Oracle's Linux Announcment: A Load of Bull?

Includes: ORCL, RHT
by: Dave Dargo

Sometimes you just have to call bull*% on something and Oracle’s announcement on Linux is as great a candidate as any I’ve seen lately. Most of the pundits and analysts will focus on what this means for Red Hat and their valuation. In fact, Red Hat’s stock price was off 24% in yesterday's trading after the announcement.

There are a number of issues I had with the announcement and, I’m sure, everyone will have their own take on the matter. I’ve written about this potential announcement going back to May when the rumors first started to fly and as recently as last week. My contention has been that this is more of an emotional reaction to the market capitalization of Red Hat than a sound business decision that delivers any added value to the industry or to the end customers.

Larry’s quote is the most interesting: “We believe that better support and lower support prices will speed the adoption of Linux, and we are working closely with our partners to make that happen.”

Well, I guess they’re working with some of their partners, but, I doubt that Red Hat is one of them. Essentially, Oracle is taking the work that Red Hat is doing and charging less for it in an attempt to bypass Red Hat as a vendor.

I’m not sure how long that model, if successful, can last. If Oracle is tremendously successful in taking Red Hat’s business then, ultimately, Red Hat won’t be around. Oracle will then either need to acquire Red Hat or staff up to include the same resources that Red Hat has in building, distributing and supporting their product. Is this their plan, to get Red Hat’s valuation low enough to acquire them?

What I found more fascinating about Larry’s quote, though, was the concept that in order to speed the adoption of Linux the support prices had to be lower and support had to be better. Let’s look at first year costs for deploying Oracle on Linux on a four processor box and see what kind of savings we’re really talking about:

First year’s Linux support from Red Hat: $2,499
First year’s Linux support from Oracle: $1,999, O.K., we’re saving money now—$500 to be exact.

First year’s Oracle database support with no database options: $35,200

So far, the support costs for the first year are either $37,699 or $37,199; still saving that $500.

But wait, there’s more, the license fee you would pay to use Oracle is $160,000. So the total, first year’s cost for Oracle on Red Hat’s Linux is $197,699 or $197,199 if you get Linux support from Oracle—a savings of a whopping 0.25%.

oracle graph

What does this tell us? That they’re solving the wrong problem. Let’s assume that Oracle provided the Linux support for free, that’s $0.00, nada, nothing, zilch. The price for Oracle on that Linux for the first year would still be $195,200.

If the limiting factor of adopting Linux is the price of support, are we going to see Oracle lower their prices? Oh, that’s right—Linux is open-source and has a competitive support model and Oracle is closed-source with a monopolistic support model. That’s why they can charge nearly $200,000 for their database, with no options, for a four processor box. Monopolistic vs. competitive; which is better for the customer? Hmmm, let’s think about that one.

But what about the other part of that quote, that support has to be better. There’s a survey from CIOInsight (.pdf) that shows Red Hat is the number one vendor for value as rated by CIOs in 2004 and 2005. Where does Oracle fit on that chart? Glad you asked, they ranked 39 out of 41.

The other thing I’m most curious about is the concept of Oracle’s Unbreakable Linux Network [ULN]. The claim is that it takes less than a minute to switch from Red Hat’s Network [RHN] to ULN. It’s going to take more than a minute, and a fair amount of cost, to get through the legal agreements and process of switching over.

But even with that aside, I’m mostly curious as to why Oracle’s first real support network is for someone else’s product. Where’s the Oracle Database Network and Applications Network and PeopleSoft Network and Siebel Network? Where are the support infrastructure networks for Oracle’s own products to automatically distribute fixes, patches and alerts? It’s amazing that they can provide all that for a mere $399 for a competitor’s products, but not for their own $200,000 product.

At the end of the day they still haven’t answered the basic question of how eliminating choice benefits the customer, and that’s bull*%.