The big Oracle acquisition that has The Street talking is none other than Sun Microsystems, Inc. The acquisition of Sun following on the heels of Oracle’s HP Oracle Database Machine last year signals a new era at Oracle – selling hardware. Despite the European Commission review of the Sun-Oracle deal, we believe that once the E.U. completes its investigation, it will rule in Oracle’s favor and the company will get its Sun business back on track.
In the meantime, we continue to get a lot of questions these days about how Oracle licensing will be affected by the Sun acquisition, and how customers might benefit … or not. While we can’t say for sure, as Oracle hasn’t announced any plans yet, I can only tell you what I think will happen and how Oracle and Sun customers will benefit.
Initially, we believe that Oracle will push the lower-end Sun boxes because of their popularity, and announce a bundled pricing of hardware and software with major discounts in licensing contracts with a two-year shelf-life. In the short-term, the pricing will be a relative bargain and everyone will be happy.
In my opinion, though, it is likely that the licensing will have strict limitations to prevent server substitution at a later date – meaning that you won’t be able to move the licenses onto another server (not even another Sun server). With that said, these bundles and discounted licensing would be a win-win for everyone. From a cost perspective, Sun and Oracle customers will get better pricing all around, while Oracle can go head-to-head with IBM.
However, if these super discount bundles come to pass, companies will need to pay attention to how this affects their longer-term IT strategy and budget. While Oracle may offer a sweet two-year deal, the reality is that technology will outgrow the licensing, as is the norm, and when the server is upgraded, cost will be, too. If our assumptions are correct, our advice to those purchasing a future discounted Sun-Oracle combo is to look for the best value while negotiating on the price. Don’t forget to look carefully at the Terms & Conditions. For example, negotiate for fixed ratios to be inserted versus naming the types of servers you are purchasing. By doing so, you will be able to move your license along to another Sun server when you upgrade.
Either way, Sun could be a game changer for Oracle as the company starts down the path of hardware sales. Despite the news that Sun’s Q4 loss feeds talk of Oracle selling the hardware unit, I believe Oracle will turn Sun Micro into an extremely profitable business. Larry Ellison hasn’t lost his Midas touch yet!