Oracle Protecting Its Stack With Virtual Iron Deal

Oracle’s acquisition of Virtual Iron, announced yesterday, raised a lot of eyebrows. Why the heck does a company that already has open source hypervisor technology of its own and is acquiring even more virtualization technology from Sun, need yet more virtualization technology in its portfolio? One issue the acquisition cleared up, however, is why Oracle had been disseminating disinformation about VMware, about which it should have been strictly neutral.

But we should have really seen this coming. There was no way Oracle CEO Larry Ellison was going to allow another company — like market leader VMware — to control such a strategic area of the technology stack, especially with Cisco clearly expressing ambitions for the data center and Microsoft starting to come on strong with its own virtualization software. As Ellison said when the Sun acquisition was announced, Oracle intends to control the stack “from database to disk” — in other words, from top to bottom. Oracle already had that capability, in theory. There was nothing inherently wrong with either Oracle or Sun’s virtualization technology, but for the cardinal sin that they weren’t close to market-leading. Virtual Iron was one of the few credible independent virtualization vendors left, and was dedicated to creating an alternative to VMware’s hegemony.

Note that virtualization technology, which allows customers to run software and store data and applications on fewer physical machines, is quickly becoming one of the linchpins of corporate IT strategy. Qualcomm, for instance, which makes chip sets and other technology for handheld devices, is up to its eyeballs in virtualization; its CIO, Norm Fjeldheim, recently told me that Qualcomm saved approximately $25 million by virtualizing some 420 Windows servers; he also credited the technology with creating the conditions that will allow Qualcomm to build a whole new business and source of revenue.

Virtualization is supposed to be the Switzerland of the data center, but as use of the technology becomes ubiquitous, vendors are differentiating themselves with additional functionality, such as the ability to move applications from one physical server to another while the application is still running.

Chuck Hollis, vice president at document management vendor EMC (which owns around 84% of VMware), recently speculated on the reasons why Oracle has spent as much time and energy disparaging VMware. In this post, which was published befoe the Virtual Iron deal was announced, Hollis speculated that, “if you’re Oracle, you don’t want a really big and important strategic control point in your stack being owned by someone else.” He was assuming that Oracle was holding a place in line for Sun technology; it was indeed holding a place for someone, but it wasn’t Sun.