...disruption in the Red Hat business at some point in the coming quarters, as Oracle accounts (for or) influences around 10 (percent) to 15 percent of their business."
But Red Hat already has factored in some of the price pressure. Its published annual support rates for single servers are lower than what it charges for customers that buy large numbers of subscriptions, said Red Hat chief executive Matthew Szulik, and the company doesn't plan to re-evaluate pricing.
"We don't have an enterprise customer that buys pays retail pricing. All our enterprise customers have volume discounts," Szulik said Wednesday.
And Wells gets cheaper prices by purchasing subscriptions through Dell. If he had to resubscribe for Linux support next week, he'd stick with Red Hat rather than switch to Oracle, he said. "I think Red Hat has proven themselves as a really solid vendor in the Linux space," Wells said. "They have a long history here. They have a solid product."
But he's not ruling anything out. In particular, if he were an Oracle customer, he'd evaluate Oracle's Linux support seriously, he said.
Indirect benefits
Oracle's move hurts Red Hat, but selling Linux support isn't likely to generate much direct revenue.
"We expect the immediate impact of this plan to be minimal for Oracle," Sanford C. Bernstein analyst Charles Di Bona said in a Thursday report. "We estimate that if Oracle had been able to capture all of Red Hat's fiscal 2006 revenue (of $278m) at a discount of 50 percent, the impact on Oracle's earnings per share would have been only $0.01."
That doesn't mean the move doesn't make business sense, though. "By driving greater adoption of Linux, Oracle further benefits as the leading provider of databases for Linux environments," Di Bona said.
But Dave Dargo, chief technology officer of open source database company and Oracle rival Ingres, said in his blog on Thursday that Oracle's relatively inexpensive Linux support just spotlights just how costly the rest of the company's products are.
To run Oracle's database software on a four-processor server, a customer would pay $197,699 using Linux support from Red Hat and $197,199 Linux support from Oracle — "a savings of a whopping 0.25 percent", Dargo said. "They're solving the wrong problem. Let's assume that Oracle provided the Linux support for free, that's $0.00, nada, nothing, zilch. The price for Oracle on that Linux for the first year would still be $195,200."
Indeed, open source databases still pose a challenge to Oracle. Smarter Living, for example, uses the open source MySQL software. "We started with MySQL, and it did what we needed it to and well," Wells said. "If I need specific Oracle functionality around data warehousing, I might use (Oracle) to power that, but at the same time, that's a space MySQL has been making a lot of moves in recently as well."
And there's some data to suggest Red Hat customers won't necessarily jump ship for Oracle. CIO Insight magazine's 2005 survey of 884 computing technology executives ranked Red Hat No. 1 in value and reliability, with 84 percent rating the company as excellent or good.
In contrast, Oracle was No. 39 out of 41 in the annual survey, with a 55 percent favourable rating.
"Oracle has a tough enough time providing decent support on their internally developed, proprietary software," the Cisco tech said. "What makes them think they can develop stuff better than Red Hat for the open source community if they can't develop their own software?"
