From an insurance industry point of view Oracle's proposed acquisition of Sun, announced on April 20, is less interesting in its most immediate effects than the vendor's AdminServer and Skywire acquisitions. However, from a general technology industry point of view the deal is of tremendous import, potentially, which could also impact the insurance industry significantly in the longer term.
If the deal goes through, it will be the first time a top-tier software provider has acquire a top-tier hardware company, as observed in a Gartner (Stamford, Conn.) research note titled "Oracle/Sun Deal Will Change Competitive Landscape in IT." Oracle will leverage the acquisition "to use the two companies' product sets to build 'open and integrated systems,' which will range from business applications to middleware, database management systems, operating systems, servers and storage platforms," According to the report. This is an attractive vision, the report's authors say, while cautioning "that it also presents both technology and business challenges, including whether customers desire to source from a single vendor."
In many respects Sun was a far more logical acquisition for IBM, given that 90 percent of the former's business is in hardware, suggests co-author of the Gartner report Kenneth Chin, research VP, information infrastructure. "The overlap for Oracle is in the middleware space, which we expect Oracle to merge into its Oracle Fusion Middleware or phase out." Chin calls attention to the deal's bringing Oracle key brands for open-source products, including Java, mySQL and Solaris.
By its very nature, open source presents challenges in terms of creating revenues, observes Donald Light, a San Francisco-based senior analyst with Celent. He argues that the opportunity will arise through developers adopting Sun's open source development tools. "Oracle will have an opportunity to provide professional services and support to insurers who have built things with them, so there is a revenue light at the end of the open-source tunnel," he remarks. "That has been Sun's business plan for some time and I believe it will be part of Oracle's."
Light remains skeptical about Oracle CEO Larry Ellison's recent announcement that the company intends to keep Sun's Hardware business, a statement that many technology industry observers say was made to dispel the notion that the deal was undertaken simply to acquire Sun's software assets. "I take the statement to mean that [Ellison] is not looking to sell the hardware assets now," Light says. The Oracle/Sun deal doesn't bring very much value specifically to the insurance industry, according to Light, particularly when compared to Oracle's acquisition of AdminServer and Skywire, and the launch of Oracle Insurance. "The use of Sun's development environments, operating systems and, to some extent, server and storage platforms becomes more attractive to insurance companies," he comments. "It remains to be seen whether it is compellingly attractive."
The Oracle/Sun deal has little near-term insurance-specific import, agrees Jonathan Steiman, an analyst with Datamonitor (New York). However, it invites speculation as to Oracle's longer-term plans and what they may mean for all industries, including insurance, he implies. "Oracle started its acquisitions with databases; the second stage was business applications and CRM; then it verticalized with the acquisitions of AdminServer and Skywire; now they're getting back and getting a hardware and operating system," Steiman notes. "The question is what its next phase is going to be."
Adds Steiman: "The interesting thing to watch will be whether Oracle is going to buy a big services provider, and if so, which one?"
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio