Forecast: Cloudy, Definitely Not Sunny

I can’t seem to resist commenting on industry anachronisms, but Sun’s latest quarterly disappointment raises a question that I have not seen the commentariat comment upon.  How has the MySQL acquisition by Sun impacted the relationship with Sun’s biggest historical partner, Oracle?  I may be misjudging Oracle’s leadership, history and culture, but my guess is they view databases as their birthright and treat any real or proposed encroachment, even from a company with as poor an acquisitions record as Sun, as a serious matter.  The telescope in Larry’s office has been pointed north for a long time (first across San Francisco Bay, then up the coast to Washington state and more recently along the great polar route to Walldorf), but I’ll bet it rotates south to Santa Clara.  MySQL was already on Oracle’s radar screen because it represents the logical end of the traditional database business, an outcome Oracle will do just about anything to forestall, including get into applications and middleware in a big way to entrench and diversify.

MySQL is a classic example of the open source playbook to turn a $10 billion business into a $1 billion business.  In this case, the $10 billion business belongs to Oracle.  Kudos to MySQL for getting about $1 billion from Sun, including $800 million in cash.  The problem (for Sun anyway) is Sun paid $1 billion for what is reportedly about $60 million in revenue.  Evidently Sun is somehow going to make its hardware work better with MySQL than that of any other hardware vendor with access to pretty much the same source code.  And they hope to do the same thing with their software stack, particularly Solaris.  There is no
S(olaris) in LAMP, despite McNealy dressing up in a penguin suit before he waddled off stage a few years too late.  Watch how quickly the community scatters (forks) in the face of atavistic attempts to reestablish the vertically integrated, proprietary UNIX stack of yore (prominently featuring “open” in the name of course…).  Or there might just be a sales “halo” effect.  Companies that use MySQL and didn’t buy Sun hardware in the past, might just reconsider now that it is under new ownership.  Sun also seems excited about the (consulting) services revenue opportunities, which is always fertile ground for companies on the decline, and can provide revenue sustenance albeit with low margins and low excitement for years if not decades as they feed on their own legacy complexity tail.

The question is whether the MySQL revenue and any associated hardware and services halo revenue offset the revenue from their Oracle relationship.  Oracle has to be one of the most popular workloads for Sun’s hardware.  But it isn’t a particularly equal relationship — Sun needs Oracle a lot more than Oracle needs Sun.  It is possible this relationship had already deteriorated as Oracle increasingly partnered with the higher volume server vendors, but my guess is Sun’s software megalomania drove this acquisition as opposed to a reaction.  Sun doesn’t even seem to be going through the motions of managing a tough partner situation.  Employees are popping off about Oracle and their Q&A sort of relegates Oracle to the services bucket:

What happens to your relationship with Oracle?

Oracle’s a very important Solaris ISV – and we have joint customers across the world that have relied upon the service and support Sun and Oracle provide in mission critical environments to run the world’s banks, retailers, telcos, governments, etc. Absolutely nothing changes about that commitment as a result of this deal – just as nothing changes in our willingness and ability to support DB2, or Microsoft’s SQL Server (which also happens to run quite well on our systems, btw). Customers want choice, and we maintain our commitment to offer it.

It’s important to remember, our service organization focuses on our customers, not our products.

The fact the Oracle management team has said almost nothing is also interesting.  They’re normally quite loquacious, especially when it comes to the competition.  My guess is Sun is no longer the go-to hardware partner choice for the Oracle sales force.  Maybe we’re seeing that in Sun’s current quarter, where the downturn supposedly started with big systems in the US.  Big systems — that certainly sounds like Oracle.  And the US salesforce will figure out corporate acrimony faster than the rest of the world because they’re closer to it.  Or I guess it is possible Sun was just big with the imploding CDO industry (they were big with Enron too ;-).

I don’t get Sun’s strategy at all, beyond a fervent desire to be in the software business (makes sense) to the point where they give everything away and plan to make it up on volume or lower margin hardware and services (doesn’t make so much sense).  They seem to have a deep desire to go back in time to the halcyon days of the late 1990s when Sun happened to be at the right place at the right time.  The odds of lightning striking twice seem low.