Last week, Oracle stepped out and started trash talking HP big time. Essentially, it said that HP's servers simply couldn't compete and while IBM's could, Oracle's hardware would easily beat both. This would have been much more powerful if Larry Ellison hadn't been quoted just the day before saying "We Can't Be Successful if We Don't Lie to Customers." However, this does showcase a problem: Of the three vendors, HP doesn't actually have a heavy software capability yet and regardless of how fast your hardware is, there should be an advantage to someone who owns the whole stack in terms of tuning the result. Particularly, if the software vendor intentionally works to ensure that their software doesn't work on your hardware. For instance, you could run Apple software on an HP PC, but it won't run as well and Apple works to ensure that this is the case.
Let's explore the coming battle.
HP's Exposure: Light in Software
Oracle is running at HP strength to weakness and because Oracle is currently driving the fight, this is their prerogative. Larry Ellison, if nothing else, is a warlord CEO and he is known for his battles and for seldom losing them. There is no doubt that he is a formidable and well-provisioned foe. Oracle is-at its core-one of the few remaining large-scale, multi-national enterprise software companies and it remains one of the most powerful in the world. So Larry is choosing to engage with software and use it as a lever to pry out HP hardware and replace it with his own. While HP is vastly stronger in hardware, it is very light in software and has to rely on other companies that have to be hardware agnostic to offset Oracle.
However, this strategy only works if HP tries to fight Larry's fight, and it could fail spectacularly if HP flips this and fights Oracle from its strengths.
HP's Strengths: Hardware and Portfolio Breadth, Choice
HP has vastly more breadth. This breadth makes the company very difficult to kill. For instance, Oracle can clearly hit their large-scale servers but mostly it can't compete with X86 servers and has no interest in printing, PCs, or networking. That means that much of HP's business is effectively out of Oracle's range. In addition, in blended bids that require a mix of this hardware, Oracle would have to partner and they aren't known for partnering well with PC companies or networking companies, which suggests that if HP can drive a blended RFP, Oracle would either be unable to bid or unable to compete.
In the large enterprise space where both companies will do battle, blended bids are very common.
Oracle's Dual-Edged Sword
Oracle uses a very aggressive commission program that rewards the top 10 percent of the company's sales force aggressively to the detriment of the other sales reps. This tends to attract the most aggressive and creative sales reps to Oracle and this is a daunting force. However, even the best reps can't win if they don't have the tools, and this creativity can lead to questionable deals and practices, which is why Oracle is being investigated by the U.S. government at this time.
This means that head-to-head with similar solutions in Oracle shops, Oracle will likely gain ground. And there are an estimated 100K companies that fit that potential scenario. However, it also means that some percentage of these deals will likely be somewhat illicit and if HP can determine and challenge them, the backlash against Oracle could be dramatic and do significant damage. HP should know which accounts are getting the most aggressive treatment, and people inside the firm, who work with HP as well, will likely know about gifts or perks given to the decision makers to ensure an Oracle decision. If this behavior hits the light of day, the repercussions against Oracle could be pronounced.
Wrapping Up: Foolish Wars
Wars between vendors, like wars between states, are generally foolish and expensive. They also often don't go the way either side intends because both fail to fully understand either their own positions or the battlefield. Oracle and HP are currently mismatched and while HP is historically the more timid, it has a chairman, Ray Lane, who has no love for Oracle and knows the firm and its CEO's practices very well since he used to run Oracle and became intimate with both.
HP's broad base of products makes it a difficult target, and Oracle's practices create opportunities that could give HP an edge. But HP will have to seek out these advantages aggressively, which as a firm, isn't known for this. Betting against Oracle, historically, is a fool's bet, but in this case it may not be that foolish.