Oracle finally makes linux annoucement

Grant Shipley gshipley at gmail.com
Thu Oct 26 05:49:30 MDT 2006


http://blogs.ingres.com/davedargo/content/2006-10-25.html

 Bull*&#%!

Sometimes you just have to call bull*&#% on something and Oracle's
announcement on Linux is as great a candidate as any I've seen lately.
Most of the pundits and analysts will focus on what this means for Red
Hat and their valuation. In fact, Red Hat's stock price was off 15% in
after-market trading after the announcement.

There are a number of issues I had with the announcement and, I'm
sure, everyone will have their own take on the matter. I've written
about this potential announcement going back to May when the rumors
first started to fly and as recently as last week. My contention has
been that this is more of an emotional reaction to the market
capitalization of Red Hat than a sound business decision that delivers
any added value to the industry or to the end customers.

Larry's quote is the most interesting: "We believe that better support
and lower support prices will speed the adoption of Linux, and we are
working closely with our partners to make that happen."

Well, I guess they're working with some of their partners, but, I
doubt that Red Hat is one of them. Essentially, Oracle is taking the
work that Red Hat is doing and charging less for it in an attempt to
bypass Red Hat as a vendor.

I'm not sure how long that model, if successful, can last. If Oracle
is tremendously successful in taking Red Hat's business then,
ultimately, Red Hat won't be around. Oracle will then either need to
acquire Red Hat or staff up to include the same resources that Red Hat
has in building, distributing and supporting their product. Is this
their plan, to get Red Hat's valuation low enough to acquire them?

What I found more fascinating about Larry's quote, though, was the
concept that in order to speed the adoption of Linux the support
prices had to be lower and support had to be better. Let's look at
first year costs for deploying Oracle on Linux on a four processor box
and see what kind of savings we're really talking about:

First year's Linux support from Red Hat: $2,499
First year's Linux support from Oracle: $1,999, O.K., we're saving
money now—$500 to be exact.

First year's Oracle database support with no database options: $35,200

So far, the support costs for the first year are either $37,699 or
$37,199; still saving that $500.

But wait, there's more, the license fee you would pay to use Oracle is
$160,000. So the total, first year's cost for Oracle on Red Hat's
Linux is $197,699 or $197,199 if you get Linux support from Oracle—a
savings of a whopping 0.25%.
Caption: Graph showing First Year Cost Savings on Four Processor
System based on List Prices. Source: Ingres Corporation.

What does this tell us? That they're solving the wrong problem. Let's
assume that Oracle provided the Linux support for free, that's $0.00,
nada, nothing, zilch. The price for Oracle on that Linux for the first
year would still be $195,200.

If the limiting factor of adopting Linux is the price of support, are
we going to see Oracle lower their prices? Oh, that's right—Linux is
open-source and has a competitive support model and Oracle is
closed-source with a monopolistic support model. That's why they can
charge nearly $200,000 for their database, with no options, for a four
processor box. Monopolistic vs. competitive; which is better for the
customer? Hmmm, let's think about that one.

But what about the other part of that quote, that support has to be
better. There's a survey from CIOInsight that shows Red Hat is the
number one vendor for value as rated by CIO's in 2004 and 2005. Where
does Oracle fit on that chart? Glad you asked, they ranked 39 out of
41.

The other thing I'm most curious about is the concept of Oracle's
Unbreakable Linux Network (ULN). The claim is that it takes less than
a minute to switch from Red Hat's Network (RHN) to ULN. It's going to
take more than a minute, and a fair amount of cost, to get through the
legal agreements and process of switching over. But even with that
aside, I'm mostly curious as to why Oracle's first real support
network is for someone else's product. Where's the Oracle Database
Network and Applications Network and PeopleSoft Network and Siebel
Network? Where are the support infrastructure networks for Oracle's
own products to automatically distribute fixes, patches and alerts?
It's amazing that they can provide all that for a mere $399 for a
competitor's products, but not for their own $200,000 product.

At the end of the day they still haven't answered the basic question
of how eliminating choice benefits the customer, and that's bull*&#%.



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