Chairman and CTO Larry Ellison turned what was expected to be a routine announcement of the latest generation of Oracle/Sun Microsystems X5 Engineered System last Wednesday into a declaration of war on data storage equipment maker EMC and its converged systems partnership with Cisco called VCE, Silicon Angle said.
Oracle will sell its latest generation X5 Engineered Systems hardware, which is Oracle’s term for converged systems, separately from Oracle applications on Linux or Windows at a significantly lower price than market leader VCE’s comparable systems. Ellison announced list prices that are half of VCE’s discounted prices. And he said “We will negotiate. We will discount”, according to the website.
Ellison also announced an all-flash array that’s part of X5 but sold as a stand-alone unit. Again, the list price is one-third of the price of what Oracle said is a comparable EMC XtremeIO array. Significantly, he did not announce a stand-alone server or network switch, although these are also X5 components. This seems to indicate that Oracle is not going after Cisco Systems, at this time, the report said.
Always an industry shark, Ellison clearly sees EMC as a bleeding whale. Oracle’s pricing is very aggressive in both flash arrays and converged systems, and Ellison repeatedly referenced his technology’s superiority to EMCs. The new products are available immediately, the website said.
With a high-quality reputation and low-price strategy, Oracle is seeking to commoditize the converged systems and all-flash array markets at a stroke. By making price a major factor in purchase decisions, Oracle is seeking to force CIOs who do not include the company’s hardware in RFPs to have to answer to their CFOs, the report said.
This is the start of a price war in the market, and Oracle has an advantage. VCE is fundamentally a hardware company. Oracle makes most of its profits from software. It can afford to sell hardware as a loss leader and make its profits on higher level middleware, such as its hypervisor, and on its software licensing, according to Silicon Angle.
Oracle, however, has its own vulnerabilities, and one open question is whether this hardware market grab will steal attention from its core software markets at a critical time in their evolution. Oracle has dominated core areas such as corporate financial software for decades. Now, however, several forces are combining to disrupt this market, among them, cloud and Big Data, the report said.
However, Oracle may see the start of significant erosion in one of its core markets. Oracle has so far dismissed such SaaS offerings as Host Analytics and Workday, Inc. which has a major financial analysis component, as annoyances. But that could change if CFOs start switching to these services in numbers, and particularly if a major competitor such as IBM or Microsoft acquire financial SaaS providers, the website said.
However, the company brings huge amounts of cash to a two-front war as it buys or develops its own new-age cloud financials while pursuing an aggressive hardware market grab strategy. Those who have watched Ellison’s strategic moves in the past, and in particular Oracle’s unfriendly takeover of PeopleSoft in the early 2000s, know he is not given to backing down once he has committed to a strategy. His sights are definitely set on EMC, and the question is how far he will go, the report said.