Removing cumbersome activities increases value for the customer and gives Oracle control of the value gained. Oracle will also be able to further enhance performance and quality by controlling the stack and improving total-cost-of-ownership.
The move by Oracle towards deeper vertical integration has enabled them to reap benefits in the four design areas:
Design for efficiency
Oracle’s customers have three main challenges when it comes to operating their servers and database software. These are: putting it all together; fast execution; resolve times in connection with issues.
By integrating vertically Oracle is able to speed up innovation in all of these areas. Complete end-to-end solutions or appliances give customers a one-stop-shop. Improvements in chip design and software utilising servers create better execution. End-to-end management tools shorten time-to-repair.
Design for novelty
Understanding what drives novelty for Oracle’s customers and business partners enables the desired innovation. This applies not just to products but also to channels and business models. As we have discussed previously, innovating new levels of performance and simplification for their customers was one aspect.
Another aspect was enabling partners to offer new channels to access an entire product stack and support to simplify them, removing complexities in dealing with two very important partners. From a customer and partner perspective the introduction of appliances changed the way they purchased and used Oracle products. From per CPU to actual usage.
Design for lock-in
Integrating Sun’s hardware with Oracle’s software, optimising all the components of the technology stack to work perfectly together, will also give companies advantages in performance and reliability. Oracle gives them the simplicity and reliability of an integrated system. Oracle’s strategy reflects a significant shift away from niche, ‘best-of-breed’ players toward integrated giants. That means ‘best-of-breed’ server, storage and networking vendors are going to have to fight for the leftover non-integrated sales. With Oracle’s purchase of Sun, customers feel more secure about the long-term viability of the systems and see how Oracle integrates both hardware and operating system to ensure greater end-user reliability and back-end scalability.
Design for complementarities
When Oracle set out to acquire Sun it had its partners and service and support business in mind. Through the combination of the two organisations they could address existing partners and recruit new ones. It was not so much about new products as it was about increased value for the partners, being able to sell and work with a complete stack of hardware and software. New business models were enabled where partners sold pre-integrated appliances and higher value services instead of pure integration as previously. Utility computing was made available to partners where they paid only for the actual usage, not the physical.
Design for implementation
Acquiring a large organisation such as Sun and integrating it requires courage, determination and timing. We have seen that it is necessary to manage and balance five areas in order to succeed with a transformation project. We will now look at how Oracle addressed the five areas: Importance, Authenticity, People, Effect and Energy.
Oracle created Importance among its employees by highlighting the opportunities for performance improvements and simplifications for the end customer. With Sun it showed how the two companies had worked together for many years creating excellent results. That will now continue in the merged company but with more opportunities for innovation and excellence.
Being authentic and true towards established values and culture creates trust and Authenticity. Oracle’s values are a combination of sales and innovation. The acquisition of Sun was based on a drive to create new innovation opportunities. It was equally fuelled by the possibility to grow sales and improve both Oracle as well as the former Sun. Getting the right People in place and the wrong people removed is important to achieve early success. It is equally important to create a mix of different people to solve the challenges ahead.
When Oracle designed the acquisition it set a goal to achieve USD 1.5 billion in increased operating returns. This Effect is achieved through a combination of increased internal efficiencies, back-office cost-cuts and a changed business mix towards higher valued products. Both Oracle and the investor community closely follow the results.