Analysis: Ellison's Pillar likely get new BFF with Oracle-Sun merger

After Sun buyout, Oracle may opt out of a reseller partnership with Hitachi

In all the hoopla over Oracle Corp.'s planned $7.4 billion buyout of Sun Microsystems Inc., little mention has been made of Pillar Data Systems Inc., a separate storage company founded by Oracle co-founder and CEO Larry Ellison.

But San Jose-based Pillar could end up getting a sweet and not-so-unforeseen piece of the data center pie as a result of the marriage of the two industry stalwarts.

Pillar sells a modular storage array called the Pillar Axiom. Based on commodity hardware, the Axiom acts as an application-aware storage-area network (SAN) and network-attached storage (NAS) server under a single management interface. The software used to manage the array automatically allocates CPU, cache and storage capacity separately to applications as they need additional resources.

Ellison launched Pillar in 2005 after four years of development and $150 million from his investment firm, Tako Ventures LLC. Ellison positioned Pillar as a legally separate business from Oracle aimed at competing with storage heavyweights such as IBM, EMC Corp. and Hewlett-Packard Co.

With the proposed Sun takeover, Oracle gains the hardware side of the data center that it has been looking for to compete against IBM, HP and other systems bigwigs. According to Bob Maness, vice president of worldwide marketing and channel sales at Pillar, it's likely that Oracle will see the benefits of a deal to resell Pillar's products through its Sun hardware arm once the deal is completed, though he hasn't been told anything officially.

Currently, Sun high-end storage systems consist of rebranded Hitachi Data Systems (HDS) arrays, while its low-end systems are from LSI Logic Corp. Sun also bought out tape library and disk subsystem manufacturer StorageTek but has done very little with the company. The only storage array Sun manufactures is its midrange Sun Storage 7000 Unified Storage System, which Maness said does not compete with the more sophisticated technology from Pillar.

Maness believes Oracle will no longer see a need to continue the reseller agreement with HDS once the merger goes through.

"Larry has made it clear he's going after the server market, and storage is a part of that. Larry is not going to take that [HDS] deal with him [when the merger closes]," Maness said. "We're excited about the ... opportunities of the whole Oracle-Sun deal. We'll have an opportunity to participate in that data center stack. We have better products than Sun. We will have a go-to-market outlet that we didn't have prior to this.

"Larry knows how to monetize technology," he added.

Mark Peters, a senior analyst at Enterprise Strategy Group in Milford, Mass., agreed that cozying up to Pillar as a reseller -- or even as an outright acquisition -- would be smart for Oracle. But he also noted that Oracle will need to be careful about increasing the angst for existing Sun storage customers.

"You can see the logic in having storage as part of Oracle product package, not just because of what Larry and Oracle [have] already done in terms of hardware, but it's not a big leap if you're talking about applications to have the hardware to go along with it," Peters said.

Peters compared the possibility of Oracle either penning a reseller agreement with Pillar or buying it to an overall industry trend of large systems companies scooping up smaller storage hardware and software providers. For example, he pointed to HP's proposed purchase of clustered NAS vendor Ibrix Inc. and Dell Inc.'s purchase of iSCSI storage vendor EqualLogic Corp.

"Pillar is doing reasonably well now -- they have some avid customers and industry supporters and good technology. But if they become part of an [Oracle-Sun-Pillar] conglomerate, that gives them and their tech a lot more access to buyers," Peters said. "And, I'm sure Oracle would like to rule the world, as would the other big players."

Copyright © 2009 IDG Communications, Inc.

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