Oracle Closes in on Sun, Wall Street Worries
Information Management Online, January 26, 2010
Let the worries begin. The European Commission Thursday approved the $7.4 billion merger between database giant Oracle and long-time Wall Street denizen Sun Microsystems.
"I am now satisfied that competition and innovation will be preserved on all the markets concerned," Competition Commissioner Neelie Kroes said in a statement.
Sun has historically been a powerhouse in capital markets with its Sparc hardware and Solaris operating system, which have allowed brokerages to trade faster and more reliably. Its Java language is used for enterprise software, and the MySQL database is a popular back end for Wall Street's Web-based applications.
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The Commission initially had concerns that the merger could put MySQL and Java at risk. But after a four-month investigation, the Commission determined that there were credible open source alternatives to MySQL, and that the Java community development process includes Oracle competitors.
The Commission approval was the biggest obstacle holding up the merger, though China and Russia have yet to weigh in.
"Oracle expects unconditional approval from China and Russia and intends to close the transaction shortly," Oracle said Thursday.
Oracle's plans to acquire Sun will mean tighter integration between Oracle databases and Sun hardware. However, Aite Group analyst Adam Honore recently surveyed two dozen capital markets CIOs about the merger, and says that companies running "critical instances" of MySQL are dubious of Oracle's claims that it will protect that less-costly database.
"There are quite a few MySQL instances [on Wall Street], for a variety of relational database applications. It's all over the place,'' he said.
The uncertain future of MySQL is their biggest concern about the merger, he said. Other CIOs were also worried about the future of the Sun hardware, he said, with the merger accelerating plans to move to a different platform. "You're probably looking at a few percentage point reduction in market share," he said.
At trading platform vendor Marketcetera, Inc., MySQL is the underlying embedded database for the company's trading platform. That platform powers such hedge funds as Cerebellum Capital and Nobilis Capital.
"It stores all the trades and positions," said Toli Kuznets, the company's co-founder and CTO. "We've been using it for four years, from the beginning of Marketcetera."
According to Kuznets, the company chose the MySQL platform, in part, because the firm is philosophically committed to the open source concept. "But obviously, it is because of ease of use and cost," he added.
Kuznets added that he's not worried that Oracle might kill the database.
"And if Oracle stops innovating, someone else will just take over innovating," he said.
According to the European Commission, MySQL's open source nature allows it to be forked - with a new player taking over development. In addition, the Commission also determined that the PostgreSQL database was a credible open source alternative for many database users.
MySQL is a database that is commonly used for Web-based applications on Wall Street. Users include the Chicago Mercantile Exchange, HypoVereinsbank, Credit Agricole, Dun & Bradstreet, Lloyds TSB, and Shinsei Bank.
At Aizawa Securities Co., Ltd., a leading Japanese brokerage, MySQL is used to power a Web-based customer system for viewing transactions.
"We depend for our existence on our Web services to work flawlessly," Kazushige Sato, the IT manager in charge of the company's online services, said in a statement. "We turned to MySQL when we found the total cost of ownership of the previously-planned Oracle solution to be too high."
According to Sun, a typical three-year deployment of MySQL on six dual-core servers would cost around $50,000 - compared to over $900,000 for a similar system running Oracle.
Sun acquired MySQL, the world's most popular open source database, in 2008 for $1 billion. But revenues were tiny, about $40 million in 2008, according to Framingham, Mass.-based research firm IDC.
Revenues for Oracle's database and middleware, by comparison, were $5.1 billion in the fiscal year ending May 2009-with another $7.6 billion in revenue from support contracts.
To convince regulators that it would not sabotage MySQL in order to protect its own database business, Oracle released a ten-point plan for preserving the open source database, which includes a promise that Oracle will spend at least $24 million for each of the next three years on MySQL research and development, which is what Sun spent last year.
Sun's Slipping Position
The maker of what once were unchallenged as the speediest workstations and servers lost ground in recent years as low-cost hardware running on powerful but cheap processors and standard operating systems became more robust and scalable.
For example, in 2008, the New York Stock Exchange migrated its trading systems from Sun Solaris to Linux running on HP servers.
"Sun historically has been very strong on Wall Street," said IDC analyst Jean Bozman, with Sun hardware used for transaction processing and analytics. However, over the course of the previous decade, Sun lost its prominence in the high-end market, which is now dominated by IBM and HP.
A technology manager at an inter-dealer brokerage firm told Securities Industry News that his company is the process of switching from Solaris running on Sun's Sparc servers to commodity hardware from HP.
"The overall performance is better, and the cost performance-there's no comparison," he said. However, the company will continue to use Sun's Solaris operating system, and is worried about its continued survival under Oracle.
"We're very, very deeply dependent on that," he said, speaking on condition of anonymity.
"Historically, that's what we've run on, so we're pretty well committed to the Solaris way of doing things, and it's not so easy to port out of that. And the other thing is, as an operating system, it's just better - it's just hands-down the most functional operating system," he said.
Solaris offers better performance, ability to handle large applications, and support for cloud computing, he said, and has better trouble-shooting and diagnostic tools than Linux.
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