Sunacle Bucks The Trend

Let's take a look at the Oracle acquisition of Sun. Big news, that came out of nowhere after IBM tried to do the same. Big bucks for sure ($5.6B). But does it make sense?

Years ago, I picked up two slogan buttons- you know the kind that vendors hand out at tradeshows.

"Hardware makes software happen".

"Software makes hardware useful".

I picked these buttons up at a time when minicomputers and mainframes were king, and vertical integration was the norm. Since then, a significant amount of hardware and software commoditization has taken place, with these linked through vendor agnostic operating systems such as Windows or Linux.

Take the telecom industry. Telecom used to be a hardware centric vertically integrated world. With the exception of Cisco that thinks that apps should be vertically integrated with network hardware, the industry at-large is rapidly evolving towards telecom as a set of Web-Services-enable software applications running on commercial off-the-shelf servers. This eliminates the network (hardware) from becoming the bottleneck in application innovation, for example, when integrating communications into business applications and processes.

So why did Oracle buy Sun (Sunacle)? Beats me. My prediction- they will learn an expensive lesson, integrate the good stuff and end up divesting the hardware business.