As the reality of Oracle’s Sun acquisition sinks in a number of intriguing thoughts come to mind.  The first is a déjà vu feeling that Oracle is trying to re-invent the AS/400.  Let me explain.  Oracle’s stated case for buying Sun is to become the “first” IT vendor to offer a highly integrated and optimized combination of applications, middleware, operating system and hardware.  This should sound familiar to those of you that were around in the late 80’s.  It is identical to the value proposition that allowed AS/400 to become a huge success.  That proposition was also the key to the early success of JD Edwards. 

The Oracle product line now includes all of the necessary pieces to offer the same kind of complete, end-to-end solution.  The big questions are: How effectively can Oracle pull these pieces together? How long will it take? Can Oracle learn how to sell highly integrated appliances? Will the value proposition be sufficiently compelling in the current market? 

Unlike IBM’s AS/400, the centerpiece of Oracle’s offerings will be leading edge applications that it owns.  They include eBusiness Suite, PeopleSoft, Siebel, the “edge” applications, Fusion (soon) and obviously JD Edwards. Customers will be enticed to buy all of the ancillary technologies needed to make these applications work from Oracle.  The value proposition will be that Oracle has optimized the various components to work together more effectively than would be the case with mix and match piece parts from various vendors. 

AS/400 demonstrated that this concept can succeed in the market if executed elegantly.  In trying to duplicate its success Oracle will face many challenges: 

  • Strongly entrenched providers of hardware and middleware.
  • Restructuring a sales force now aligned to sell each product separately.
  • Competing successfully in a brutal, cut-throat hardware market.
  • Building a partner network able to bring integrated appliances to the mid-market (the segment where the integration story works best).
  • Bringing this story to buyers in a compelling way will require Oracle to invest more in marketing than it likes to.  

Becoming a one-stop-shopping provider will not come naturally to Oracle – a business built on providing best-of-breed technologically elegant building blocks.  Ellison will have to change his act in ways that will not come naturally to him in order to succeed.  On the other hand, it has never been a wise bet to assume Ellison will fail at anything he gets serious about. 

I plan to explore some of the issues raised above in more detail in the coming weeks.  Your thoughts and feedback are welcome as always.

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