Oracle DB Appliance Targets SMB/ROBO Markets

On Tuesday, during an analysts call to discuss fiscal first quarter results, the head of Oracle made it very clear that selling low-margin commodity hardware--servers and storage largely acquired through the Sun acquisition--was not a strategy the company was interested in. "In Q1, the transition away from selling low-margin commodity servers to selling high-margin engineering systems increased both the gross margins and the overall profitability of our hardware business," said Larry Ellison. "In Q2, we will accelerate that trend when we introduce four brand-new engineered systems products."

Barely 24 hours later, Oracle President Mark Hurd announced the Oracle Database Appliance, a bundle consisting of 11g Release 2 and Real Application Clusters on a two-node Sun Fire server cluster running Oracle Linux, as well as professional services. The appliance can be configured in minutes; is easy to use, scalable and affordable; and comes with single-vendor support, Hurd said. "I think this makes it an ideal consolidation platform for small databases."

It comes with proactive system monitoring, one-button software provisioning, full-stack integrated patching and automatic phone home on hardware failures. The pay-as-you-grow software licensing for Oracle Database and related software from two to 24 processor cores enables customers to align their software spend with their business growth without the need for any hardware upgrades, Hurd added.

The new bundle is targeted at small and midsize businesses (SMBs) and remote/branch offices (ROBOs), but the entry price of $50,000 will probably put it out of the reach of most small businesses, suggests analyst Charles King, Pund-IT. Besides the sticker cost, he thinks there are some significant challenges ahead for Oracle.

"First and foremost, I can’t think of many who would consider Oracle a natural player in the SMB market, so the company has some serious market education to do if it expects to compete effectively against major SMB vendors like Microsoft."

Oracle expects its channel to do a lot of the heavy lifting on selling this appliance, but that may not be the strength the company thinks it is, adds King. "While the channel will play an obviously critical role in the success of the new systems, I haven’t heard Oracle talk much about its small business-facing channel partners."King also wonders about Oracle's other partners. "Oracle has partnered with vendors including Dell and HP for years in targeted SMB solutions. Considering the efforts those vendors--particularly Dell--have been putting into cultivating SMB customers, I can imagine Oracle’s new solution is rubbing some folks in very wrong ways."

Finally, King cautions that two of the features Oracle is promoting--simplicity and affordability--could be problem areas. "As much as Oracle wants to promote its own homogenous stack, SPARC/Solaris is foreign territory to the vast majority of SMBs. Getting employees the necessary training to manage and operate the new DB Appliance could bump up its [total cost of ownership] TCO significantly.”

According to Oracle, the company has been making good progress on transforming its Sun hardware business into a profit center. Last quarter, hardware systems revenue was $1 billion, with gross margins up to 54% from last year's 48%. Hurd said the two lead products, the Exadata and Exalogic bundles, experienced nearly triple-digit growth.

"In addition to Exadata and Exalogic growth, our SPARC server products grew this quarter. We had growth in the core SPARC product line. Our strategy around high-intellectual property, high-attach, high-margin solutions, that include Exadata, Exalogic and the SPARC server products, is working. You're also beginning to see that show up in these industry market share figures that show us gaining shares."

See more on this topic by subscribing to Network Computing Pro Reports Data Centers: Virtual vs. Physical (subscription required).