Larry Ellison is nothing if not great for a soundbite. His latest incendiary comment came earlier this month in an interview with the Financial Times.
“I’d like to have a complete stack,” he said. “We’re missing an operating system. You could argue that it makes a lot of sense for us to look at distributing and supporting Linux.”
Was this just posturing for the sake of it, or is this a tell-tale sign of Oracle's intentions for open source? Would Oracle really create its own Linux OS (ORACLIX anyone?), and more importantly, does Ellison feel he HAS to go down that path?
Financial Times: What are the arguments against Oracle distributing its own Linux version?
Larry Ellison: They’re not very strong – now that Red Hat has bought JBoss and competes with us in middleware, we have to relook at the relationship – so does IBM. If Oracle were to have its own Linux distribution, or just provide paid support for Red Hat, that’s one thing – if Oracle and IBM both did it, it’s a whole new world. I don’t think Oracle and IBM want to create a second Microsoft in Red Hat. But you can’t – because Red Hat doesn’t own anything, they own nothing. They couldn’t [become the next Microsoft], they own nothing.
Financial Times: Do you want to build an open source stack?
Larry Ellison: I’d like to have a complete stack. We’re missing an operating system. You could argue that it makes a lot of sense for us to look at distributing and supporting Linux, it makes a lot of sense. That’s the one area where Oracle isn’t a player.
We would be able to test all the components together and do a better job of service. Most of our big customers would rather have one phone number to call – the classic “one neck to choke”. At least from the operating system on up to the application we’re completely responsible. We test everything together, we have one set of management tools — when we ship patches, its one system that upgrades it all together so you’re not out of synch. It’s all synchronized, that’s the Microsoft approach – that was historically the IBM approach, for a very long time.
I don’t think we’ll make a lot of money in the Linux operating system business, I don’t think its going to be a hugely profitable business for us. But it will allow us to deliver a higher quality of service to our customers because we’ve tested the whole stack, we know it works. One set of management tools, one set of patching tools, one set of upgrade tools.
He certainly sounds serious, although finding and supporting an enterprise class Linux OS is easier said than done. Oracle hasn't hidden its designs on open source of late, attempting to buy MySQL, dancing with JBoss (but ultimately losing out), acquiring Sleepycat and allegedly considering an acquisition of Zend.
Although I recommend reading the entire interview transcript, let me highlight a few of the more compelling comments:
Additional thoughts on Open Source...
- [On open source being disruptive to Oracle] Once open source gets good enough, competing with it would be insane. Keep in mind it’s not that good in most places yet. We’re a big supporter of Linux. At some point we may embed Linux in all of our products and provide support.Just like software-as-a-service, we have to be good at it. We don’t have to fight open source, we have to exploit open source. At some point we could very well choose to have Linux as part of the Oracle database server.
- [On JBoss] JBoss wanted to sell the company to us. Clearly if we wanted to buy JBoss we’d have bought JBoss. Why didn’t we buy JBoss? Because we don’t have to – if it ever got good enough we’d just take the intellectual property – just like Apache – embed it in our fusion middleware suite, and we’re done. We always have that option available to us – IBM always has that option available to them.
Ellison's thoughts on Software-as-a-Service...
- [SaaS] is a delivery mechanism for software. I believe, over time, more and more software will be delivered as a service – I totally believe that.
- [On the importance of multi-tenant] It's sheer nonsense: most companies don’t want multi-tenant. It’s a convenience for a supplier. Most companies don’t want their data co-mingled with other customers. Small companies will tolerate it.
- [On the more predictable economics] We make more money selling software-as-a-service than we make just selling software. I’d much rather be in the monthly service charge business, I’ve said this repeatedly. [At present] a huge percentage of our sales are done in the last week of the quarter: all of that goes away, it’s a much better business model.
- [On the margin impact of subscription pricing] We make more margin dollars. In the end, the only thing that really matters is how many billions we make this year. I’d much rather make $10bn at 40 per cent margins than $8bn at 50 per cent margins. I want to make $10bn. Our margin dollars will increase at a higher rate with software-as-a-service. Plus there’s no piracy, and no need to maintain old versions. There are huge advantages to the model.
Two months ago, I suggested that Oracle needed to better define its open source strategy, to its shareholders, customers and ecosystem partners. I'm not sure this qualifies, although it is comforting to understand that Larry holds no illusions about the margin and revenue potential of open source. If anything, embracing open source serves as a way of insulating Oracle's primary asset; which are the long-term maintenance revenue streams derived from its acquired application stack and its market-leading database share.
- Financial Times Interview: Part I
- Financial Times Interview: Part II
- The Great Oracle Open Source Myth of 2006
Note: At the time of this writing I, and/or funds I maintain discretionary control over, maintained a long equity position in ORCL but did not maintain a position (long or short) in IBM and RHAT.