| Should Oracle get into the Linux business? |
Apr. 17, 2006
If Oracle were to get into the operating system business with Linux, would this be a good thing for the database giant? Industry watchers are all over the map with their thoughts on the matter.
On the plus side, Dan Kusnetzky, executive vice president of marketing strategy for Open-Xchange, said, "Oracle would then own the whole stack from operating system through application development, and deployment environment through the application." This is one of the goals that Larry Ellison mentioned in his Financial Times interview (subscriber-only link), which sparked this debate.
On the other hand, "If Oracle purchased Novell; many are likely to be upset," Kusnetzky added.
Top on that list of upset people would be IBM, said a consultant with a global system integrator who asked not to be named. "SUSE is critical to IBM because it supports all the IBM architectures. Oracle competes with DB2, although the SP2 (Scalable POWERparallel 2 supercomputer line) and zSeries (mainframe) are very important Oracle platforms."
Of course, it wouldn't be just IBM that wouldn't be pleased with a move by Oracle into the operating system space. Kusnetzky continued, "The same is true if Oracle purchased Red Hat. In any case, Oracle would find it increasingly difficult to work with Microsoft and some of the suppliers of Unix, because Oracle would have become a clear competitor."
Kusnetzky also thinks that "Customers may not be pleased. It is not clear that Oracle would allow its newly acquired Linux division to maintain a database, development tool, and application neutral position. Since it's [now] possible to move from one Linux to another, if the customer isn't happy, they can move to another distribution."
Gordon Haff, senior analyst for research house Illuminata Inc., scoffs at the notion that Oracle might buy Novell. "Buying Novell for a Linux distribution would be a little bit like buying IBM to get a database."
Still, Haff added, "Novell has so many other software assets. Maybe they'd collectively make sense as part of Oracle -- Novell sure hasn't exploited them as well as it might -- but Oracle would have to be prepared to absorb them, as much as a Linux OS."
"The fact is that there's nothing particularly magical about an Enterprise Linux distro," said Haff.
Kusnetzky agreed. "Oracle doesn't have to buy a big Linux. They can buy a smaller, more affordable, player, like Xandros or Rpath, and still get the operating system for a complete software stack.
Laura DiDio, the Yankee Group's research fellow for application infrastructure and software platforms, however, thinks Novell might make an ideal purchase for Oracle.
"At first listen, Larry Ellison's pronouncement may shock some, but the more you think about it, the more it makes sense. Linux is the fastest growing server operating system platform and there's lots of money to be made in this market for smart vendors with superior marketing and technical service and support skills," she said.
"IF (and that's a big "if") Ellison follows through on his public musings and does attempt an acquisition of a Linux distribution vendor," DiDio continued, "Novell, on paper, would be the better choice for several reasons: - Price -- Currently, Red Hat's stock is trading at approximately $28.50, which is roughly 4x Novell's present stock price of about $7.73.
- Market Cap -- Again, Red Hat's market capitalization currently stands at $5.1-billion compared with Novell's current market capitalization of $3.02-billion; Red Hat's EPS (earnings per share) is 0.41 compared to a negative 0.03 for Novell.
- Embedded management functionality -- Novell has an excellent management and migration offering in the legacy ZENworks product suite.
- Directory services -- Although eDirectory now lags behind Microsoft's Active Directory in terms of performance and functionality, it is superior to Red Hat's iPlanet.
- Close working relationship -- Novell and Oracle have enjoyed a close, warm mutually beneficial working relationship for nearly two decades. This is not to say that Red Hat and Oracle have a bad relationship, just that the Oracle/Novell relationship and partnership is longer standing.
Simply put, Red Hat would be a much pricier purchase than Novell."
DiDio concluded, "However, all of this speculation may be a moot point, since Ellison told the Financial Times that he considered buying Novell but passed and that Oracle many now develop its own Linux software stack -- a time consuming and expensive endeavor. Only time will tell. But it's clear from the PeopleSoft and Siebel acquisitions of the past year that Ellison is not afraid of spending money or tackling tough challenges."
Stacey Quandt, the AberdeenGroup's research director for security solutions and services, thinks that "Ellison's comments regarding the addition of their own Linux for an Oracle stack demonstrates the ripple effect of Red Hat's purchase of JBoss."
She believes that if Oracle does make such a move, it would mean major changes for all the Linux distributions. "While there are a number of advantages in an Oracle acquisition of Novell, namely SUSE, this could also set off BEA and others to explore their own Linux as well."
"The wild card here is Debian, in particular Ubuntu, since it is a community developed and supported distribution. Although Ubuntu lacks widespread support by industry vendors, if Oracle purchased Novell then it would be logical for IBM, HP, Intel, AMD, BEA, SAP and others rally round a Debian-based distribution as a replacement or substitute for either Red Hat or SUSE. The irony would be if Oracle acquired Novell and this resulted in Debian becoming a target for ISVs and system vendors."
Not everyone is convinced that any Linux would be a good fit for Oracle.
Stephen O'Grady, a software industry analyst for RedMonk, said, "Oracle would in either case assume control of businesses that would not appear to be strategic, and would likely lose a fair share of the more important assets in each case: developers."
"Whether or not such an acquisition would make sense for Oracle, however, is a complicated question," he added. "First, there are the distinct differences between the two major North American Linux vendors: Novell brings more of a desktop focus, and has major investments in a non-Java technology -- Mono, while Red Hat is proceeding down the more typical operating system/Java middleware stack model."
O'Grady continued, "Looking just at the operating system piece, the question is what benefit would controlling a distribution offer Oracle? Better account control, for one, which is important when Red Hat in particular is appearing increasingly ambitious."
"It would also put them in a better position to compete against the likes of Microsoft and Sun which can offer operating system complete stacks, unlike Oracle which must bring in a third party for that sale. Last, it would serve to pressure IBM, who would not want to cede either account control or be beholden technically to its major competitor, which is one reason I see a potential opportunity for Debian in all of this," O'Grady concluded.
So, what will happen? Will Ellison make a try for Novell? Will IBM, BEA, or another major enterprise player try to preempt Oracle by buying its own Linux distributor? Will Debian become an important business Linux distribution as a result?
Today, we really don't know. If nothing else, however, Ellison has certainly made the entire IT community take another long hard look at the Linux business.
-- Steven J. Vaughan-Nichols
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