Analysis Red Hat chief executive Matthew Szulik has written an open letter to Larry Ellison, essentially accusing Oracle of being a relic of a dying enterprise software age, which has served its own interests rather than those of customers for 30 years.
Szulik's mildly worded letter appeared in the Financial Times on Thursday, shanghaiing the very pink pages Ellison had co-opted just five days earlier to share with the world his thoughts on how Oracle may buy a Linux distro.
Szulik has been joined by Scott Handy, IBM's vice president of Linux and open source, who made it clear IBM ain't gonna be re-assessing its relationships with anyone just cos' Red Hat bought JBoss. Ellison used his FT piece to lump IBM in with Oracle, saying both must re-assess their relationships with Red Hat since it bought their mutual competitor, JBoss.
The slowly gathering backlash against Larry's comments are almost as predictable as Ellison's words themselves. Larry's outburst blends some good-old-fashioned ERP/CRM vendor politics calculated to freeze the competition with the passions of the jilted lover who knows he's lost something of great value.
And looking at Wall Street's initial reaction to Larry's comments on Monday, it would seem his words have had an early effect in freezing Red Hat. The company's share price fell seven per cent as analysts squawked that Larry had confirmed their fears of price competition. Market-leading quarterly growth in the hot technology area of Linux had, at least until now, helped bolster Red Hat's status on Wall Street.
As you would expect, Red Hat responded to steady everyone's nerves. What would you do if Larry took a bite out of your share price and set the feathers flying on Wall St? IBM also had to come out against Larry. IBM has invested too much in Linux as its operating system of choice against Microsoft's Windows to get sucked into a partisan war of Red Hat versus Novell sparked by the whim of one chief executive. IBM uses both Red Hat and Novell judiciously to give customers what they want and to help keep Windows out of accounts.
So what is Larry up to? The obvious conclusion was to assume Larry is trying to crush Red Hat, who moves from partner to platform competitor by owning JBoss. However, the numbers speak for themselves: Red Hat's revenue comes in at $278m compared to $13.4bn for Oracle. On revenue, Oracle has little to fear. Don't forget, too, JBoss was a loss making operation offering relatively little competition as a corporate entity.
However, JBoss' middleware was posing a challenge to closed-source middleware providers, and there in lies the rub: growth.
JBoss is getting increasing traction while Red Hat's quarterly revenue is growing at 37 per cent - twice that of Oracle. Maybe there was something too Szulik's words, when he wrote in the FT that the JBoss acquisition represents an opportunity to grow, by appealing to both customers and developers.
It's only natural, then, that Larry should want to scare investors and customers about the competition while assuring everyone he is on track to fill the gaps in Oracle's software stack and product roadmap. That's a trick Oracle's software partners have accused the company of using in the enterprise resource planning (ERP) and customer relationship management (CRM) markets. In response to customer requests for features in its software, Oracle will say it plans to offer "X" feature 18 months down the line effectively freezing out smaller partners. Customers decided to wait for their number-one database/applications provider to deliver the goods to keep things simple by purchasing from a single supplier.
But why should Oracle buy a Linux distro? One reason could be Oracle's Linux strategy hasn't really moved on from the ubiquitous "unbreakable Linux" ads that appear - and are booked to keep appearing - in the pages and on the back covers of BusinessWeek and The Economist, and on billboards up and down the 101 freeway that runs through the heart of Silicon Valley (past Oracle's campus.)
Oracle's Linux message was certainly in need of some headline grabbing attention. And recent attempts by the company to remind everybody it has a Linux strategy have appeared, well, a little ungracious. Larry unsubtly reminded the community that Linux and open source "don't just happen" but instead have relied heavily on corporate patronage from IBM, Oracle and Intel.
Oracle doesn't really need a distro, making this argument something of a red herring. Why should it buy an operating system when it can rely on partners like Red Hat and Novell to take responsibility for R&D of the distro themselves?
The only possible justification is if Oracle feels that by owning the operating system, it can also "own" a growing number of open source software developers. These developers can then help drive integration between the distro and Oracle's applications. Owning the operating system would certainly confirm the view Oracle is working towards an open- and closed-source stack that is certified to work together.
If this is Oracle's strategy, then Novell is certainly in the running. Analyst firm Evans Data Corp said Novell is second only to Red Hat in terms of mind share among developers when it comes to open source. EDC found Novell mentioned by 10.5 per cent of developers in its latest survey, with Red Hat first on 11.7 per cent in what is a "deeply fragmented" open source market. IBM and Sun Microsystems also scored favorably, the analyst firm said, noting all four are poised for "tremendous gains."
If you're gonna buy someone, it makes sence to ensure that that someone has an installed base you can monetize and grow. Novell's rather embattled CEO Jack Messman who refused to comment on Larry's unguarded words of an acquisition by Oracle, has "predicted" Red Hat's deal with JBoss would lead to a, err, "closer" relationship with Oracle.
Of course, publicly listed companies never comment on rumors about mergers and acquisitions. However, they will start rumors and speculation when it suits. Which leads onto the timing of Larry's comments and explains why talk of a distro is something of a smoke screen designed to hide what really happened.
Sources tell The Register that Oracle was in the running to buy JBoss, only the deal faltered because there was a clash of personalities. Apparently, one reason JBoss' chief executive Marc Fleury spurned Oracle was the manner of the corporate courtship. Oracle sent the suits - excluding Larry - over to Atlanta, Georgia, where JBoss is based, while Red Hat's senior management skipped over the boarder from North Carolina to meet Fleury and negotiate the deal.
Larry was within his CEO rights to keep mum on the whole affair and let it slip into the unrecorded annals of history, as a possible acquisition that was just a rumor. However, it seems the CEO's decision to speak out was motivated by more of a personal score. And who can blame him for being miffed? As Larry himself noted recently, open source has set the stakes high for Oracle.
Larry had hoped he could bring home JBoss to help Oracle win in the open source middleware market. Commenting on rumors of Oracle buying JBoss in February, Ellison had explained the rational for the purchase saying: "Rather than fight this open-source trend we think it's important to figure out ways to make it work to our advantage."
Losing JBoss to Red Hat means Oracle has lost a key ingredient in the Java platform providers' battle to turn open source to its advantage. Oracle has lost a low-footprint, free application server that would have served as an entry point to its bigger enterprise-class product. That, after all, is why IBM bought Gluecode last summer. And that's why Oracle entertained talks with JBoss, so JBoss could serve the same purpose for Oracle.
So, who can blame Larry for trying to put the freeze on Red Hat?®