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June 29, 2011

Unix vendors have some explaining to do

The HP partner just mentioned, off-hand, the mess for HP's reps. The ones selling Unix-based Integrity servers have a lot more explaining to do, now that HP is suing Oracle over non-support of the Itanium chips in the Integrity boxes.

"Every sales call now starts with why Itanium is still a viable option," the partner said. "Both Oracle and IBM have made HP-UX a target market." But the latest numbers from Oracle show that not even throwing mud at HP's Unix in March made a difference in hardware sales for that quarter.

HP's old CEO Mark Hurd had some explaining to do in the call to analysts covering Oracle's stock. He said that Oracle could sell lots of systems at no profit, just to get the hardware in the door. While that's pretty much the game-plan for every vendor of Unix iron today -- new customers are once-in-a-year events for many Integrity resellers -- Oracle wants to sell much bigger iron. Well, iron with bigger profits, anyway. Try to tease apart Hurd's answer in the last analyst call.

We are now selling fewer systems, at a higher price, that are of more value to the customer, that stay installed longer. And also we're doing that at higher margins. So these are the fundamentals of a solid hardware business, and then of course to the point we have to eventually grow that business on a top line, and you have a very, very attractive business model.

But growing the gross top-line business is the sketchy part today. It's had an impact on share price; Oracle and HP both have stock trading in the low-to-mid 30s, and nobody is happy about that turn of events. So when a pair of Unix vendors can't scratch up new customers to grow that top line, it's not a vote of value for the environment. HP 3000 sites are not just leaning hard toward Windows when replacing systems. They're even looking close at Linux by now. Linux, which runs on just about every chip, isn't tied to a single-vendor business model, and costs less to operate than ever. Choosing HP-UX is turning out to be a matter of following apps, and little else.

IBM is also making inroads during the Unix decline, but it's doing it with the vendor-created products it sells like the DB2 database, and maybe even the POWER7 chips across its enterprise servers. Make no mistake, IBM still sells a ton of Intel's Xeon-based chips in its servers. But IBM has maintained its outposts in AS/400, Unix, Z Series mainframes, proprietary databases -- it's a list that has no explaining attached to it.

HP has set a timetable of at least 2018 for HP-UX, so there's no short-term anxiety about the OS going off the price lists. Of course, we all thought the same about MPE/iX at one point. Itanium might not have a future left without explanations. Which would mean that 3000 migrators would have some explaining to do if they become the rare new customer for HP-UX or Itanium, two Hewlett-Packard products yoked to each other's fortunes.

Roger Kay of Endpoint Analysis says that the Oracle-HP Unix fight has been good for IBM. Writing in Forbes, Kay says

Meanwhile, this beef has been a windfall for IBM, which, amid the uncertainty surrounding Itanium’s future, is picking off HP and Oracle (former Sun) customers right and left.  IBM has institutionalized this process, creating what it calls the STG Power Migration Factory to bring its competitors’ customers over to Power-based systems.

IBM has been extending its lead in Unix servers steadily in the past several years, taking out hundreds of its competitors systems per year.  Even if Oracle caves and restarts support, customers will remain uncomfortable about the depth of that support.  If the suit goes to trial, even if HP wins, support will come too late.  Enterprise customers don’t like uncertainty.

01:15 PM in Migration | Permalink

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