As promised, Oracle and Salesforce.com announced a new partnership today. This is a big get for Oracle CEO Larry Ellison.
It’s a massive nine-year deal in which Salesforce.com agreed to buy a whole bunch of Oracle’s software and hardware for an undisclosed sum.
Although Ellison was an early investor in Salesforce.com, Ellison had a much-publicized strained relationship with Salesforce’s cofounder and CEO Marc Benioff in recent years. The two companies are increasingly becoming competitors.
Benioff had been making noise like he would ditch Oracle’s software altogether. His company was inching up its use of an alternative open-source database called PostgreSQL, looking to hire an army of PostgreSQL’s developers last year.
Now Benioff has done an about-face and agreed to keep using Oracle’s database, other bits of Oracle software, and to adopt Ellison’s pride-and-joy Exadata engineered hardware systems.
These engineered systems, which are fine-tuned to run Oracle software really quickly, are the reason that Ellison bought Sun Microsystems in the first place, Ellison has said.
Since that purchase, Oracle’s hardware business revenues have been steadily plummeting. Ellison says these lost revenues are part of his plan because he’s shaving off Sun’s low-end, low-margin commodity hardware business to focus on the high-margin engineered systems. But he also promised that hardware revenues would start to grow by last quarter, which didn’t happen. He’s now predicting a turnaround next quarter.
Having Salesforce as a hardware customer should help Oracle convince other enterprises to buy Oracle hardware.
Salesforce also agreed to standardize on Oracle’s flavour of the Linux operating system. That’s interesting because Oracle’s Linux is actually a version of Red Hat’s Linux and Salesforce was previously a big Red Hat customer. So score another point for Ellison.
But there was something noticeably absent from the announcement. The press release made no mention Oracle’s fancy new cloud database, called Oracle 12c. Ellison had heavily hinted that this agreement with Salesforce would involve 12c when he discussed the new partnership last week with Wall Street analysts.
We asked Oracle if Salesforce was planning on using 12c, but the company declined to comment.
As we also predicted, the agreement included plans to make Oracle’s cloud to “integrate” with Salesforce’s cloud, though the companies were tight-lipped on what that would mean for their customers. Presumably, it means that a customer’s data will be able to be more easily shared between the two clouds. They did say that Salesforce agreed to become a customer of Oracle’s human resources and financial/accounting clouds.
So what is Salesforce getting out of all this? Probably a great deal on a lot of expensive hardware and software. Salesforce just hired Oracle’s previous head of sales, Keith Block. He certainly knows his way around a contract negotiation with his old employer.
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