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Oracle OpenWorld: After the penguins...

2nd Nov 2006
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As the streets of San Francisco are cleaned up following the Oracle OpenWorld conference last week, the analyst community has been passing judgement on the announcements made at the event and how the firm's increasingly deep software stack stacks up.

"Oracle offers more packaged business applications than the other Big Four players — IBM, Microsoft, and SAP — and increasingly wins customers with its strong portfolio of runtime middleware products," notes Merv Adrian, senior vice president at Forrester Research.

"However, despite its leadership in the DBMS market, Oracle has gaps in its information management and architecture and development stacks, and it is clearly not focusing on the management and security elements of IT infrastructure. Therefore, Oracle today is not a candidate for single-vendor status in those areas.

"Clearly strong where it plays, Oracle must continue to enhance its portfolio if it hopes to capture a higher share of software spend in its target audience. In the past few years, it has acquired packaged applications and other products aggressively. We expect that Oracle will focus on additional parts of the portfolio, such as content management, security and business intelligence (BI)."

The most eye-catching announcement at the conference was of course the move into the Linux support space, which poses a clear threat to Red Hat.

Oracle will provide full support for the Red Hat Linux distribution and will compete against Red Hat's support. It will offer discounts until 31 January 2007 and claims its list prices, on average, will be 50 per cent lower than Red Hat’s list prices. Oracle promised to indemnify users against Linux patent infringement.

"Gartner has previously stated that Red Hat users will likely face increasing support and service problems as Linux-based mission-critical systems become more complex," says Gartner’s Donald Freiberg.

"Red Hat's dominance is due to users needing to rely on a standard distribution that has widespread industry support and certification, which means they don't need to worry about patch management or whether the kernel has been modified ("forked"). Oracle's intention to provide the open-source community with patches could still potentially result in forks.

"Oracle's entry into the Linux support market will inevitably slow Red Hat's momentum and raises doubts about its long-term viability. Just as significant, Oracle has given the growing commercial open-source vendor community a wake-up call. It is demonstrating that proprietary-licensed vendors have the means to selectively adopt open-source business models in a way that turns the tables on who is marginalising whom."

Gartner also highlighted the fear that Oracle’s move could kill the Linux support market altogether. Oracle CEO Larry Ellison insisted: "We are trying to speed adoption of Linux. We don’t want to kill Red Hat. We expect Red Hat to compete aggressively. This is capitalism. We’re competing."

But Red Hat doesn’t have much wiggle-room. It doesn’t own the code it distributes, and is bound by the open source licensing of the Linux project. "It has a head start and a good track record in supporting customers, but it now has a well-healed and well-connected competitor," concludes Gartner.

In the Software as a Service (SaaS) space, Oracle made further noises with managed services offerings for PeopleSoft and Siebel in addition to the existing services for Oracle E-Business Suite.

"The release may confuse some buyers with the incumbent multitenant Siebel CRM On Demand offering," warmed AMR Research’s Robert Bois. "The two new Oracle products are not multitenant software-as-a-service (SaaS) subscriptions, but are managed applications, closer to the traditional application service provider (ASP) model. Although this is not true SaaS from a deployment standpoint, the pricing is much like the SaaS model.

"The biggest challenge for buyers in this case may actually be the on-demand nomenclature. For example, the true multitenant SaaS CRM On Demand product acquired from Siebel is now called Siebel CRM On Demand, while the single-tenant managed applications in this announcement are called On Demand for Siebel CRM and PeopleSoft Enterprise On Demand. The naming conventions lack consistency, which can be particularly challenging for an emerging delivery model still somewhat cryptic to many prospective buyers.

"Like almost every other large software vendor, Oracle is riding the on-demand wave. However, it is betting that multi-tenancy SaaS is really more appropriate for smaller enterprises, or enterprises requiring less breadth in functionality. While SaaS has seen the greatest adoption in smaller enterprises to date, companies like and RightNow are seeing increased success and demand for SaaS applications within large enterprises. But the reality is SaaS and on-premises applications will frequently work side-by-side in many organizations, and Oracle is positioning itself well for that future."

Stuart Lauchlan
News & Analysis Editor
[email protected]

Further reading

  • Oracle: Making penguins an endangered species

  • Oracle OpenWorld: Ellison p-p-p-p-picks up a penguin

  • Oracle OpenWorld: Wookey gets buzzword compliant over Fusion

  • Oracle OpenWorld: CRM on the move

  • Oracle OpenWorld: Phillips stacks up the portfolio

  • Oracle OpenWorld: On Demand expands

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