Integration Key Component of Oracle's Market Strategy

Loraine Lawson

Integration has long been something of a market strategy for Oracle. It's one thing to buy a company, but it's another thing to integrate it and, as Judith Hurwitz recently pointed out, Oracle deserves credit for integrating the 60 companies it's acquired in recent years.

 

It's a strategy that seems to be working well for Oracle, which reports an 82 percent gross profit margin -- a fact that gives Oracle plenty of wiggle room should the recent buyout of Sun turn into a loss, writes Dave Rosenberg, a co-founder of MuleSource. As of closing Monday, Oracle was up 16 cents with a stock price of $23.22.


But the Sun buyout does more than give Oracle a stock boost. It brings Oracle's integration strategy to a new, bold level. "Vertical integration," Larry Ellison called it, according to a synopsis by RedMonk.

 

How so? For one, it will put Oracle into direct competition with IBM in terms of being a single vendor who can provide a complete stack, including the hardware. That hardware component is not insignificant and could be a deal breaker-especially since selling hardware is substantially different from selling software, as Hurwitz and others have commented.

 

But more to the point, especially for customers, is that this changes what kind of company Oracle is. I think Jonathan Eunice, co-founder and principal IT adviser at Illuminata, best summed up the significance of the Oracle-Sun deal in his Friday CNET blog post:

 

"Oracle is no longer a software company. It's an Integrated IT company. IT is maturing. It's no longer about 'best of breed' point-products, or owning just one 'category.' De facto, enterprise customers value integration above almost all other virtues; IT businesses respond by having most systematic overall portfolios. I recently discussed how traditional boundaries and definitions have gone by the wayside as the IT industry rapidly consolidates. The new Oracle is part and parcel of this trend. Oracle now has a full-spectrum offer: servers, storage, networking, software, and services."

 

Eunice believes Oracle's strategy reflects a significant shift away from niche, best of breed players toward integrated giants.

 

Still, some wonder if Oracle can pull it off. After hearing Oracle's integration plans last week, Hurwitz raised not one, but five issues with the deal, including questions about reviving the mainframe and concerns about whether Oracle can still "claim openness when the platform itself is hermetically sealed?"

 

But more to the point for end-user companies, Hurwitz wondered whether customers would be willing to trade integration headaches for a single vendor's "brave, new world," no matter how integrated the solution:

 

"Oracle's strategy is a good one - if you are Oracle. But what about for customers? And what about for partners? Customers need to understand the long-term implication and tradeoffs in buying into Oracle's integrated approach to its platform.

 

 

ITBE reader John Mitas is one of those who believe Oracle's strategy is not working well for customers. In a response to Dana Gardner's guest column on the deal, Mitas wrote:

 

"What use is having all these systems if there is no coherent integration strategy between them? Oracle have a host of systems and services BUT ask anyone in an IT evaluation position for an enterprise and they'll tell you the same thing, alot of systems just fail to integrate in a cohesive manner unlike Microsoft systems. Oracle need to better there story around cohesive integration if it's to achieve what your suggesting."

 

Finally, IT Business Edge's Rob Enderle thinks Oracle is taking a page out of Apple's playbooks-and if you've ever read Enderle, you know that's not a compliment. Enderle has nicknamed Oracle "Snorkel" ("Sun + Oracle," he explains) and writes that Oracle will rely on marketing smoke and mirrors to undermine tech heavyweight IBM:

 

"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."

 

If you'd like to read more, you might also want to check out Redmonk's Q&A session on the deal-a lot of user issues are covered there. CIO.com also has a nice piece on how Oracle's Sun integration plan might help small businesses.



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