Sun-MySQL: The winner is Oracle with Microsoft second

Sun (JAVA)-MySQL. Ora­cle (ORCL)-BEA (BEAS). As I said (see in the Oracle-BEA post put up on this site on Jan­u­ary 17), there is one major inter­con­nect­ing theme in the two major software-supplier acqui­si­tions this week: For users and investors the inde­pen­dent mid­dle­ware mar­ket as we know it is going away.

In Ora­cle acquir­ing BEA, the thought process behind that state­ment is (hope­fully) clear and explicit.

In the Sun-MySQL deal, which also will lead to the col­lapse of mid­dle­ware inde­pen­dence, it’s actu­ally implicit in Sun’s state­ment that it wants to get into the data­base mar­ket. That really means Sun wants back into the whole infra­struc­ture stack mar­ket, offer­ing a frame­work from hard­ware up through busi­ness process man­age­ment, and even appli­ca­tions if you count openOffice.

Think about that (“Sun as a com­peti­tor against Ora­cle in the data­base mar­ket”). That makes Ora­cle the win­ner in both deals. Now, instead of wor­ry­ing about com­pet­ing against a bunch of hun­gry nerds toil­ing away in an aggres­sive free­stand­ing start-up, con­duct­ing guerilla mar­ket­ing world­wide the way Sun did against DEC and Data Gen­eral 20 years ago, Ora­cle just needs to think about Sun as a com­peti­tor in the data­base market.

And on the same day, it put BEA out of its mis­ery!!! A two-fer.

But of course that is not Sun’s objec­tive. Sun wants to take on Ora­cle, IBM (IBM), SAP (SAP) and oth­ers and make sure the oth­ers think of Sun as a com­peti­tor all the way up and down the stack. As Larry said in the con­text of his deal, it was “a great day for Java.”

Sun CEO Jonathan Schwartz said the MySQL deal was the “most impor­tant acqui­si­tion in his­tory of Sun” But he also said the MySQL acqui­si­tion was com­ple­men­tary to Sun’s JavaDB (Berke­ley) and post­greSQL offer­ings. The lat­ter are other open source soft­ware (OSS) projects in which Sun is involved that com­pete with MySQL. That the com­pet­ing projects com­ple­ment each other may be Sun’s inten­tion but that’s just not human nature.

First point: Watch for a tumul­tuous period start­ing almost imme­di­ately (the deal will be final­ized plus/minus April 1) where the mul­ti­ple OSS data­base offer­ings sort them­selves out within Sun’s sales force. This will retard MySQL’s growth from what the OSS data­base might have oth­er­wise achieved in 2008. MySQL may even lose; IT devel­op­ment and mar­ket­ing guys play hard ball. We have already seen aggres­sive PR cam­paigns bad­mouthing MySQL prod­uct and sup­port quality.

Speak­ing of MySQL’s rev­enue, the losers in this acqui­si­tion were the OSS pure­plays and those OSS dual-license guys that still like to call them­selves OSS pure­plays. Research 2.0 and oth­ers esti­mate MySQL did about $75 mil­lion in rev­enue in 2007. We applaud Sun’s nego­ti­at­ing skill. Even if MySQL only did $50 mil­lion in 2007, the low­est esti­mate we have heard, it means Sun “only” paid 20x annual rev­enue. In Octo­ber 2007, Cit­rix (CTXS) acquired Xen­source for some where north of 100x 2007 rev­enue. To be fair to Cit­rix, it believes it paid about 10x 2008 rev­enue for Xen­source. But of course we won’t know if that’s true for a year and Cit­rix won’t tell us if it was wrong anyways.

Sec­ond point: The value of pureplay-heritage OSS hybrid com­pa­nies, which is what MySQL was, is drop­ping by that val­u­a­tion mea­sure­ment, com­ing back to earth from the JBoss, Zim­bra and Xen­Source acqui­si­tions. As I said in my ini­tial blog post on this acqui­si­tion, the OSS IPO parade band is turn­ing into a quin­tet and might sim­ply become a guy accom­pa­ny­ing him­self on a har­mon­ica by the end of 2008. And as I said when MySQL was beat­ing the IPO drum back in July, a good busi­ness case is still more impor­tant than a buzz­word such as OSS.

In my opin­ion, the invest­ment opportunities—and OSS’s future—lies on the appli­ca­tion func­tion­al­ity side of the mar­ket, not the infra­struc­ture side. Alfresco, Com­piere, Jasper­soft, etc. are still in the parade but the oth­ers best get out of line and find their “pro­pri­etary part­ners” as soon as possible.

As for part­ners, MySQL allies such as Google (GOOG), HP (HP), IBM (IBM), and Unisys might really be think­ing twice about Sun’s acqui­si­tion. Intel (INTL), Red Hat (RHT) and SAP (SAP) pulled a few dol­lars out of the deal because they were major MySQL investors. But pre­sum­ably SAP would have pre­ferred that MySQL stay inde­pen­dent because it was prob­a­bly going to bet on MySQL as a coun­ter­weight to Ora­cle (it doesn’t like hav­ing its major com­peti­tor “own­ing” most of the file sys­tems its cus­tomers’ SAP appli­ca­tions access). With this acqui­si­tion, SAP will now be equally beholden to Sun. But SAP can still switch eas­ily to Ingres or post­greSQL, or even–although unlikely–its own SAP DB.

Smaller MySQL part­ners, many of whom are also OSS com­pa­nies, should be helped by this move, as explained over at my OSS blog on ebizQ.net, where I research about OSS all the time.

As for users Sun believes it can drive new adop­tion of MySQL’s data­base in more tra­di­tional appli­ca­tions and enter­prises. Today MySQL shows up more in embed­ded appli­ca­tions and “Web 2.0 stuff.” Sun says, “The inte­gra­tion with Sun will greatly extend the com­mer­cial appeal of MySQL’s offer­ings and improve its value propo­si­tion with the addi­tion of Sun’s global ser­vices orga­ni­za­tion.” Schwartz said Sun’s research found that the lack of “peace of mind” by large enter­prises was hold­ing MySQL back. But some very large enter­prises such as Nokia and Google weren’t hav­ing that problem.

The com­pa­nies also said more than 100 mil­lion copies of MySQL’s OSS data­base soft­ware have been down­loaded. A very large per­cent­age of those were for Win­dows but MySQL said that by the time the data­base gets to pro­duc­tion (only one in a thou­sand down­loads turn into busi­ness MySQL had said pre­vi­ously), most are on Linux, with Win­dows and Solaris sec­ond and third in popularity.

Third point: So even major Sun part­ner, Microsoft (MSFT) might get some ben­e­fit out the acquisition.

But in the end, the real win­ner is Oracle.–Dennis Byron

Tags: open source soft­ware, OSS, Microsoft, Sun, Ora­cle, MySQL, SAP

Tagged as: Microsoft, Open Source, Oracle, Sun Microsystems