Oracle’s Sun Deal and the IBM Factor: The Future May Not Be What It Appears (Especially for SAP)

At first blush it looks like Oracle’s deal to buy Sun plants a large, made-in-Redwood Shores boot right in the [name your favorite body part] of IBM. Oracle will now take over the competition with IBM that Sun had waged for so many years, and that this will lead, among other things, to IBM and SAP getting closer than ever before.

I was buying into this for a few minutes, despite the fact that IBM has been the silent partner of so much of Oracle’s M&A strategy of recent years that it was almost as if Oracle was actually consulting with IBM about these deals (which, it turns out, was exactly what happened.) In fact, when you look at the main acquisitions of the last six years, Oracle has been acquiring an IBM customer base as much as it has acquired a PeopleSoft, JDE, Seibel, Retek, Profitlogic, iFlex customer base — all of which were major close partners of IBM before they were acquired.

Furthermore, behind the deal to buy Sun is a clear focus on rescuing Java from the ashcan of history — something that is in both Oracle’s and IBM’s interest. Not that it was going to happen any time soon, but with Sun in a slow, inevitable decline, the threat that someone or something hostile to Java could come in and buy up the detritus of the once-great Sun had to worry IBM and Oracle equally.

With this in mind, let me propose an alternative to the zero-sum, IBM vs Oracle/Sun view of the deal. While it looks like Oracle and IBM will now be close competitors, the fact is they will remain even closer partners moving forward. Sure, there is this little business of the companies now competing in the hardware department. But, hey, hardware isn’t exactly IBM’s strong suit anymore, relative to software and services, both of which are foundation product lines that are highly integrated with the Oracle customer base. And, well, let’s be honest, Sun’s hardware business hasn’t been too much to sneeze at lately either — so much so that Larry Ellison has said he’s buying Sun for Solaris and Java (and not MySQL.)

In other words, with Oracle now the owner of Java, IBM becomes a stauncher ally than ever before. In fact, life in the Java world will be much better for IBM now that one of its main rivals has been nuked and its biggest software partner now owns the Java brand. You can almost imagine the call from Larry to Sam, and then Larry to Scott, ensuring that stewardship of the Java brand would continue and that everyone would be better off with Oracle in charge. If it didn’t happen before the fact, I’m sure it happened after the announcement.

Which leaves us with the notion that IBM must now buy SAP. Guess which way I’m tilting on this one. In fact, I would argue that, if IBM wanted some real regulatory scrutiny (which the company claimed was the main reason it backed away from the Sun deal), it should try to buy SAP now. Not only is the current IBM/SAP business so big that the marriage of the two would meet the test for constraining competition, but, with IBM and Oracle ever more closely aligned, IBM/SAP’s market position would be so locked in it would make Standard Oil of New Jersey look like a local non-profit.

So, with speculation as my main proof point, I maintain that IBM and Oracle have too much at stake to suddenly dust it up over a little hardware competition. Nor does this mean that SAP must now become part of IBM. What is does mean is that SAP needs to reorder its thinking about one of its biggest allies — IBM — and begin to look at alternative partners to balance off a growing IBM/Oracle axis of competition.

Steve Ballmer, you’re wanted on the phone…..