Why The Open Cloud Wins And Oracle Loses When IT Gets Virtualized

Oracle said today they have bought a company called Xsigo that leverages the growing popularity of software defined networking (SDN) — an emerging virtualization technology that is shaking up the way we view IT and the cloud.

The acquisition points to a shift in the market that will eventually make Oracle the loser. The cloud is opening up while Oracle is folding inward. Network virtualization is serving as a catalyst for a federated infrastructure that will make the open cloud more viable for an organization than a vertically integrated stack that needs to be managed by teams of IT engineers.  Oracle is rejecting that premise and will use Xsigo to strengthen its own proprietary environment.

It’s a losing game that Oracle is playing. Corporate run data centers are going the way of internally managed corporate utilities at the turn of the century.  The industrial giants of the time realized they had no business being in the electricity business. Now companies are realizing the same thing about data centers.

And in this shift, open environments will win. The infrastructure will be built on open source infrastructures such as OpenStack, Eucalyptus and CloudStack. Infrastructures that interoperate will become the norm. Amazon Web Services, Windows Azure and other more proprietary environments will open up to integrate with federated environments. I don’t think Oracle will follow that path.

Oracle wants to control it all. From the infrastructure level to the top of the stack – Oracle sees itself as the king of IT. There’s just one problem. The kingdom is not what it used to be. And King Larry is not having much luck quieting the rebellion.

The Xsigo acquisition points to Oracle’s “control it all,” strategy. Oracle plans to use Xsigo as a way to virtualize the network that is managed through its Exadata servers. These are giant data warehouse machines for corporate data centers.

The purchase follows VMware’s acquisition last week of SDN vendor Nicira for $1.26 billion. We don’t know what VVMware will do but Nicira is a key player in OpenStack. The question is if VMware will embrace OpenStack with Cloud Foundry and build apps on top of that or compete with a proprietary platform.

Oracle is developing its own virtualization solution that will compete with the VMware hypervisor technology. Oracle’s hope is to leverage its massive installed base of database customers. With Xsigo, Oracle can now virtualize its own virtual machines and essentially try to shut everyone else out.

SDN puts us closer to a point where networking goes to the app instead of the other way around. It means everything will become programmable. Our networks will come to the apps on our smartphones, in our cars – anywhere imaginable.

IT will no longer be centralized from one place.The CIO will become a service provider to individuals. Workers will manage thousands of business relationships who they communicate with using apps and mobile devices over distributed networks in collaborative environments. The CIO will need to adapt to enterprise networks where these relationships coalesce and people collaborate among teams.

VMware now has to make a choice. Will they embrace OpenStack and differentiate with Cloud Foundry, its innovative platform as a service? Or will they go the way of Oracle and create their own proprietary stack?

Oracle will lose in the end.  For VMware, the choice should be pretty clear.