Sun, Oracle Renew Their Vows, Chase Market Share

Published: January 12, 2006

by Timothy Prickett Morgan

Server and operating system maker Sun Microsystems and database, middleware, and application software provider Oracle held a powwow for their employees and members of the press this week in Silicon Valley to renew their vows as partners to one another. Since the IT industry, of necessity, believes in polygamy, the value of such pronouncements of faithfulness is debatable. Sun and Oracle have been mostly partners, sometimes competitors, for two decades, and the fact that they have re-upped a 10-year agreement to work together in various areas may not be surprising, but it is significant.

You need only envision a Unix server, middleware, or application market where Sun and Oracle are enemies rather than partners to see how important it is to both Oracle and Sun to have these very aggressive, first-generation Silicon Valley start-ups working on the same side of the deal.

It is hard to say which vendor has helped the other more in the past two decades, but clearly Oracle and Sun have rose together during the ascendancy of Unix in the late 1980s and early 1990s and the explosion of Internet-style computing in the late 1990s and early 2000s. According to Sun, more than 85 percent of the Sun server installed base that supports relational databases runs Oracle database software. Oracle is the top database provider for all of the key industry segments where Sun plays--telecoms, service providers, financial services, government, and healthcare are key verticals. With Oracle having eaten PeopleSoft--as well as Retek, J.D. Edwards, Siebel Systems, and a bunch of other niche players--and Sun needing to get better traction in manufacturing and distribution (where IBM and Hewlett-Packard have very large proprietary and Unix installed bases), the two also work together at a lot of accounts on application software. Sun says that its platforms are the number one platform for Oracle's homegrown E-Business Application suite, and that it is number three on the Siebel and PeopleSoft suites. If Sun wants to remain the number one Oracle application platform, it is going to need help from Oracle to do that, and if Oracle wants to take on mainframes, proprietary systems, and Windows boxes with its future Java-based Fusion applications, it will need Sun's help. (The last thing Oracle needs--but something it can pretty much count out--is a Sun-SAP alliance.) Last November, Oracle announced that it had chosen to develop its 64-bit 10g database and future Fusion applications on the 64-bit Solaris platform. What this didn't mean, however, was that Oracle was dropping its preferred development status on 64-bit Linux--a point that Oracle chairman Larry Ellison clarified at the powwow. Sun pegged its annual Oracle-related revenue stream at $3 billion, so it is clear that Sun needs Oracle.

As is usually the case when Sun chairman and CEO, Scott McNealy, takes the stage, there were some well-scripted jokes at hand to get the event rolling. "Are you buying Sun?" he asked Ellison, who was not prepped for the question and fumbled a bit. "A simple 'Yes" or 'No' will do." Ellison regained his balance, and quipped that "as you know, Oracle has a strong preference to do everything hostilely." So if Oracle does buy Sun, McNealy won't be asked first, presumably. The two joked about their championing of the network computer a decade ago, and McNealy said that it was Google's turn to take a stab at the idea since it was "young enough." And in characterizing their partnership for two decades, McNealy explained it straight up: "You are not totally faithful, and we are not totally faithful--but you are less so." To which Ellison rejoined, "We are talking about IT, right?" Indeed, both married men surely were--especially with their wives in the front row.

Aside from their desire to see Java take over the world, Sun and Oracle did make some announcements this week. While Oracle is probably one of the most important Java partners--alongside IBM, which signed its 11-year partnership extension last year--Oracle has its own Java development platform, called JDeveloper, and is a prominent contributor to the Eclipse Foundation's open source integrated development environment. However, this week McNealy and Ellison mumbled that Oracle would be taking a look at Sun's NetBeans project, which is a competitor of sorts to Eclipse. The exact nature of Oracle's commitment to NetBeans was not made clear--and that was intentionally so. When pressed, Ellison danced a bit, talking about Java and Eclipse and adding that Oracle was "watching NetBeans very closely." The important thing that Ellison and McNealy wanted to stress is their mutually beneficial commitment to Java, and as is his habit, McNealy characterized this as ".NET versus mankind."

Sun and Oracle also announced that Sun would be offering a bundle of its servers, Solaris operating system, JES and Oracle middleware, and the Oracle 10g database on its Sun Fire servers using the dual-core UltraSparc-IV and UltraSparc-IV+ processors that would essentially give away the Oracle 10g license to those Sun buyers, including a one-year contract for support from Oracle. "We are going to take the hit and basically you are going to get the Oracle database license for free with one year's support," said McNealy. He said that the bundle would mean that a Sun-Oracle server and software stack would be about 25 percent less than a similar bundle on an IBM pSeries Unix server. "The bigger the machine, the cooler this gets," bragged McNealy.

The exact pricing details for this Sparc-Oracle 10g bundle were not available, but McNealy said that they would be finalized in a few weeks. The bundle is only for Oracle 10g Enterprise Edition, and it is only on those most recent Sparc-based servers. Under the deal, when Sun makes an Oracle bundle sale on a Sparc platform, the associated Oracle sales rep will also get full credit for the sale. And just to be clear, to get the free license to Oracle 10g, customers will have to shell out the support fees to Oracle.

The Opteron-based "Galaxy" servers and the new Sun Fire T series servers that use the "Niagara" 32-thread T1 processors apparently are not getting the bundle. But Oracle recently announced special pricing on these machines that brings the costs on these machines in line with other platforms with fewer cores and about the same processing power. But that doesn't mean that eventually Sun and Oracle might not decide to do the same thing on Opteron machines. You see, Oracle 10g Release 2, the current release, is not yet certified to run on Sun's Galaxy servers when running Solaris, so it is not really something Sun could bundle and take the hit on to offer compelling bang for the buck. Ellison hemmed and hawed about why the Solaris-Opteron platform is taking so long to get certified, and then said simply that it was a matter of the chicken-and-egg problem, that there wasn't very much customer demand for it. However, this new 10-year deal addresses that problem, said Ellison, and Oracle 10g R2 will soon be certified on the Solaris-Opteron platform, and presumably will come out in lock-step with Sparc and other platforms in the future. That is what a preferred platform should mean, at least.

Sun also announced this week that it would be moving its recent acquisitions, such as StorageTek and SeeBeyond, to the Oracle application platform, and would be an Oracle shop internally, from top to bottom. This will make Sun one of Oracle's largest customers.