Oracle/Sun vs. The Cloud

Larry Ellison makes it very clear that Oracle believes in a back to the future model where software and hardware meld together into “systems”, purpose-built, integrated solutions. In other words you won’t buy an Oracle database and a server and configure it to run a data warehouse, instead you’ll buy the “Oracle Data Warehouse Server.” The first such system is Exadata, which is apparently doing quite well, according to Ellison.

This is a classic bundling, although some may call it a tying strategy. Microsoft, seeing that they couldn’t win each office productivity segment individually—including word processing, spreadsheet and presentations—decided to play to their strength and bundle them into a solution that no individual company could compete with. This is bundling. The tying strategy is where Microsoft used their dominance in the operating system to tie the browser to the OS, thereby owning the browser market. In the case of Oracle, one could make a case either bundling or tying. I’m making neither a value, nor a legal judgment about Oracle’s strategy; I am just providing historical context.

Ellison points to Cisco and IBM, under T.J. Watson Jr., as examples of successful systems companies. But my question is simple: Will this back to the future strategy work against the cloud? Assembling solutions with pre-packaged systems is certainly easier than starting with more granular components like hardware and software. But does it really stack up against today’s benchmark, the cloud.

Let me use a transportation analogy:

Assembling all of the components (hardware, software, etc.): Like building a car piece by piece

Assembling systems (a la Oracle's Exadata and Cisco): Like building a car by installing large grain items, the chassis, wheels, engine, etc.

Using the cloud: Like buying a pre-built car off the lot

SaaS Applications: Like riding the subway

Most people are perfectly happy either buying a car or riding the subway. For really high-end performance, some may want to build their own car with components or by hand, but it’s a relatively small market.

I don’t expect any public cloud offerings to satisfy high-end enterprise demands…yet. But I have to admit, the cloud is evolving quite rapidly. Just look at Amazon and their introduction of Virtual Private Clouds, Elastic Block Services (a SAN in the sky), Boot from EBS, etc. I can launch an entire cluster with a mouse-click, without talking to IT. How can you beat that? Historical precedence is also on the side of commodity technologies, like the cloud, growing up to cannibalize the high-end. The PC cannibalized the workstation, which cannibalized the mini, which cannibalized the mainframe. From the clou's perspective, the trend is their friend.

The cloud won’t seriously threaten large enterprise systems for quite some time, but I believe it is just a matter of time. Oracle can certainly ride a strong wave of current demand for systems. I expect that in time they will also provide a compelling suite of solutions in the cloud. But if I were a bettin’ man I’d have to bet on the cloud; they have simplicity and history on their side. On the other hand, it is hard to bet against Ellison.