Oracle to Support IBM's WebSphere with Project Fusion Apps
by Timothy Prickett Morgan
Like many of you, I still find it somewhat unnerving that Oracle has so recently and so thoroughly acquired great leverage in the IT business in general and with IBM server platforms in particular. Oracle was one of the poster children for the dot-com boom, and is arguably, with Sun Microsystems, one of the original dot-commers and certainly one of the big beneficiaries of the whole triple boom of the ERP, Y2K, and dot-com waves at the end of the 1990s.
While Sun has been weakened post-boom, Oracle has been on an acquisition binge and is now one of the most powerful companies in the IT arena. In fact, I would argue that Oracle's influence is much broader and deeper than you might reckon based on its $11.8 billion in revenues in fiscal 2005 and projected revenues of around $15 billion in fiscal 2006 thanks to the acquisitions of application software suppliers PeopleSoft-JDE, Retek, Siebel Systems, and others. Those acquisitions, as well as its own vast installed base of Unix and Windows database customers and a smaller but still large number of Oracle Applications Suite customers, have allowed it to amass a worldwide customer base of 35,000 companies. You need look no further than Oracle's current $70 billion in market capitalization to see what I mean; investors and Wall Street analysts seem to believe that Oracle is influential and powerful enough to command a market cap to revenue ratio of about 6; IBM booked $96 billion in sales in 2004, and when you extract the approximately $10 billion in sales it got from PCs (which it sold off to Chinese IT supplier Lenovo earlier this year for pocket change), IBM would have a market cap to revenue ratio of about 1.5. IBM has about 500,000 customers, by the way. It probably still has about the same number of customers, since IBM hasn't pushed PCs in the retail channel for years. Hewlett-Packard fares even worse in such a comparison, with a market capitalization of around $80 billion and with around $83 billion or so in sales projected for fiscal 2005 ended in October.
The reason I bring this up is to point out that when Oracle's founder and chairman, Larry Ellison, says that he can double the company's size again through acquisitions as well as organic growth to become a $30 billion behemoth--and do so while maintaining a 40 percent operating margin--we all have to get used to the idea that he might just pull it off. That's what Ellison said he could do last week at the OracleWorld trade show in San Francisco. And if he does accomplish this, what Oracle does and does not do will have a direct effect on potentially hundreds of thousands of customers and millions of end users. And many of them will be at OS/400 shops, who have only been indirectly affected by Oracle so far. Think about what Oracle will have to do to get to $30 billion in the next few years: eat just about every application software vendor that is smaller than it is and bigger than two guys programming from their basement. And IBM, which used to understand that it had to be in the application software business back in the 1970s and 1980s--and built a wonderful machine called the Application System/400, in fact--is just sitting idly by, seemingly without a care in the world so long as all the software vendors chant "WebSphere, WebSphere" and give IBM a chance to its servers and middleware along with applications.
But, you see, picking IBM as a middleware partner seems to be a leading indicator for an acquisition by Oracle. Each in their turn, when times got financially or technically tough, JD Edwards, PeopleSoft, Retek, and Siebel Systems all agreed to make IBM's WebSphere middleware their standard, and now, of course, they are part of the Oracle collective. Lawson Software is in the middle of eating Intentia International after standardizing on IBM's middleware stack, and SSA Global, which is itself an amalgam of dozens of software players, has also decided to use IBM's middleware as a standard. It will be interesting to see if the correlation holds as Oracle looks around for something else to eat.
Oracle Yields on WebSphere Support for Fusion Apps
A week ago, as IBMers in the iSeries Division were preparing, like myself, to head down to Orlando, Fla., for the COMMON iSeries user group meeting, other IBMers from Software Group were heading out to Silicon Valley to do a legal dance in advance of the OracleWorld user group meeting for Oracle customers, which was held last week as well. What came out of those meetings was an agreement by Oracle to support IBM's WebSphere application server on the forthcoming "Project Fusion" application suite, which will be a whole new software suite due in 2008 or so that will be upgradeable from current Oracle, JDE, and PeopleSoft suites (and probably Siebel and Retek as well).
You might be thinking, how did that happen? Well, there is a kind of détente between Oracle and IBM. Back in the old dot-com days, Oracle was predominantly sold on Sun and HP Unix servers and a bunch of other Unix iron by vendors who are not around any more. But by acquiring so many application vendors, Oracle's dominant server platforms in its customer base is--yup, you guessed it--IBM iron. Oracle is not interested in pleasing Big Blue one bit, but the word on the street is that plenty PeopleSoft, JDE, and now Siebel customers have been saying to Oracle that they have invested huge amounts of money in WebSphere and there is no way that they want to retool. And by their very nature, these customers want choice when it comes to database and middleware options. And that is why Oracle and IBM are setting up a joint development team to work to make this happen.
Oracle, of course, has its own middleware stack, which has the Oracle Application Server 10g Release 3 (announced last week) at the heart of Oracle's newly renamed Fusion Middleware stack. (Yes, Oracle chose the same name for the future application suite and the current middleware stack, and yes, this is very stupid.) As it turns out, the PeopleSoft and JDE OneWorld suites have just been certified to run with Fusion Middleware; Oracle E-Business Suite Release 11i was already certified on Fusion Middleware. And, by the way, Oracle customers--just like PeopleSoft, JDE, Siebel, and Retek customers--already have the choice of using WebSphere instead of Oracle Application Server that is the key feature of the new Fusion Middleware.
The deal with Oracle brings several questions to mind. First, will the Fusion Middleware be ported to the iSeries and its OS/400 operating system? Or will iSeries customers that use Oracle applications be told they have one middleware choice--namely, WebSphere? There is no question that Fusion Middleware will be supported on the big three Unixes--Solaris, AIX, and HP-UX--as well as Windows and Linux, and quite possibly on IBM's z/OS mainframe operating system if Oracle wants to be funny. Oracle has to run Fusion Middleware on Unix, Windows, and Linux.
The second question is whether or not Oracle will do the right thing and allow DB2 to be an optional database for Project Fusion applications, much as WebSphere middleware is. The steadfast JDE base certainly has no desire to use Oracle databases or Oracle middleware, that much is for sure. And although Ellison said last week that the decision has not been made yet to support DB2 databases with the Project Fusion applications, the very fact that WebSphere is now supported means that there is a chance. If enough OS/400 shops tell Oracle that they don't want to leave DB2/400, then Oracle will not have much of a choice but to support DB2/400. Ditto for the relatively smaller base of Unix and Windows customers who have DB2 behind their PeopleSoft and JDE suites. Siebel was originally developed as a Windows application and is by and large still deployed on Windows with a smattering of Unix, which means it is deployed mostly on Oracle and Microsoft's SQL Server. And just because Oracle supports DB2/400 on the iSeries does not mean it will support DB2 Universal Database on Unix and Windows, either. They are radically different databases, no matter what IBM's naming convention might lead you to believe. No matter what, Oracle has time on its side, since it has agreed to support the current incarnations and upgraded versions of the PeopleSoft and JDE suites on DB2 databases and IBM servers until 2013. A lot can change in the next eight years--and it probably will.