Ellison Wants Oracle to Be IBM 1.5

Published: October 5, 2009

by Timothy Prickett Morgan

Just because Larry Ellison, the chief executive officer of Oracle and presumably the hardware subsidiary that Sun Microsystems will eventually become (facilitating a spinout should that become necessary in the future), wants to kill IBM in the IT space doesn't mean he doesn't admire Big Blue.

Quite the contrary, said Ellison last Monday at a talk hosted at the Churchill Club in Silicon Valley. Like most of you, I was not able to attend the event, so I have to rely on press accounts to get the gist of what Ellison said. (If you want to listen to the talk, which was hosted by Ed Zander, the former president of Sun Microsystems and former CEO at Motorola, you can get it complements of ZDNet at this link.)

At the Churchill Club talk, Ellison gave the integrated systems talk that the AS/400 faithful have been living and breathing and suffering through as Big Blue itself seems to have forgotten some of the lessons it learned with the System/38 and AS/400. And to all of the Doubting Thomases and Timothies out there, who do not really believe that Oracle will stick to the low-margin hardware business, Ellison said that he wanted Oracle to be the successor to IBM as the dominant IT player, and not Louis Gerstner's IBM, which was dominated by a shift to services (let's call it IBM 2.0), and Sam Palmisano's IBM, which has jettisoned hardware businesses as if they were infested with bugs to chase services and software (call that IBM 2.5), but Tom Watson's IBM. (That makes Tom Watson Junior's company IBM 1.5, which is when IBM really got going in the kind of computing that we think of today as information technology instead of card walloping, I suppose.)

Watson Senior, of course, cobbled together International Business Machines out of a collection of companies peddling punch card, meat slicing, and time keeping gear, and eventually this morphed into the most profitable company in history; a company that got the kind of margins out of systems that only companies in the software racket can command today--and only with a fair amount of H1-B visa and offshoring at that. His son, Thomas Watson Junior, made the biggest bet in the history of corporate America in the early 1960s, spending $5 billion to develop a unified computing platform with virtual memory and with gear scaling from small to massive machines called a mainframe--a bet Watson Junior made when IBM had about $3 billion a year in revenues. Those margins and the revenue growth were as much Junior's doing as his father's work.

Let that sink in for a second. Imagine how wonderful Windows and desktop software might be if Bill Gates had made a similar bet with Microsoft? Or imagine how much more AS/400 sales there might be today if an IBM in 1997 had made a decision to open source OS/400 and RPG and get it running on lots of iron because an integrated system was the right idea and was willing to put maybe $5 billion of engineering and marketing money behind the idea to take on Windows Server? I could go on. But let's let Larry speak, because he seems to get the idea.

"T.J. Watson's IBM was the greatest company in the history of enterprise in America because its combination of hardware and software was running most of the enterprises on the planet," explained Ellison, getting the history somewhat wrong, since it was Watson Junior's IBM that he really admires. "We think with the combination of Sun technology and Oracle technology we can succeed and beat IBM. That's our goal. We have a deep interest in the systems business. We think that by combining our software with hardware that we can deliver systems that can be the backbone of most enterprises in America and around the world."

As I have said like a million times since April 20, when Oracle made its $7.4 billion bid for Sun after IBM walked away from a deal, that sure sounds like the Application System/500, 2010 Edition, to me.

As for what Oracle might and might not spin out after it acquires Sun, Ellison was absolutely clear in his intentions for Sun. Oracle will not spin out the MySQL database to appease European Union antitrust regulators who have held up the Sun deal, and he added that Sun was "keeping everything," and this meant tape, storage, x64 and Sparc systems. Ellison added that Sparc chips were "great microprocessor technology" but that they needed some more investment, that StorageTek tapes led the market, that its disk arrays were "absolutely fantastic," that Java "speaks for itself," and that Solaris is the best OS on Earth.

Incidentally, Sun wants the European Union to get the lead out and get moving toward approving this deal because by Ellison's reckoning, Sun is losing $100 million per month as this takeover drags on and keeps nervous customers from buying stuff. The wonder as far as I am concerned is that this number isn't higher.

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