The cat’s out of the bag. Rumor mills — encouraged by Oracle — centered on Oracle buying a Linux distribution, like Ubuntu. Instead, they’re co-opting it, offering “Unbreakable” support of Red Hat Linux. The tale of Ellison’s stab in Red Hat’s back has prompted some colorful reaction, of which we especially enjoyed Ingres CTO Dave Dargo’s no-BS BS take.
While Oracle’s means were a bit surprising, the end shouldn’t have been: Oracle wants complete account control of the enterprise back end. They’ve made little secret that they want to own the enterprise back end, and back in the spring, Ellison himself told the Financial Times that he’d like to have a complete stack.
You can chart the move up. From the database tier, Oracle began building and later acquiring its way to the application tier. And after aborted moves to place Java support inside the database, they’ve made a concerted effort to conquer the middle tier. That leaves the client — where Oracle made an anemic play in the late 90s — and the OS.
Oracle’s foray into Linux will likely end up a loss leader, but the impact will obviously be more modest than to Red Hat (witness yesterday’s 15% share price drop).
We don’t believe for a minute Oracle’s competitive positioning that “Unbreakable Linux” will be half the cost and more responsive than Red Hat’s. For enterprise licenses, likely the core of Oracle’s thrust, the difference is only $500, or 20% off Red Hat. And, while there’s little doubt Oracle can muster the resources, as eWeek Linux watcher Steven Vaughan-Nichols points out, Oracle doesn’t have a great track record when it comes to supporting its own database bug fixes.
In all likelihood, the brunt of the business will come from Oracle’s existing database or application customers who currently have or are considering Linux.
But the real target of all this isn’t Red Hat, it’s IBM. Until now, IBM has enjoyed a free ride. Sure, they’ve plowed hundreds of engineers into Linux-enabling their products and services — an investment dwarfing that of Red Hat et al. But they’ve profited nicely from an extensive Linux and open source ecosystem that repopulates mainframes, spurs blade sales, and provides opportunities for Global Services. They’re making much fatter margins off Linux than Red Hat or Novell.
At the end of the day, while Red Hat may wind up collateral damage, IBM may finally be prodded into assuming the loss leader business as well.