Academic journal article Journal of the International Academy for Case Studies

Oracle: Stacking High through Technology Integration

Academic journal article Journal of the International Academy for Case Studies

Oracle: Stacking High through Technology Integration

Article excerpt

INTRODUCTION

In January 2010, Oracle acquired Sun Microsystems, which was previously a major competitor of Oracle, with the transaction valued at approximately $7.4 billion. Larry Ellison, Oracle Corporation's CEO, commented, "The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems. Oracle will be the only company that can engineer integrated system-applications to disk-where all pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up (Dignan, 2009)." With the acquisition of Sun Microsystems, Oracle gained two major Sun Microsystems software assets: Java and Solaris, which is essential software that Oracle middleware and database are based on. Right after the acquisition of Sun Microsystems, Mark Smith, the analyst of Ventana research, said that the acquisition of Sun Microsystems led the elevation of Oracle into an exclusive group of technology providers, such as IBM and HP that have software, server, and storage technology (Ackerman& Padilla, 2009). Oracle not only gained control over Java and Solaris but also vertically integrated its system stack.

Oracle has completed over 100 acquisitions between 1994 and 2013. For instance, Oracle acquired Siebel for CRM (Customer Relationship Management), J.D Edwards for ERP (Enterprise Resource Planning), Retek for retail management applications, BEA systems for middleware, and recently Sun Microsystems for Java and server hardware. Oracle's aggressive acquisitions have contributed to strengthening Oracle's position as the dominant leader in information technology industry by enabling technology integration among servers, storage, software, and networking connections. Oracle has been able to reach nearly 50 percent of profit margins, retain customers, and position itself to battle SAP and IBM as Oracle established vertical integration for its software products (Wailgum, 2008).

Although Oracle has established fully integrated system stacks by offering applications, databases, systems, and storage, it encountered several difficulties in achieving technology integration: how Oracle integrates its acquired products with other existing its software products. Given Oracle's consecutive acquisitions in multiple product stacks and the associated complexity involved in enhancing product compatibility, it is important for Oracle to facilitate technology integration and maximize its synergy from technology acquisitions.

STACK WAR IN SOFTWARE INDUSTRY

Since the advent of software in the early 1960's, the software industry has rapidly expanded with a number of inventions such as SaaS (Software as a Service) and cloud computing. According to Gartner (2014), the worldwide revenue of software industry reached $388.5 billion in 2012 and $407.3 billion in 2013, a 4.8 percent increase from the previous year. Moreover, Table 1 shows that 39 out of 100 rapidly growing companies are in the software industry. This indicates that the software industry has grown fast in the past and is also expected to grow in the future.

Many new companies continuously enter the software industry because it does not require large capital. In general, these new companies are specialized in one or two software products such as IT solution consulting, middleware, database, storage, and networking. Customers usually select appropriate software products separately from different companies that are suitable for their business needs. However, if they use IT solutions from different providers, they have to spend substantial resources on figuring out which software would operate well with high compatibility on the existing platform and thus able to create synergy (Oracle, 2010). Once the organization has finished figuring out which software to add to their IT solutions stack, it must spend additional time and effort integrating all the components into one compatible system. …

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