Longterm, though, the picture looks a lot less clear and it has the potential for truly shaking up retail IT operations.
Most of the products that are likely to be at play in the merger talks—including Java, MySQL, Sun servers and workstations and Oracle's Retail suite—will either be unchanged (Oracle Retail seems to have no redundancy and is likely to be not impacted at all) or the changes will be irrelevant (MySQL operates so far below the database size and needs of most major chains that it is likely to be irrelevant). Although Java has attracted a lot of attention and debate, it's unlikely that Oracle would handle it much differently than did Sun.
But if one looks a bit further down the road, things could get a lot more interesting for the typical retail chain CIO.
Will Oracle Be Injured Longterm?
Over the last several years, Oracle has been on a strategic buying spree (PeopleSoft, Primavera, BEA, Retek, ProfitLogic, 360Commerce, Siebel Systems, etc.). Traditionally, such high-tech acquisitions rarely prove effective over a long period. The size and strong culture of Sun makes it a particularly good candidate for an indigestion-generating meal.
If these acquisitions eat into Oracle profits and revenues, it would likely hit R&D and customer service, a lethal combo when Oracle Retail will be trying to fend off incursions from long-time rivals such as SAP, IBM, Epicor, Microsoft and Escalate. Revenues typically take a hit during these acquisition transitions, as prospects and current customers hold off new purchases until they can see a detailed product roadmap. Those customers often will also be more open to meetings with rivals and the poaching season begins.
Profits will take a hit as contractual costs from the acquisitions hit. One of the reasons that have been cited for the failure of IBM's offer to buy Sun, while Oracle's offer survived, is that IBM balked at the golden parachutes Sun wanted but Oracle reportedly agreed to them.
Continuing on the pessimistic view: Such mammoth integrations distract key management at a crucial time, allowing for missed opportunities and slower than usual responses to rival attacks. All in all, if many of these problems emerge, it could weaken Oracle, which would clearly impact Oracle Retail. Is Consolidation Such A Good Thing?
Even if none of these issues undermine Oracle, we can look to more general emotional concerns. There was an interesting analysis of the acquisition penned by our friends at Retail Systems Research. It basically makes the argument that retail IT execs want a single throat to choke, if you will, and that to the extent that this move gives Oracle a more complete family of technology enterprise offerings (including now hardware), it will be a good thing for them.
I must disagree with that conclusion, though, and for two very different reasons. The premise is that retail IT leaders want to consolidate their technology purchases as much as possible. For most chains, I'd argue that the opposite is true. The point of failure philosophy wants as many different vendors in a network as possible, so that a problem with any one is as limited as possible and won't blow up everything.
The real issue against consolidation is that retailers are generally loathe to give that kind of power, that much control, to anybody. If the vendor wants to impose a rate hike or arbitrarily change licensing terms or stops being responsive on tech support issues, retailers want to be able to remove them without forcing a catastrophic change. No vendor should control too high a percentage of systems, the thinking goes.
But even for those retail CIOs who have opted to accept such control risks in exchange for the easier management and the reverse control (if the retailer is writing one huge check to that vendor, that's quite a bit of power as well), there is psychological history to contend with. Other than Computer Associates during its height, no company has a nastier reputation than Oracle of being difficult to work with and of pulling surprise extra charges. To the level that any CIO is comfortable turning over a lot of control to a single vendor, asking them to do it with Oracle is a huge leap. Oracle may have done the impossible: Make Microsoft and IBM look like flexible and easygoing partners by comparison.
I'm therefore having difficulty envisioning Larry Ellison's crew as this warm and inviting group that will make retail CIOs willingly turn over the car keys for their entire fleets. Tedd Ladd, a senior PR manager at Microsoft, posed a self-serving—but interesting nonetheless—thought: "Customers are likely asking themselves if this merger adds more complexity and cost to their environments at time when they are asking for more clarity and value."
Not so sure that it adds any real complexity and cost to their environments, but Microsoft gets brownie points for moving into FUD mode before IBM did. What it does so, ironically, is to truly deliver FUD—fear, uncertainty and doubt—to the market. And although it's not likely to have a huge strategic impact on most major chains, the most talked about confusing product is MySQL.
Retailers that use the MySQL open source database probably weren't too concerned 14 months ago when Sun Microsystems spent $1 billion to buy the company (with Sun CEO Jonathan Schwartz calling the deal "the most important acquisition in Sun's history") because Sun has always been an advocate of open-source software. But this week's move is a different story.
The news has some MySQL fans in a state of anxiety as they wonder if Oracle will continue to support MySQL or kill it given that MySQL is an open-source alternative, for some applications, to Oracle's own database. Oracle isn't revealing its plans. But the issue has created a level of chatter that would give the Tower of Babel a run for its money as pundits and experts try to guess.
"Oracle will kill MySQL," said IHL Consulting Group President Greg Buzek. He took that stand despite noting that MySQL, which has an install base of about 12 million, doesn't scale up to the super sizes of Oracle database but it is widely used for "literally anything below a terabyte," an area where Oracle license fees don't fit.
Nevertheless, MySQL has been a thorn in the side of Oracle, which was rumored to be interested in buying the company before Sun took the plunge. But that doesn't necessarily mean Oracle will now stomp it out. In fact, those who believe Oracle will not discontinue support for MySQL suggest the company will keep it alive as a means of competing with similar-sized database products offered by competitors, including Microsoft.
Among those who reportedly believe Oracle will not lay to waste MySQL is Marten Mickos, MySQL's former CEO. He told Forbes he believes Oracle intends to challenge Microsoft's fast-growing database business and will use MySQL "to achieve a stronger developer community." Mickos noted Oracle CEO Larry Ellison is "smart" and, therefore, not likely to kill a product that was getting about 70,000 downloads daily a year ago and is very popular with young developers.
Like other well-known pieces of open source technology, MySQL is being used at almost all of the major retailers, but typically in very minor projects. The very low deployment cost makes it easy for workgroups to use it to customize all kinds of projects. It's inability to scale, though, has sharply limited its use.
Retail Systems Research Partner Paula Rosenblum said "most significant Web sites tend to use Oracle and Sun as a backend," but she conceded MySQL is "free, performs very well" and "tends to be embedded in packages so you often don't know where it is." Because of that, Rosenblum recommended retailers concerned about the Oracle/Sun deal fallout should "check and see what runtime licenses you have running in your ancillary applications. Someone in your IT department probably knows if they have MySQL in it or not and if it does you might find yourself paying a royalty."
But lest anyone think that these thoughts have gone unnoticed at Oracle, they announced the purchase of Sun on Monday (April 20). On Tuesday (April 21), Oracle announced an "Internet Seminar" where an E-mail blast said one topic would be one user discussing "how he gained a reliable, scalable, secure, and cost effective platform by moving from MySQL to Oracle." Coincidental timing? With Oracle, there's no such thing.