Oracle Rolls Out A New “Red Stack”
With EU approval out of the way, Oracle finalizes the Sun deal and resumes its quest for the largest share of the IT wallet. Oracle’s 60+ acquisitions follow a concerted strategy and Sun adds key areas such as servers and storage. The stack now comprises Vertical Apps, Horizontal Apps, Middleware, Database, Operating Systems, Virtual Machines, Servers and Storage (see Figure 1). Customers and prospects can expect more details on each of the integration points and how Oracle’s engineering teams will collaborate to bring interoperability to the stack.
Customers and Prospects Can Expect Oracle To Follow Its M&A Playbook
As with previous Oracle acquisitions, the Redwood Shores, CA vendor intends to increase the aggregate investments in R&D, support, and sales. Where possible, Oracle plans to create innovations among the stack but also significant barriers to entry. Back office functions and other inefficiencies will most likely lead to an elimination of positions. Oracle will reach out to customers with a 70 city tour to address concerns, consider feedback, and discuss future road maps. Investment in new SPARC chips represents one example of how Oracle will continue innovation post acquisition. Despite not buying any fabs, Oracle will continue the development of four new SPARC chips beyond the current US-T3. Key feature sets will include new processor cores, higher frequencies, smaller sizes (e.g. 40 nm to 28 nm). Expect more cores, higher frequencies, larger caches, next gen memory, next gen IO, improved power management.
The Bottom Line For Customers – Organizations Gain Efficiencies But Must Balance Lost Of Leverage And Choice
Charles Phillips referenced the gold standard “IBM” experience of the 1960’s. As Oracle tries to recreate the vertical stack, the software vendor promises to keep building on open standards. Given the economies of scale achieved, Oracle can commit $4.3B towards building an integrated “Red Stack”. Should Oracle succeed, they will eliminate a lot of waste that IT leaders have faced with integration, security, and scalability. “One throat to choke” brings significant appeal given complexity in today’s technology. However, customers must carefully balance the risk (i.e. the lack of competition and the complexity of owning multiple, yet disparate technologies) with the benefits (i.e. improved integration and cost effective innovation). Consequently, customers will want to preserve third party maintenance rights as industry consolidation will continue and they will need to keep some level of choice and balance in the marketplace.
The Bottom Line For Vendors – The “Red Stack” Creates A Major Force In Competing For IT Wallets
Vendors competing or partnering with Oracle must take note to understand the new dynamics in the technology vendor “Stack Wars”. Oracle’s model to directly sell to its top customers, ask partners to specialize to create customer and Oracle value, and increase dominance in R&D investment, will force smaller competitors to rethink relationships and potentially create new alliances. Partners must carefully think about their long term competitive strategy or else maximize exit strategies in the short term. Those partners who spend time building and providing solutions on the Oracle “Red Stack” will profit the most. Those partners in the way of Oracle’s long term tech strategy will become major competitors.