Like Silicon Graphics in bankruptcy again and now merging with Rackspace, Sun has been unable to recover from the dotcom bubble of 2000-2001. The biggest problem appears to be that Sun was unable to redesign and manufacture next-generation servers without falling behind other hardware companies and chip makers, nor were they able to monetize sufficiently their software platforms. Thus, the gains for Oracle are huge – the Java programming language, the MySQL database platform, and the Solaris operating system, all owned by Sun are the foundation of the internet in many instances, old and new.

Oracle now owns and manages its own legacy database platform, plus MySQL and InnoDB, another open source standard that is rising quickly in popularity. Marten Mickos, the former CEO of MySQL, was quoted in Forbes with these comments on the deal:

“It’s amazing, and not entirely surprising. Oracle has the money and is a long-term, strategic player. They went into applications to compete with SAP and have successfully done this. Now they want to out-compete Microsoft.”

“Microsoft’s database business is the fastest growing. Oracle can use MySQL to achieve a stronger developer community.”

For many people, this deal “feels better” and seems to make more sense than a Sun-IBM merger, because both companies are ideologically aligned and operate as traditional allies in Silicon Valley politics. But Oracle has no history in hardware production along the lines that Sun maintains. Business Week reports that Oracle earns margins of 46% in its software development, sales, and maintenance contracts. Even at its best, server & hardware manufacturing would be a significant drain on this.

“Java is key to a set of Oracle business applications called Fusion, designed to stitch together the array of programs Oracle has scooped up through its acquisition binge. Controlling the software in house could help Oracle assure customers of a smooth transition from older products to new ones. And owning Java gives Oracle a counterweight to Microsoft (MSFT) as it tries to convince more developers to incorporate its database, middleware, and other software into their products.”

“Oracle is expected to generate more than half of its estimated $23.1 billion in 2009 sales from technical support and ‘maintenance’ of products its customers have already licensed. Those support contracts carry profit margins of about 90%. Controlling Java ‘is all about future maintenance streams,’ says Citigroup’s Thill. ‘This will create stickier lock-in for the Oracle installed base.’ ”

Though many suggest Oracle may be better to sell off Sun’s hardware division and focus on maintaining and expanding the Java, MySQL, InnoDB development & services platform, Oracle is suggesting it will attempt to maintain the server division and is looking at producing “stacked” machines, or servers pre-loaded with custom operating systems and software for large corporate / research requirements. Currently Sun is the 4th biggest server manufacturer, behind IBM, HP, and Dell.

“Amitabh Goel, a securities analyst at First Global, said he was ‘not very positive on the acquisition, as it remains to be seen how Oracle will run a hardware company, with Sun’s market share on a declining trend.’”

“But the purchase was ‘in line with Oracle’s goal to gain share in the data centre market and offer more integrated end to-end products,’ he added.”

” ‘With the acquisition, Oracle will now be able to offer an integrated stack of hardware, software, and services to its customers.’ ”

“During a conference call with analysts on Apr. 20, Oracle CEO Larry Ellison called Java ‘the single most important software asset we have ever acquired.’”

“Scott McNealy, chairman of Santa Clara, California-based Sun, which employs more than 33,500 people worldwide, hailed the merger as ‘an industry-defining event’. “

This is a post from Web Dev News, a site brought to you by Xavisys Web Development.

Oracle buys Sun – To Provide Integrated Hardware, Software, Services around Java

For those interested, you can read the Cloud Manifesto in its entirety.

The document begins with a description of media hype:

The buzz around cloud computing has reached a fever pitch. Some believe it is a disruptive trend representing the next stage in the evolution of the Internet. Others believe it is hype, as it uses long established computing technologies. As with any new trend in the IT world, organizations must figure out the benefits and risks of cloud computing and the best way to use this technology.

One thing is clear: The industry needs an objective, straightforward conversation about how this new computing paradigm will impact organizations, how it can be used with existing technologies, and the potential pitfalls of proprietary technologies that can lead to lock-in and limited choice.

This document is intended to initiate a conversation that will bring together the emerging cloud computing community (both cloud users and cloud providers) around a core set of principles. We believe that these core principles are rooted in the belief that cloud computing should be as open as all other IT technologies.

They then seek to define exactly what cloud computing is:

The key characteristics of the cloud are the ability to scale and provision computing power dynamically in a cost efficient way and the ability of the consumer (end user, organization or IT staff) to make the most of that power without having to manage the underlying complexity of the technology. The cloud architecture itself can be private (hosted within an organization’s firewall) or public (hosted on the Internet). These characteristics lead to a set of core value propositions:

• Scalability on Demand
• Streamlining the Data Center
• Improving Business Processes
• Minimizing Startup Costs

The five main challenges that cloud computing must address:

• Security
• Data and Application Interoperability
• Data and Application Portability
• Governance and Management
• Metering and Monitoring

The Goals of an Open Cloud:

• Choice
• Flexibility
• Speed and Agility
• Skills

The Principles of an Open Cloud:

Of course, many clouds will continue to be different in a number of important ways, providing unique value for organizations. It is not our intention to define standards for every capability in the cloud and create a single homogeneous cloud environment. Rather, as cloud computing matures, there are several key principles that must be followed to ensure the cloud is open and delivers the choice, flexibility and agility organizations demand:

1. Cloud providers must work together to ensure that the challenges to cloud adoption (security, integration, portability, interoperability, governance/management, metering/monitoring) are addressed through open collaboration and the appropriate use of standards.
2. Cloud providers must not use their market position to lock customers into their particular platforms and limit their choice of providers.
3. Cloud providers must use and adopt existing standards wherever appropriate. The IT industry has invested heavily in existing standards and standards organizations; there is no need to duplicate or reinvent them.
4. When new standards (or adjustments to existing standards) are needed, we must be judicious and pragmatic to avoid creating too many standards. We must ensure that standards promote innovation and do not inhibit it.
5. Any community effort around the open cloud should be driven by customer needs, not merely the technical needs of cloud providers, and should be tested or verified against real customer requirements.
6. Cloud computing standards organizations, advocacy groups, and communities should work together and stay coordinated, making sure that efforts do not conflict or overlap.

Companies and organizations that currently support the open cloud manifesto are listed as:

AT&T, Abiquo, Accario, Akamai, ALTIC. Org, AMD, Aptana, Appistry, Arista Networks, Barcelona Supercomputing Center Blend digital, Boomi, Business Logic, Cast Iron, Cisco, CSC, Dilgenter, the Eclipse Foundation, Elastra, EMC, Enomaly, Engine Yard, enStratus, F5, Global Media Solutions, GoGrid, Heroku, Hyperic, IBM, In Cloud Company SL, Juniper, LongJump, Luminis Innovation Consulting, ManualsMania, Metadot, MyCube9.com, newScale, Northwest A&F University (Shanxi, China), North Carolina State University, Nirvanix, Novell, the Object Management Group, Okuri Ventures, Open Cloud Consortium, Open-XChange, Prgmr.com, PointStar, QuadraForte, Rackspace, Rails Machine, Red Hat, Tech4Quant, Terremark Worldwide, the Hot Air Channel, the Reservoir Project, Trend Micro, RightScale, rPath, Saasmania, S3 Graphics, Soasta, Sogeti, Sun, Synapses, Technical University of Catalonia, Telefonica, the Open Group, Velneo SA, Venue Software, Veredas, VMware, Voxeo, VPS.net and Zenoss.

The Open Cloud Manifesto is licensed under a Creative Commons Attribution-Share Alike 3.0 Unported License

For more information: http://opencloudmanifesto.org/supporters.htm

This is a post from Web Dev News, a site brought to you by Xavisys Web Development.

IBM leads IT Companies in Proclaiming “Open Cloud Manifesto”

Yet, some are saying IBM doesn’t need Satyam with its 50,000 employees and IT staff that form the outsourcing backbone of the majority of the world’s Fortune 500 companies. IBM already has around the same number of employees in India currently, making it with Infosys, Wipro, TCS, Cognizant, and Satyam one of the top IT outsourcing service providers in the country. Analysts say Satyam’s potential liabilities, from a class action shareholder suit against Raju for destroying stock value and a lawsuit by Upaid for fraud / copyright issues could be problematic, to the tune of over $100 Million in liabilities. Bidders for the company have been unable to review the full accounts of Satyam, as the investigation into the accounting fraud is still ongoing. Clients have canceled accounts with Satyam, and the company has taken a bridge loan to cover operational costs until a new buyer is found. What advantage to IBM, then, in purchasing the company with so many problems?

Return then to the bidding process. Currently, 51% of Satyam is being sold by the government. A list of bidders who have confirmed requirements includes 8 companies, some of which have been mentioned at various times during the process as:

1. Larson & Toubro – Indian Engineering Firm
2. Tech Mahindra – IT Branch of Indian Conglomerate
3. Spice Group – Now Withdrawn from Bidding
4. Wilbur Ross – Distressed Assets, Venture Capitalist
5. IBM – or their proxy
6. HP – very little on this possibility published
7. Cognizant – Reportedly withdrawn
8. KKR – PE firm, May be in or outsourced

Again, there may be another private equity firm or multinational IT company involved but not publicly confirmed, some of the names listed above may not be included. The front-runner is considered L&T, whose founder has already acquired around 12% of the company. IBM is reportedly purchasing Sun Microsystems at what may be considered an incredible price – a former $200 Billion USD company at a fraction of its value. Even so, the purchase price was double Sun’s market value at the time of the announcement. Would a 100,000 strong outsourcing team in India, combining IBM Global and Satyam be a powerful backend for a fused IBM-Sun conglomerate? The fact is Satyam has one of the best client portfolios in the world, and the company has IT service contracts with Fortune 500 companies that could add $1 – $2 Billion USD in yearly income to the company that acquires it at current value. Companies generally sell between 10 and 20 times average yearly receipts, but since Satyam’s books are scrambled, nobody knows for sure what that value is.

Satyam needs a strong buyer with unparalleled corporate governance, openness, and transparency. They need a company that instills confidence in their client base and brings in new accounts. The Satyam staff or employee base are recognized as being some of the most talented in the world – before the Ramaling Raju revelation, there were really few companies with the international reputation of Satyam, in a very good way. Satyam essentially invented IT outsourcing or BPO, industries that have created a development revolution around the world, and trillions of dollars in business. This is the main point – more than being an Enron or Ponzi scheme, Satyam was one of the best and most innovative companies in the world over the last 25 years, and their employees are among the most talented and respected in the field. In 2006, IBM considered a takeover of the company at its heights – and at a market cap over 10 times current values.

So there is a bond and a perfect synergy between Satyam and IBM, the main issues being former management (already removed). But L&T has to be seen as the front runner and favorite in the bidding. Unless one of the PE firms makes a surprisingly high offer and outbids them, or IBM seriously pursues Satyam (something most market analysts are suggesting they are not doing), or another wildcard emerges, L&T will probably win the bidding. A bid by HP aimed at fusing their work with Mphasis and Satyam into a large outsourcing service provider based in India would be an exciting development, but nothing suggests anything like this is brewing.

Taking a Wilbur Ross model, imagine a PE firm buying Satyam – required by law to hold the company for three years, selectively acquiring other international outsourcing and BPO companies, merging the companies together, building up a massive IT service providing company, selling it off when the market recovers – similar to what he has done in steel and coal. The fact is that no one can really compete with Indian BPO at this point and it is going to grow continually based on cost / quality factors over the next 10 years, and no one really does that better than Satyam traditionally. There is massive potential here and the base is strong.

Whatever the motivations, potential benefits and unknowns, the process looks to be resolved quickly – reports suggest the sale will be announced within 2 weeks. We can hope the best for Satyam and its employees, and hopefully the company’s recovery will be symbolic of the overall greater recovery of the economic situation globally.

This is a post from Web Dev News, a site brought to you by Xavisys Web Development.

Prospective Satyam Bidders May Include IBM – L&T, Tech Mahindra Confirmed