Larry Ellison has announced that Oracle will provide support for Red Hat Linux distributions at approximately half the cost of current support from Red Hat, and with a new premier-level support agreement currently beyond the scope of support available from Red Hat. Interestingly, this move could have repercussions far beyond the simple notion of providing support for Linux distribution.
In addition to the distribution support, Oracle will also provide Linux binaries as free downloads, and has committed to periodic realignment with Red Hat to ensure the two distributions will not diverge.
The upfront reasoning behind the new support offering is to increase the level of confidence of large corporate customers in committing critical applications to a Linux platform. Linux is strategic to Oracle as it underlies the grid computing initiative that is the key to Oracle’s future growth in both database server and middleware products.
The support offered by Oracle (available immediately) will provide back-porting of bug corrections to existing versions of Linux, reducing the pressure on users to embark on OS upgrades (with the associated potential to destabilize systems).
At face value, this makes perfect sense – but there is much more beneath the surface of this.
Oracle will provide this support of Red Hat Linux to organizations that are not Oracle customers. The impact on Red Hat is fairly predictable. Red Hat will be faced with a damaging loss of support revenue. Large numbers of Red Hat customers will consider defecting to Oracle to take advantage of the superior support and/or lower support cost now being offered by Oracle. If Red Hat decides to fight this by ramping-up its support level (with the associated additional costs), or by heavily discounting its pricing, the result will be a cut in profits.
Oracle already has a substantial support infrastructure in place so the additional support revenue from the new initiative should be profitable fairly quickly – but, in any event, the extraction of revenue from Linux support is not likely to be high on the list of reasons for the announcement.
If Red Hat’s profitability suffers, the stock value of the company is likely to decline, exposing it to possible acquisition. So which vendors are likely to be in the market for Red Hat if such a thing should happen? Why, Oracle would be a front runner (potentially along with IBM, Sun, BEA and other vendors with significant interests in the Linux world).
Just to explore the possibilities a little further, if Oracle were to end up owning the Red Hat distribution, how would this impact the market? For a start, Oracle would greatly increase its penetration into organizations of all sizes, especially those organizations that are customers of Oracle’s competitors. This could provide the proverbial ‘thin end of the wedge’ for Oracle to boost its presence across the board.
A second potential outcome could be the return of Oracle to an ‘appliance’ strategy – tried some years ago with little success. The market is now better placed to adopt appliances, and the notion of creating database and middleware products that install on the ‘bare metal’ by embedding the necessary portions of the OS would be very appealing. In a world moving rapidly towards a services view of applications, such appliances would be a sound foundation for service appliances that could be implemented as part of a scalable, fault-tolerant grid.
The above scenarios are pure conjecture, but show potential outcomes that have repercussions far beyond the simple notion of providing support for a Linux distribution.
At the immediately obvious level, the initiative is a smart move on the part of Oracle, and should help in its drive to have its grid products accepted by a large user base. An inescapable conclusion is that Oracle really feels the need to provide a single-vendor ‘soup to nuts’ software scope in order to compete with Microsoft across the whole spectrum of enterprise software. However, we should really look at this as an astute and highly aggressive move on the part of Oracle to steal an edge from its competitors, and potentially to create an entirely new type of software product.
Source: OpinionWire by Butler Group (www.butlergroup.com)