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Oracle's Unbreakable Linux tries to neutralize Microsoft apps

Jack Loftus, News Writer

At first blush, a successful Oracle Unbreakable Linux support program might appear to threaten Red Hat Inc., whose Red Hat Enterprise Linux (RHEL) Oracle

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Corp. has cloned and which it now supports for 50% less than Red Hat's cheapest package.

For more on Oracle and Linux:
Oracle 11g ships first on Linux, not Microsoft Windows

Oracle Linux gets backing from EMC, others

And now Oracle says it has acquired 1,500 new Unbreakable Linux customers since this time last year – a dramatic increase over the mere 26 customers Oracle announced six months ago. During that time, Oracle has also signed a dozen new hardware partners, including EMC Corp., Egenera Inc. and Hitachi Data Systems.

But despite an increasing edge on Red Hat's domain, some analysts believe that Oracle's Unbreakable Linux strategy is more about competing with Microsoft than it is about chipping away at Red Hat. "Oracle's strategy is to own as many customer touch points as it can," said analyst Matt Aslett at the New York-based 451 Group. "The company will tell you this is so it can provide customers with 'more value and increased services,' but locking out [Microsoft] is a nice little side win."

Edging in on Red Hat
That's not to say that Oracle's strategy doesn't include Red Hat. CEO Larry Ellison was eager to highlight the company's momentum during Oracle's annual OpenWorld user conference in San Francisco last week. In his keynote, he also advanced an anti-Red Hat message by accusing the Raleigh-based Linux distributor of perpetrating buggy code. "With the Red Hat code, all we did for the first year was fix bugs," he said. "Now Oracle is growing a lot faster than Red Hat."

[Oracle will tell you that Unbreaksble Linux] provides customers with 'more value and increased services,' but locking out [Microsoft] is a nice little side win.
Matt Aslett,
analystthe 451 Group

Further, many customer wins in 2007 came from existing Red Hat customers, Oracle executives claimed. "We believe we have displaced Red Hat in many implementations," said Monica Kumar, Oracle's senior director of Linux and open source marketing. "Many of the customers that have come to Oracle for Linux support are Red Hat customers, and to us that is displacement."

And in some cases, these customers are noteworthy: In March Yahoo and pancake chain IHOP Corp. signed up for support; and more recently apparel retailer Abercrombie & Fitch, newspaper conglomerate Cox Enterprises and Mitsubishi Motors climbed aboard as well.

But Red Hat's financial picture doesn't suggest that it's taking a beating from Oracle. Rather, Red Hat revenue has increased to $400 million, up from $278 million in 2006. And the ever-important category of subscription revenue was up 29% year over year to $109.2 million in Q4.

A Red Hat ruse?
But even as many industry observers predicted that Oracle would make inroads into Red Hat territory , many believe that the true target of Unbreakable Linux is Microsoft.

Aslett said that Microsoft is one of the few vendors in the world with the reach, depth and coffers to match Oracle -- not Red Hat -- and that the Redmond independent software vendor is the true threat to Oracle's software business.

These days, Linux and Windows are the main platforms on which enterprises will deploy databases, said Noel Yuhanna, an analyst at the Cambridge, Mass.-based Forrester Research Inc.. "Although Oracle database management systems used to dominate the Windows platform eight years ago, today it's SQL Server. Oracle is already betting on Linux to succeed by putting strong R&D and marketing efforts around it. If Linux grows, Oracle grows," he said.

Thus, a win for Linux is a win for Oracle as it immediately eliminates SQL Server, Exchange and Visual Studio from the equation and increases the likelihood that a customer will choose Oracle software, Aslett said.

That's true regardless of whether customers choose Oracle Unbreakable Linux – or Red Hat.

In October, for example, Heimir Sverrisson, the chief architect for the Manchester, N.H.-based transportation management firm Cadec Global LLC, said he dumped SQL Server for Oracle 10g on RHEL 4 because of scalability issues. Red Hat's software updates sufficed, so Sverrisson did not see a need to buy support from Oracle.

"You could question why Oracle is paying so much attention to Linux," Aslett said, "given that its revenue from Unbreakable must shrink in comparison to the other areas of its business, but that misses the point. It isn't really important for Oracle to make money from Unbreakable Linux. … What is important is that it strengthens Oracle's relationship with its customers and keeps competitors out."

Accrding to Aslett, "The significant factor here is Oracle's desire to increase its influence over its customers' IT estates."

Ellison said as much in an April 2006 interview with the Financial Times . At the time, Ubuntu sponsor Canonical Ltd. and Novell were floated as possible acquisition targets, but Ellison dismissed the idea out of hand.

"I don't think we'll make a lot of money in the Linux operating system business, I don't think it's going to be a hugely profitable business for us," he said. "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."

Email Jack Loftus with your comments and suggestions. You can also check out our blog, the Enterprise Linux Log, for more information on Linux and open source software .


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