infoTECH Spotlight Magazine

infoTECH Magazine

Publisher's Outlook

August 01, 2011

HP Itanium Feud with Oracle Hurts Customers Most

This article originally appeared in the July 2011 issue of infoTECH Spotlight.

Oracle (News - Alert) is fiercely competitive – in and out of the water.

The rivalry between HP and Oracle is definitely heating up and the endgame probably isn’t good for HP. For more than a decade, an acquisition spree at Oracle has allowed it to become a software behemoth depended on by IT departments worldwide. And as the company rolled up industry after industry (CRM in particular) they were able to get regulators to buy-in because Oracle was one of the software companies acting as a counterbalance to Microsoft (News - Alert). And Oracle – unlike most of the tech companies I come across – knows how to acquire and integrate, and do it well. They are so successful they now supply to 100 out of the Fortune Global 100 and have more than 345,000 customers.

But now with so much software concentrated in a single company, Oracle has incredible power. They have the ability to raise prices on maintenance contracts and customers have limited options. This brings to mind an article from Bob Evans in InformationWeek last year talking about how at the time Oracle’s maintenance business had an operating margin of 92 percent on more than $3 billion in a quarter.

But most important, they have the power to really hurt their enemies.

And if you haven’t noticed, one of Oracle’s biggest enemies lately is HP and Oracle’s Sun acquisition has placed the companies in direct competition.

The latest in this rivalry is Oracle’s decision to pull support for Intel’s (News - Alert) Itanium processor; Kevin McLaughlin at CRN details how Oracle has decided to drop support for the chip powering many HP computers and in response, HP is using social media to try to persuade Oracle to change its mind.

Jeffrey Burt at eWeek explains how many Oracle customers are unhappy with the decision – this isn’t surprising as making multimillion dollar hardware platform bets only to find out your software won’t run on the platform you chose is never good. Especially when budgets call for hardware platforms to be around for many years in order to be cost-effective.

HP’s official corporate blog has more but the post is not as diplomatic as I would have expected. I was surprised to read the following:

Oracle continues to show a pattern of anti-customer behavior as they move to shore up their failing Sun server business. HP believes in fair and honest competition. Competition is good for customers, innovation and the marketplace.

My surprise is not in the accuracy of the above statement but more that HP and Oracle, like it or not, are tied at the hip since they both have many customers in common. And keeping these customers happy should be their primary jobs. But in the case of Oracle – they have what you might want to call an entrenched position in the market and customers are extremely dependent.

Oracle’s statement on its Itanium decision is well-worded and is in its complete form below:

After multiple conversations with Intel senior management Oracle has decided to discontinue all software development on the Intel Itanium microprocessor. Intel management made it clear that their strategic focus is on their x86 microprocessor and that Itanium was nearing the end of its life.

Both Microsoft and RedHat have already stopped developing software for Itanium.  HP CEO Leo Apotheker made no mention of Itanium in his long and detailed presentation on the future strategic direction of HP.

Oracle will continue to provide customers with support for existing versions of Oracle software products that already run on Itanium.

So the question, which only Oracle knows the answer to, is whether this decision was in any way influenced by the fact that HP is heavily reliant on Itanium and, moreover, the fact that via the Sun acquisition, HP and Oracle are now major competitors.

What is clear however is that industries are at the mercy of companies who roll up industries and this rivalry can in no way be good for any customers. That is unless of course Sun and HP compete via innovation – and this spat in particular shows that for the moment the situation is more of a feud than a rivalry to outdo one another with better products.

Rich Tehrani is CEO of TMC. In addition, he is the Chairman of the world’s best-attended communications conference, INTERNET TELEPHONY Conference & EXPO (ITEXPO (News - Alert)). He is also the author of his own communications and technology blog.

Edited by Stefania Viscusi