Still staring at the Sun?

It’s surprising to think that it was only as recently as 2008, when IBM approached Sun with a view to acquire it. HP was the only other vendor in the running for the takeover. At the time of IBM’s acquisition interest, Sun was wounded after years of leading-class innovation being undermined by weak commercial management.

Fast forward to 2011, and it’s Oracle who is in control of Sun - the server market has changed dramatically. So, let’s take a look at how it all came about.

Let sleeping dogs lie

Back in 2008, Oracle took a ‘breather’ after feasting on over 60 acquisitions in the preceding seven years, which would have left IBM with a clear run for Sun apart from the hurdle of regulators that could block its path. But IBM’s sudden intent to acquire Sun jolted Oracle out of its slumber, as the software giant suddenly became aware of the threat to its server business.

Oracle knew that the Sun acquisition would help IBM accelerate towards a more dominant market position. However, what really got Oracle sweating was Java, part of Sun’s portfolio, a critical building block in Oracle's product set .

Power Struggle

Once Oracle realised how detrimental the loss of Java to IBM would be, it started assessing its options but was stuck hoping for a chance to place a bid as IBM was still negotiating. However, the software giant was in luck. The IBM discussions stalled as it struggled to value Sun’s assets. Oracle took this opportunity and sealed a $5.6bn agreement with Sun in April 2009.

All Oracle’s shareholders and the US Government were at peace after the approval of the deal. Unfortunately, before the ink could dry on paper this peace was shattered. Neelie Kroes, European Commissioner (EC) for competition weighed in with objections. The EC had placed concerns about MySQL control as a central competitive concern, causing a nine month delay that gave IBM and HP the chance to exploit the market’s short-term uncertainties by offering Sun switch-outs.

Was Neelie right?

Looking back, Kroes had a good point. The Open Source brigade wouldn’t thank her for that, and Oracle will always be dismissive of them. However, MySQL was never Oracle’s biggest concern.

Why would Oracle disrupt or overly commercialise what competes nicely in the MS SQL Server space and is wholly outside the mainstream enterprise data centre database market?

Unfortunately, it seems like Kroes missed this too. She didn’t realise the impact the acquisition would have on the relationship between enterprise software licensing, enterprise server configurations and the overall stack.

It’s this relationship that changed the competitive dynamics of enterprise data-centre vendors, and the element that left Oracle as the front runner.

The next post will take a deeper look at the consequences of the Sun acquisition and how it has affected today’s competitive landscape.


Copyright © 2011 IDG Communications, Inc.

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