In some ways Oracle, by acquiring Sun, has created a company that on paper looks very similar to the direction that IBM was going in the 1960s but with software, not hardware, in the lead. However, there is a big difference between where a company is going and where it is. At Oracle's event this week, Larry Ellison demonstrated a Steve Jobs-like strategy where you lead with perception and follow with product.
What folks tend to forget is that for product decisions, perceptions generally trump reality and Oracle's expertise in managing them could trump IBM's superior competence and maturity in existing products. This is how I think the two will come to battle.
Snorkel in Three Steps
Oracle seems to be taking a page from Steve Jobs' book in the initial engagements, which suggest three steps: first on perception, second on promise and third on product.
On perception, Oracle will position the inadequate Sun products (if they were adequate, Sun would have been doing better) as better than they think they actually are. This is exactly what Jobs did when he took over Apple. He knew the products weren't competitive, but he positioned them competitively and won over enough customers to keep Apple afloat. Oracle likely will do the same thing while furiously working to redesign the lines to better optimize for the vision Oracle is building for.
The second step will be to position what will be very immature offerings as mature, leveraging both the Sun and Oracle brands to showcase experience and product maturity. But these products will be new concepts, so Oracle will wrap the companies with services and contain any problems so buyers simply won't realize how immature these offerings actually are.
Finally, Oracle will bring out very well-tuned competitive offerings that have been tested in the market and likely will stand up well against competitors and differentiate by being better with Oracle software. It should be able to reach this superiority because of the unique tight relationship inside of Oracle and tuning on both sides. At the earliest, it will complete this phase in 24 months, which will require bridging cultures quickly and connecting the hardware and software groups intimately in the first six months post-merger. (I should point out that such integration typically takes more than two years by itself, but Oracle is one of the best at this.)
IBM's products through all of this will be superior, but IBM lacks the ability to fight (exempified here) the kind of image fight Oracle will be starting. To combat Oracle, IBM will need to closely couple the software and hardware groups on message and product development. These are effectively separate companies under a corporate umbrella. The umbrella, or corporate marketing, should be the entity that drives the competitive response, but it has weakened significantly over the past decade and may be unable to provide the necessary response.
We saw a similar mismatch on the consumer side in the Apple Mac vs. PC campaign. Microsoft was unable to effectively respond to Apple's attack until it brought on board Kathleen Hall to head its marketing response. Kathleen was a leading agency-trained marketing expert.
For IBM to produce an effective and timely response, it will have to overcome Oracle's superior messaging and either take the market in a different direction or get to where Oracle is going faster and better. The do that, it must more closely couple IBM software and hardware and let software lead in product direction. That would be easier than trying to figure out and execute an integrated strategy on the former because it is already defined.
Wrapping Up: Oracle Will Lead on Messaging and Lag on Product
Unless the companies that compete with them match on messaging, this will work to Oracle's benefit. Recall that Apple started the past decade doing this and ended up kicking a lot of Dell and Microsoft butt. A message-oriented attack is difficult for engineering types to counter because they don't fundamentally get that perception is 100 percent of reality and that it actually doesn't matter that much if your solution is more mature or better if folks believe the other guy's solution is the better deal.
Oracle's attack on this market might be vapor, but it knows how to effectively use vapor as a weapon. IBM might not have a good defense. Oracle must execute quickly, which given the mess Sun is in, won't be easy. IBM must dramatically improve its ability to counter the message and tie two divisions more closely together. That won't be easy either. IBM should win, but the market is full of examples when "should" didn't win.