Analysis: In The HP-Oracle Server Fight, There Are No Winners

Hewlett-Packard and Oracle are both losers in the war over whether Oracle is legally obligated to continue developing software for HP's Itanium-based server platform -- despite HP having the legal upper hand for now.

The judge in the HP-Oracle lawsuit Tuesday released the text of his final decision in which he concluded that Oracle is legally obligated to continue developing its software for HP's Itanium processor-based servers for as long as HP continues to manufacture them.

Those servers are used primarily for applications running on HP's HP-UX Unix operating system, especially Oracle database and other applications. The two vendors worked together for three decades, and HP-UX traditionally was the largest operating environment for Oracle's high-end software.

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But now customers of both vendors' high-margin Unix servers are leaving those platforms for IBM's Unix server line or for high-end x86 servers from HP and other vendors, according to research firm Gartner's second-quarter server sales report, released this week. And, according to channel partners close to the two vendors, customers also are looking at alternatives to Oracle's industry-leading database and other software.

Gartner's second-quarter server sales report estimated that Oracle's Unix server shipments fell 5.2 percent and HP's fell 31 percent compared to the second quarter of 2011.

Those drops resulted in a 31.9 percent decrease in Oracle Unix server revenue and a 29.1 percent decrease in HP Unix server revenue over the same period, according to Gartner.

For HP, the second-quarter drop was slightly better than in the first quarter when its Unix server shipments plummeted 36 percent and revenue 40.2 percent. But for Oracle, the second-quarter Unix sales situation deteriorated compared to the first quarter, when its shipments fell 1.2 percent and revenue fell 25.7 percent.

Meanwhile, HP last week reported that revenue for its Business Critical Systems, or BCS, business, which is heavily based on its Unix servers, fell 16 percent year-over-year.

NEXT: Customers' Choices Don't Always Include HP Or Oracle

HP and Oracle solution providers say that the dispute has pushed customers to either leave those vendors' Unix platforms or consider doing so.

One solution provider whose business depends strongly on its HP partnership, and who declined for that reason to be identified, said in an emailed response to questions from CRN that the blow against HP and Oracle already had been struck before the judge released his findings in the lawsuit.

That solution provider said customers are taking two approaches to the Itanium platform and to Oracle. First, customers are planning to get off HP's Integrity Unix server platform, if not now, then in the next capital spending cycle. "Given the performance of x86 Linux solutions, this is the stated preferred direction for most of our customers," the solution provider said.

Second, customers who work with Oracle rival SAP are thinking about staying with HP servers, moving to Hana and Sybase solutions, and giving up on Oracle.

The lawsuits have generated a lot of concern about Oracle, the solution provider said.

"Licensing issues are driving customer purchasing and architecture decisions," the partner said. "x86 platforms are the preferred choice given the relative performance, and the price advantages [of] HP DL980 and other enterprise-capable x86 platforms. We are helping customers make that migration to enterprise-capable Linux. People are concerned about Oracle changing the rules as they have many times in the last decade with processor licensing, platform support, forced version changes, etc. There is very little customer loyalty for Oracle outside of the immediate DBA community."

Chris Case, president of Sequel Data Systems, an Austin, Texas-based solution provider and a longtime HP partner on HP's Unix servers, said customers of HP's Unix line have started leaving, often moving to a Linux solution.

Such a move has impacted Sequel Data Systems' relationship with some customers who need a specific Linux application when the software developer has a relationship with another server vendor such as Dell, Case said.

However, Case said, the worst of the impact is now over. "It's not going to hurt our business at this point," he said. "We've made the transition."

Case said customers already are looking at HP's Project Odyssey, a mission-critical server strategy calling for the integration of HP's x86 server blades into its Integrity Superdome 2 Itanium-based servers, the introduction of new scalable c-Class blade enclosures, and the porting of HP-UX Unix features to Windows and Linux.

NEXT: What Was Oracle's Strategy?

"HP is not able to talk to customers about the Oracle lawsuit, but they can talk about Odyssey," Sequel Data Systems' Case said. "Customers say Odyssey is interesting. But one customer said, 'Oh, you're hedging your bet on the Oracle lawsuit.' HP said it couldn't comment."

In the end, however, customers are not concerned about HP as a company because they have Sequel to go to bat for them, Case said.

"Customers can't count how many changes they've had in their HP reps, or how many HP acquisitions they've seen," he said. "But as far as they are concerned, we're their consistent partner. The only thing that might concern them is if one day we said we are closing shop."

The negative impact to HP's Integrity Unix server line may have been Oracle's strategy all along, said Dhruv Gulati, executive vice president of Lilien Systems, a Larkspur, Calif.-based solution provider and longtime HP partner.

However, Gulati said, that strategy has backfired.

"If you assume Oracle wanted more market share for their Sun servers, they weren't successful," he said. "There is a major move to Linux going on. Some larger customers are looking to IBM's AIX [Unix]. So what was in it for Oracle?"

HP is unlikely to regain its Itanium processor-based server momentum and probably does not expect to do so, Gulati said. However, he said, people also assumed IBM's mainframe business would die, but it has continued to do well.

"There are customers running HP-UX without Oracle applications," he said. "And there will be some who are satisfied with new arrangements between HP and Oracle. But that is a minority. ... It's really too bad. HP-UX is a good operating system, right there with [IBM's] AIX and [Oracle's] Solaris."

HP's Project Odyssey makes sense in that it combines Linux and Unix, Gulati said. "It's still too early for customers to comment on Odyssey," he said. "They think it's interesting. But they're still waiting for pricing and features."

John Convery, executive vice president of vendor relations and marketing at Denali Advanced Integration, a Redmond, Wash.-based solution provider and longtime HP partner, said in an emailed response to questions from CRN that his company's goal is to provide customers with the results they require.

NEXT: Origin Of The HP-Oracle Dispute

"If HP’s BCS products are in play, we deliver results," Denali’s Convery said. "Much of HP’s challenge and opportunities are being played out in the press or the courts. None of this matters if the BCS products and services meet the needs of our customers we represent HP in our discussions. With that said, sometimes we try to put out the fire in the barn, when the horse has already left the building and out to pasture." Convery said Denali presents customers with choice and options and a variety of solutions.

"Based on a number of customer requests, yes, the trending is moving toward Oracle's and SAP's offerings," he said. "With that said, the BCS products and services have a long-standing customer base, and [customers] continue to require [these] solutions."

The ongoing dispute between the former partners resulted in a series of lawsuits stemming from Oracle's decision to suspend all software development on the Intel Itanium microprocessor, citing what it called indications from Intel management that it is focusing on the x86 processor line and that Itanium was nearing the end of its life.

HP's Itanium-based Integrity servers, which the company uses as the hardware platform for its HP-UX Unix operating system, was one of the primary platforms for which Oracle developed its market-leading database and other middleware.

However, that relationship started to unravel when Oracle acquired Sun Microsystems, a move that gave Oracle its own server platform. Oracle has since moved to integrate its software and server hardware into tightly integrated appliances.

HP in June 2011 filed suit against Oracle alleging breach of contract, libel, intentional interference to disrupt business relationships, and violations of business codes in relation to Oracle's decision. The two have since filed a series of suits and countersuits against each other related to that dispute.

Both HP and Oracle declined to comment for this story, citing policies that prevent them from commenting on ongoing litigation.

PUBLISHED AUG. 30, 2012