Larry Ellison is a famously activist exponent of competitive strategy. An avowed student of Sun Tzu’s Art of War, the Oracle chief executive has long followed an approach that sets Oracle’s interests against those of its main rivals, with Microsoft, IBM and SAP cast as the enemy.
With the acquisition of Sun Microsystems, however, he is about to walk on to new terrain where some of the methods that defined Oracle’s traditional approach to strategy no longer apply.
Sun’s main software assets – and the jewels for which Mr Ellison said this week that he had agreed to pay $7.4bn for the company – are all closely tied to the open source world: the Java programming language and development tools, which are partly open source, as well as the Solaris operating system and MySQL database.
That makes them unlike the roughly 200 software properties that Mr Ellison has acquired in the past. They are made freely available, and rely partly on the efforts of a wider group of developers to extend and support them. Their future success, in fact, relies on a technology community that stretches well beyond Oracle – and includes companies such as IBM, which also relies on Java as a core technology.
“Obviously Oracle is going to have to be a lot less heavy handed,” says Kenneth Chin, an analyst at Gartner. “They’ve acquired a lot of open-source assets, and they need to keep the communities involved.”
So far, Oracle has had little to say about how it will manage this balancing act. That has left the open source world trying to second guess what Mr Ellison will do next.
The focus has shifted in particular to how he will seek to make money from software properties that Sun itself so glaringly failed to “monetise” in the past, and whether his real intention is even to subvert some of the assets he is acquiring to protect Oracle’s existing business model.
The future of MySQL – an open source database bought by Sun last year, which has come to be seen as a long-term threat to Oracle’s own core database software business – has become the most immediate source of concern.
Marten Mickos, the former chief executive of MySQL, admits that Oracle’s acquisition of an upstart rival has sent a chill through the open-source community, and he likens it to Goliath vanquishing David. However, he also claims that it will still be in Mr Ellison’s own interests to maintain the software: “I think MySQL is cannibalising Oracle anyway,” so Oracle might as well benefit from that process directly, he says.
Most observers do not expect the hard-headed Mr Ellison to see it this way. Gary Reback, a Silicon Valley antitrust expert, says there is a chance that anti-trust authorities will force him to divest MySQL, but adds: “I think he wins any way you cut it. If he keeps it, he kills it: if he spins it off, who wants it without the top developers anymore?”
There are some potential limits. Mitch Kapor, a leading figure in the open-source world, points out that MySQL has a life beyond Oracle’s control: the software has already been “forked”, meaning alternative open-source versions have been created that are outside Oracle’s control.
However, stripped of the sponsorship of a big company willing to supply the core group of developers to push the project forward, MySQL could lose momentum as a significant rival to Oracle.
Mr Ellison’s intentions for Java have also become the centre of considerable speculation. Created by Sun as a way to counter the growing influence of Microsoft, Java’s power comes from its adoption by a wide group of companies, including IBM. If Oracle upsets this ecosystem it would undermine the value of Java – something people close to the company have been at pains to stress.
Yet maintaining Java’s openness, while at the same time directing its future development, will be a delicate balancing act, requiring the exercise of what Bill Whyman, an analyst at ISI, calls “soft power” – not Mr Ellison’s strength.
“We always wanted Java’s evolution to be participatory, but fully open would compromise compatibility,” says Bill Joy, the Sun co-founder and former chief scientist. “I believe Oracle shares these values, so am not concerned.”
More directly, Oracle has made clear that it plans to make money from Java in a way that Sun failed to do – another source of potential conflict with the rest of the technology world. Besides simply raising the licensing fee, Oracle could try to levy a small fee on every application that runs on Java, according to Gartner – a move that would have particular implications for the mobile world, given that Java is shipped on virtually all mobile phones.