Oracle Buys Virtual Iron, Renders Some Sun VM Products Moot

| May 15, 2009 | Data Center | Competitive Intelligence Report

| Analyst: Steve Schuchart

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

May 13, 2009 -- Oracle has agreed to acquire Virtual Iron Software, Inc., a provider of server virtualization management software that enables dynamic resource and capacity management in virtualized data centers. The transaction is subject to customary closing conditions and is expected to close this summer. Until the deal closes, each company will continue to operate independently. Financial details of the transaction were not disclosed.

Analytical Summary

• Current Perspective: Positive on Oracle’s acquisition of Virtual Iron, because Oracle immediately will be able to take advantage of Virtual Iron’s advanced virtual machine management software to provide features on par with Citrix and other top providers of Xen-based virtualization schemes. On top of that, Virtual Iron’s install base in the SME will open up new opportunities for Oracle’s other products. The only downside is this realistically signals an end to most of the virtualization efforts happening at Oracle’s other high-profile acquisition, Sun Microsystems, although neither Sun nor Oracle has made such plans public.

• Vendor Importance: High to Oracle, which in the space of a very short time is about to look a lot less like a software-only company and a lot more like IBM or HP. If Oracle is going to make all of this work, having a strong server virtualization play will be very handy, and Oracle should be able to drive penetration of Virtual Iron’s strong virtualization management tools in ways that Virtual Iron could not as an independent company.

• Market Impact: High on the server virtualization market, as Oracle (especially Oracle/Sun) will be in a position to push Virtual Iron’s strong virtualization management and challenge other competitors such as Microsoft, VMware, and Citrix. Competitors that had relegated Virtual Iron’s tools to the SME market will now need to take Oracle into account when the acquisition finishes this summer.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Data Center | More information

Recommended Competitor Actions

• Citrix, who uses the same base hypervisor as Virtual Iron, will find the largest market challenge in terms of differentiation when it comes to the combined Oracle/Virtual Iron. Citrix should create comparisons to Virtual Iron’s existing management feature set and be prepared to sell against that in the near term, compensating for additional features Oracle may add later. Citrix needs to be ready with this on day one, when the acquisition completes.

• Oracle, with its strong presence in the largest of enterprises could be a significant competitive threat to VMware if it can pull all of the pieces together. VMware should use the new transaction processing speed found in vSphere 4 against Oracle at every turn while showing off its industry-leading feature set. VMware should blunt Oracle at every turn, including paying for performance tests of Oracle’s VM offerings versus VMware’s own.

• Microsoft will need to fight Oracle tooth and nail in order to move copies of Hyper-V into large enterprises. Microsoft has the least-developed management feature set amongst major server virtualization vendors. Microsoft has been making excellent strides in improving the feature set of its management for Hyper-V, but it still has a long way to go. Oracle’s acquisition of Virtual Iron should spur Microsoft to greater efforts to prevent Hyper-V from being relegated to the SME market only.

• Red Hat has to do a better job on executing on its server virtualization strategy (seeVMworld Europe 2009: Red Hat Outlines Virtualization Strategy, February 26, 2009). Switching from Zen to KVM may have made some technical sense, but from a market perspective it was the equivalent of starting over. If Red Hat does not release a full-featured server virtualization product and soon it will never be able to catch up and will be in danger of becoming a permanent second-tier vendor in regards to server virtualization.

• Competitors that offer add-on functionality for virtual environments need to begin including Oracle as soon as it is practical. Oracle has no guarantee of market success with its server virtualization products after the acquisitions, but there is certainly an excellent chance it will. Vendors that aid in server virtualization or work with server virtualization will need to add Oracle to their certification/interoperability lists.

Recommended End User / Customer Actions

• Current customers of Virtual Iron have reason to be worried from a cost perspective. Oracle has a reputation for high cost and raising the prices on the products it acquires. Yet, until the acquisitions of both Virtual Iron and Sun complete, no specific action should be taken. There will be time to re-evaluate if a significant price hike occurs afterwards and Oracle may have a new strategy due to the significant changes the company will undergo because of its acquisitions.

• Customers using Oracle’s current VM should actually be cautiously happy. The management tools Oracle is acquiring with Virtual Iron are a significant upgrade to Oracle’s own tools and should make using the Oracle VM much easier.

• Customers that are trying to decide on a primary server virtualization vendor in Q4 2009 should find out what specific directions Oracle is taking with the technology from Virtual Iron and Sun and evaluate it against Microsoft’s Hyper-V suite, VMware’s V-Sphere, and Citrix’s XenServer suite.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Data Center | More information

Top