
The figures from the interim report once again confirm that Oracle knows where Barthel gets the must. As a software manufacturer of traditional color, the company has a well-oiled update and maintenance machinery as a source of income. In the past, the US company had repeatedly demonstrated how quickly and profitably it can integrate the products of bought-up companies into this machinery.
It was therefore obvious that one of the first measures on the agenda was the reorganization and revision of Sun's previous support policy. The new regulations caused unrest among users of Sun systems from the start. Even the local Oracle user association DOAG (German Oracle User Group) was forced to ask its favorite manufacturer to be more transparent due to the new support regulation . Medium-sized users in particular (known to the editors) are so “pissed off” by the business conduct of the new owner that, after many years of loyalty to Sun, they vote with their feet and tackle the switch to x86 servers with Linux.
In a departure from Sun's usual approach, it is now “all or nothing”. If you want support from the manufacturer, you have to obtain maintenance from Sun / Oracle for all hardware systems you use. Oracle reduced the previously existing tiered support offerings to two variants: Premier Support for Operating Systems and Premier Support for Systems (computer including operating system and virtualization software). The price for Premier Support for Operating Systems is eight percent of the net system price. Premier Support for Systems is another four percent.
With the maintenance contract, the customer receives round-the-clock service. In the case of the complete package, Oracle also promises a two-hour response time for on-site support. However, this only applies if the technician's location is a maximum of 40 kilometers away. If the distance is 79 kilometers, the response window widens to four hours. If the distance is even longer, the person seeking help has to be patient until the next day. With a handful of support centers, there is consequently a high risk of belonging to the “late-servant” clientele. In the Hanover area, for example, there is no support point within the 40 or 79 km radius.
In addition to the “all or nothing” requirement, other framework conditions appear strange from the user's point of view. This begins with the fact that all Solaris-operated systems have to be at least on Release 10 Update 9. Anyone who signs a new contract must also prove that their systems are up to date. For this proof, in turn, you have to use the “Premier Support Qualification Service”, which is of course not free of charge. If you want to switch from the operating system support variant to system maintenance, you must also provide evidence.
It becomes even more costly for users whose maintenance contract is interrupted for more than 90 days or who only signed it after purchasing hardware. You have to shell out a "reopening fee" of 150 percent. In fairness, two things may be pointed out: On the one hand, the new features do not make maintenance more expensive for a company in every case; on the other hand, aspects such as the number of systems installed play a role.
Catch and Shackle
The bottom line is that the impression that Oracle is transferring support practices from the software world to the hardware segment is solidifying. Unlike in application environments, however, customers do not necessarily need a maintenance contract for all development and test systems. In the past, users have often concluded a support contract exclusively for their production systems. Or they left the maintenance of part of their systems in the hands of independent service companies. According to the Service Industry Association (SIA), Sun users worldwide will spend around 2.4 billion US dollars annually on this.
Now you have to know that the maintenance of your own products by third parties jeopardizes the core of Oracle's business model. The company reacts correspondingly aggressively, as SAP has learned extremely painfully . However, the intellectual property club, which is popular and vigorous in the software market, hits the target far less often in the hardware segment.
At the same time, Oracle is therefore trying to lure users to itself through the price. The difference of four percentage points between the two support offers leaves independent providers hardly any more room to survive. The SIA, the US interest group of independent service providers, has recently filed a complaint with the relevant authorities in the fifty US states and with the EU. She accuses the manufacturer of exploiting the dominant market position and monopolizing Sun hardware maintenance through the changed contractual conditions.
The new Sun owner still allows Solaris to be used on certified x86 systems from other manufacturers. In this case, too, the operating system can only be obtained from him. However, the interested user does not purchase the software; he currently subscribes to it for 792 euros per CPU socket per year. In return, he receives all the services that are included in Premier Support for Operating Systems. For smaller companies, this can mean an improvement in support compared to Sun. In terms of maintenance costs for the complete system, however, it will be difficult to undercut Oracle. Larger competitors will also hardly appreciate the fact that the US company secures a back door to its customers via the maintenance detour.
The anger on the customer side regarding the changed maintenance conditions is comparatively moderate compared to the waves of indignation that Oracle generates in the open source community. Many observers are convinced that the fears expressed by open source protagonists during the Sun takeover not only come true, but also turn out to be an understatement. Repeated requests for comments on the subject of maintenance and open source, such as OpenOffice, have unfortunately not been crowned with success. At best, reference is made to papers freely available on the Internet.
As is well known, at the very beginning of the Sun acquisition, the Oracle leaders described Java as the most important software asset their company has ever taken over. Quite a few prominent representatives of software houses were already concerned about the independence of the programming environment. The accusation against Google of violating Java license conditions or patents on Android seems to prove them right. For James Gosling, one of the forefathers of Java, this advance came as little surprise. Because the patent situation was already an issue during the integration talks between Oracle and Sun in the spring of this year. The eyes of the Oracle lawyers literally sparkled, reports Gosling in his blog . And Oracle knows how to make money with intellectual property - see SAP.
Oracle also plays “hardball” in other fields of open source, albeit less spectacularly. According to reports in US magazines, Oracle switched off the server provided by Sun for testing the MySQL alternative PostgreSQL under Solaris without warning . It took three weeks for the community behind PostgreSQL to organize replacements. It is almost ridiculous how Oracle more or less forced the Hudson community to rename the integration project of the same name to Jenkins. The company just relentlessly insisted on supposed naming rights after the dissatisfaction with the infrastructure requirements on the Oracle-operated java.net and Kenai platforms led to an outsourcing to a new website.
Battlefield open source
However, the shrinking commitment to OpenSolaris is understandable. After all, Oracle has been marketing the RHEL clone “Unbreakable Linux” for a long time. Two open source operating systems under their own flag hardly make sense - especially if the intention is to position the Sun operating system as an enterprise operating system for your own software. Now it is up to the communities around distributions such as OpenIndiana / Illumos, Nexenta Core Platform, BeleniX or SchilliX to show whether and how things are going with the "open" Solaris system.
In the case of OpenOffice, on the other hand, it was rather the uncertainty about the future of the project and the difficult dialogue with Oracle that led to the establishment of the LibreOffice alternative . According to insiders, Oracle uses its own resources primarily for the development of a commercially viable cloud office offering.
There is no question that Oracle has truly earned its reputation as a "bad company" from the point of view of the open source community. Seen in light, however, this was hardly any different before. The company was never particularly sympathetic. The fact that Oracle only upholds the open source idea where it serves its own business can be criticized. It is hardly really reprehensible, however, when someone exploits market rules in their favor. Because ultimately this argument can be used against many companies. Even Sun was committed to open source primarily to boost its own hardware and service sales. Fortunately, however, the open source environment in particular offers ample opportunity to set up alternative offers if, for example - as happened - Oracle cancels the inexpensive basic variant under the MySQL subscriptions. Perhaps the lack of commitment from Oracle should also be seen as an opportunity to shed the overly great dependency on one manufacturer.
Little by little, the veil is also lifting up on the future layout of the product portfolio. The main goal here right from the start has been “complete solutions from a single source”. Roughly this means: Everything that does not bring money and everything that does not come from us has no future. Hitachi Data Systems suffered from this policy, and its OEM partnership with Sun, which had been in place for years, was abruptly terminated . The smaller server and storage models are also suffering, as Oracle boss Ellison prefers thinking in large categories. The Exadata product line, for example, whose recently introduced top model X2-8 completely fills a rack, is being rapidly expanded. The past few months have also been characterized by the announcement of new server models based on the SPARC T3 (Niagara 3), above all the SPARC Supercluster "Sunrise".
In person, Ellison presented the SPARC version of the Exalogic Elastic Cloud - probably also to underline the SPARC commitment. In its highest expansion stage, the private cloud machine has a flash memory of five TBytes. The recently introduced StorageTek T10000C Tape Drive stores such a volume of data on a tape cassette, which increases the capacity of its predecessor T10000B fivefold.
Fears that Oracle “cannot hardware” have therefore not materialized. A more detailed analysis reveals, however, that the focus is clearly on the integrated hardware and software bundles. In particular, the Exalogic should go away like sliced bread. Ellison speaks of orders totaling two billion dollars. Given around 295,000 database and 150,000 middleware customers, such a well-filled sales pipeline for the new data machine is quite conceivable. Only Oracle has to convert the orders into deliveries if it wants, as Ellison loudly announced, to climb to second place among the high-end server manufacturers "shortly".
So far, Oracle / Sun has been the big loser in the global market when it comes to quantities (see table “Server sales from Sun / Oracle”). In relation to the servers delivered, the market share fell by a good third to 1.8% last year, while the market share in terms of sales fell by a quarter to 6.3%. The bottom line is that Oracle has sold significantly fewer, but more expensive systems.
We would have liked to hear Oracle's opinion on all of these points. But its representatives were not ready to comment despite the weeks-long deadline. But regardless of the justified criticism of Oracle's business conduct, there is one fact that the inclined observer should not lose sight of: Sun was - to put it mildly - in the last few years of independence really not been doing well. And whether the measures in a sale to IBM would have been more pleasing for users, staff or the open source community is certainly to be provided with big question marks. (sun)
is a specialist journalist for computer technology and specializes in IT companies and business software.
 Achim Born; IT market; Incorporated; Ellison did it: Oracle may buy Sun; iX 3/2010, p. 80
 Oracle Hardware and Systems Support Policies; January 14, 2011; www.oracle.com/support/collateral/hardware-systems-support-policies.pdf
 Achim Born; Economy; The Billion Sch (r) eck; SAP loses litigation; iX 1/2011, p. 36
 Oracle shuts down open source test servers; www.itnews.com.au/News/221051,oracle-shuts-down-open-source-test-servers.aspx
 Thorsten Behrens, Florian Effenberger; Open source; The freedom I mean ...; LibreOffice and The Document Foundation; iX 2/2011, p. 88
 Susanne Nolte; Storage networks; All in one; Storage Networking World Europe 2010; iX 12/2010, p. 8
- Oracle Implements Sun's Business Model; the maintenance of the Sun hardware should develop into a cash cow.
- At the same time, Oracle has spoiled itself with large parts of the open source community.
- The bundled hardware / software offers of the US group are going well. Nevertheless, the server businesses are declining in terms of numbers.
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