Will BMC and CA be Oracle's Next Big Acquisition?
Ronnie Ray
The news of the week has certainly been the announcement by Oracle of its agreement to purchase Sun for $7.4B. After the much publicized negotiations with IBM that fell through last week, this was surprising - yet, much in the character of Oracle's bold and big acquisition style. Oracle has acquired around 50 technology companies worth more than $40B in the last several years.
While a lot of ink is being spent in the media and the blogoshere regarding the strategic benefits to Oracle owning Java and MySQL and the less strategic play in server hardware, we decided to dig into what this might portend for the future of the IT Management industry - with some crystal gazing of our own to spur discussion.
For
starters, Sun has been relatively quiet on the IT management front up to this
January when they bought Q-layer for an undisclosed sum. Industry analysts and
commentators thought this to be a smart move as it gave Sun an entree into
private and public cloud infrastructure services and management. No doubt
this should help Sun sell more hardware and Solaris software through their
own recently announced Sun Cloud offerings and for private cloud
deployments. In fact, one has to go back to 2002 to find an infrastructure
management acquisition (Terraspring) by Sun.
Oracle, on the other hand has been a prolific acquirer of middleware (e.g. BEA), business applications (20+ companies including biggies like PeopleSoft and Siebel), corporate performance management (e.g. Hyperion) and also a few IT Management plays on the Telco/OSS segment (notably the acquisition of Metasolv in 2006).
Now, let's look at the reshaped landscape in Oracle's competitive map after the Sun purchase. Clearly IBM and HP become even bigger competitors, if Oracle decides to hold on to the server business. EMC, and lately Cisco, are also competitive in the datacenter market around storage hardware and cloud computing initiatives. The nature of the play with Microsoft also changes, given the ubiquity of Java and MySQL and its direct head-on competition with .NET and SQL Server.
What strikes me, is the missing piece in Oracle's arsenal that each of Oracle's competitors have in plenty - the ability to manage IT infrastructure and applications. All of these companies have made acquisitions in the past few years bolting on new management software that enable more efficient performance of the entire enterprise technology stack - hardware, middleware and business applications.
Why is this important?
First, it provides tremendous opportunities for consulting services as HP and IBM and the Microsoft partner ecosystem's services revenue will attest. This is one of the reasons that Cisco is moving into this territory with its Advanced Services offerings.
Second, it provides a powerful defensive mechanism to keep competitors out from gaining a strategic position in key customer accounts. Imagine an enterprise running its business applications on the Solaris/J2EE/ BEA/Oracle stack with IBM Tivoli or HP OpenView (before its recent name change to Operations Manager) management systems giving a deep entree for key competitors into what could be a top-to-bottom Oracle shop. Of course there will be zillions of other software components from 3rd parties, but not strategic pieces directly from the primary competitors.
Third, as cloud computing comes of age over the next several years, IT ROI will depend on a large measure on intelligent automation to manage dynamic and virtualized stacks of components. This is not possible without a depth of IT Management capability from deployment, change management, security, monitoring and so on and their feedback into dynamic provisioning and cloud sourcing.
If you agree with the above, let's take a look at Oracle's options. Digesting Sun may take a little bit of time, but Oracle has a good reputation for hard-nosed decisions and swift integration. Once that is done, if Oracle wants to earn itself a level playing field in IT Management there are two independent players that have leadership in this space - BMC and CA. Both have strong Enterprise IT management plays and also software to bolster Oracle's offerings in the OSS space (for Telecom providers). Buying either of them would provide Oracle a seat at the table with the CIO, discussing IT infrastructure strategies, ITIL and related technology management business processes, and, of course, future cloud technology evolution. IBM and HP are already in this game from all angles including recent Cloud announcements (IBM and Amazon AWS partnership for instance).
Which of the above would be an easier acquisition for Oracle? Probably BMC - given its newer technology refresh, smaller size, BSM leadership and a solid position with Atrium being the preferred CMDB at the heart of IT operations (again the primary competitor here is IBM).
I would love to hear your thoughts. It's time to take a look at your IT Management crystal ball.
Ronnie Ray
President
MarketPlane Consulting Inc.
Tarry Singh
Sun needs to be stripped and all those extravagant bonuses will go, so will old crappy brass.
As for BMC , Cisco's eyes ar on it and CA too is attractive. Its just that they're still a bit expensive. "They ought to bleed a little more" as a M&A advisor would say before they are ready for a "mercy" buyout.
Kind Regards,
Tarry Singh
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Jeanne Morain
Jeanne
From: Ronnie Ray <ron...@marketplane.net>
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Sent: Thursday, April 23, 2009 12:42:04 PM
Subject: [ Cloud Computing ] Will BMC and CA be Oracle's Next Big Acquisition?
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