collective unconscious of the smarter planet

Wow! Interesting analysis - and crazy implications.

IBM is reportedly talking to Lenovo about selling its x86-based server business to Lenovo and the move would make a lot of sense.

If the talks, flagged in the Wall Street Journal and CRN, sound familiar that’s because Big Blue famously unloaded its PC business to Lenovo in a win-win deal. Lenovo went on to be one of the premier PC makers and IBM focused on software and services and got ahead of trends such as analytics.

To say the IBM’s PC situation then and today’s server state of affairs rhyme would be an understatement. You could argue the situations are the same thing. When IBM offloaded its PC unit, no one saw tablets coming. All IBM knew is that the margins stunk and it wanted higher value wares. The post-PC era was years away.

Fast forward to the server market, which is ripe for disruption. Server sales are doing ok. Companies will have to buy servers right? Of course they will—-for about another three to five years. The reality is servers are going in the following directions:

Specialization by workload. Think IBM’s PureSystems and Oracle’s Exadata efforts.

1. Commodity-ville on the x86 front. You can’t ignore that companies like Google and Facebook go right to white box makers for servers. That reality isn’t so hot for HP, Dell and IBM.
2. You need to own the silicon and intellectual property to really work the server business. IBM’s Power systems won’t go anywhere. Oracle has SPARC. Hewlett-Packard is going processor agnostic with Moonshot, a server line that appears to be innovative.
3. Fewer server buyers. As companies move to the cloud, demand for compute will only increase. The problem. Server makers will be selling in bulk to fewer customers and cloud computing farms. There will only be so many cloud providers. Enterprises large enough to roll their own data centers will be few and far between.

Now let’s talk timing here. The server market won’t unravel tomorrow. It won’t unravel in a few years. But Armageddon will occur and the clock starts ticking right about now.

Why? An enterprise that buys a server right now will start a tax depreciation clock that will run about three years. Once those three years are up and those assets depreciate, the CXO in charge will weigh the costs and benefits of the cloud vs. running a data center, server cluster or whatever. I’ll bet that in three years the cloud will win by a wide margin. Let’s face it—-the cloud is already starting to win and all you have to do is show up at one of Amazon Web Services’ customer powwows to know the writing is on the server rack.

On Thursday, I caught up with Cycle Computing CEO Jason Stowe. There’s a lot to like about Cycle Computing. First, the company is bootstrapped so there’s instant respect. Second, Cycle Computing is at the forefront of making high performance computing clusters for the masses. And third, Cycle Computing has top insurance and pharmaceutical companies as customers. Cycle Computing had massive customers from day one. In other words, Cycle Computing is the real deal, hooked up with Amazon Web Services and will enable a lot of science to happen just by democratizing HPC for smaller companies.

Stowe noted that Cycle Computing is starting to land manufacturing and engineering customers now for its HPC management software and cloud connections. In other words, this HPC for the masses is catching on. If you play this out, there will be fewer servers sold because folks will be using Rackspace, AWS or some other former hardware focused vendor.

Today, it’s big data and research compute driving Cycle Computing demand. Tomorrow every company will have the mathematic models and horsepower to simulate just about anything. You won’t buy your own servers for that computing power.

Stowe said servers will become like wheat fields not things you name. “Today servers are hugged, named and managers know their quirks. There’s an attachment. In the future server clusters will be more like wheat fields. You grow the wheat, reap and sow, eat and replant the seeds. There’s no attachment to the wheat,” said Stowe.

In other words, Stowe’s excellent analogy on servers and meeting compute demand translates into cloud farms and fields. Most companies are going to hit the brakes on new server buying as soon as the depreciation ends and new compute demand has to be met. Play this out and the profit margins on servers aren’t going to look so hot.

IBM sees all of the servergeddon scenarios developing and that’s why it’s ditching its commodity server business now. Let Lenovo, which has the scale and ambition to do the commodity server game, carry the ball from here and duke it out with HP and Dell.

Alternative database technologies - including NoSQL - are beginning to cut into Oracle’s revenues.

Something is seriously wrong in Larry Land. Oracle does not command absolute control like it once did. You can see this clearly with the earnings the company posted last week and the growth that startups like Datastax are witnessing as more customers seek alternative databases for online applications.

Until this past week, the extent of Oracle’s problems were not known. But there is a cut, a slight bleeding that’s now visible. But how deep is the cut? How much is Oracle really bleeding? That’s exactly the question analysts asked in a Reuters story after the earnings results:

“Data base revenue, which has been the cash machine of the company, has changed. There are now alternative databases, as well as the cloud,” said Mark Moerdler, an analyst at Bernstein Research. “That pressure is still a tiny bleed, but it is out there and the question is – is it bigger than we think it is?”

We know this much. Oracle reported this week that new software licenses are down two percent. And that decline is in part reflected by the adoption of NoSQL databases offered by Datastax and a variety of other services that use in-memory technology and new SQL offerings at the database layer. Update: Of course, there are competitive forces at play with enterprise giants such as SAP, IBM and Microsoft playing their part. But it’s the startups that represent the core of the innovation.

The reason for the drop has more to do with the enterprise acceptance of online applications more than anything else, said Datatastax CEO Billy Bosworth in an interview last week.

That’s the truth. NEA Ventures Scott Sandell said to me at SXSW that CIOs are convinced to move their workloads but cloud security is still an issue.

That’s where companies like Datastax enter the picture. Datastax is built on Cassandra, a high performance, fault tolerant Apache open-source database technology.

Datastax, founded in April 2010, finished its first year with 26 employees. It ended 2012 with 100 employees. Bosworth expects to have 160 people on staff by the end of this year.

Customer growth has increased significantly. By the end of 2011, Datstax had 27 customers. One year later it had 270, with 20 from the Fortune 100.

Several dozen of those customers have moved either all or parts of their application off relational technology such as what Oracle provides.

When companies come to Datastax, they say the number one thing they need is security, Bosworth said. They are building from day one to avoid disaster scenarios.

Datastax, like other NoSQL providers, spans its database technology in a fully distributed way, across private data centers and the cloud.

Datastax differentiates by offering high performance at scale but without complexity.

How customers use Cassandra reflects on why Oracle growth has begun to stall. Often, customers will continue to use Oracle databases but will put it deeper in the backend. They will take another piece of the app and put it on Datastax.

Customers will build in a middle layer of services components that allows the app to decide which database to use for which workload.

Lighter Oracle workloads means less revenues, which we see reflected in the company’s earnings.

To counter this swarming hive of distributed systems, Oracle has taken the opposite approach, building out engineered solutions with their software running on big, new age mainframes. That strategy does not seem to be working very well. Oracle bought Sun Microsystems with plans to sell the hardware with its software.

Analysts tend to agree:

“The problem is, the growth of SaaS (software as a service) applications is undermining that strategy. When you subscribe to salesforce.com, you don’t need to buy a database, middleware or hardware,” said Patrick Walravens, an analyst at JMP Securities in a Reuters story last week.

Oracle has lost money every quarter since it acquired Sun for $5.6 billion. And there is little proof that companies are going to start using one company like Oracle for all their hardware and software needs. Instead, they will mix Oracle software on commodity systems. Or they may even go with the new open-source server technology coming out of Open Compute. They have plenty of other options, too. OpenStack, the open cloud effort, is growing fast, as is Cloudstack, the open-source cloud service now part of the Apache Foundation.

Datastax has its own challenges. It competes with Amazon Web Services and all the other NoSQL providers such as 10gen. The ecosystem is still quite young. Finding qualified people is a challenge. Developers need more education, a change in thinking for the new cloud approach.

But overall, it’s clear that Oracle really is starting to show the pains of being an aging innovator. The earnings show a slight cut. The question is how deep the cut is and how Oracle will respond to challengers like Datastax.

Not only are Oracle hardware sales and revenues declining, Oracle is also slowly killing off its reseller channel.

The road ahead for Oracle’s plucky band of hardware resellers in not certain say analysts.

The admonition comes in the wake of Oracle’s latest numbers which show that software licensing and support revenues rose in its third quarter but hardware and systems support fell 16 per cent and and four per cent respectively.

Commenting on the numbers, Canalys boss Steve Brazier, said the extent to which Oracle had “shrunk” the Sun server biz since the acquisition is “quite astonishing” and the reason is that “they don’t understand the channel”.

“They [Oracle] put direct people from the software business in charge of hardware channels. Its clearly not working, the business is sinking quickly,” he said.

Brazier added there was “no sign” of Oracle recognising and reversing this trend and claimed the boil first began festering on the day Oracle completed the acquisition of Sun when Larry Ellison said it was taking dealer accounts direct.

“It hasn’t gone well since then. The rest of Oracle’s business, the Right Now acquisition, is doing very well as a software company as it has always done but the hardware business is in crisis and will be difficult to turn around,” he added.

Oracle has posted year-on-year declines in sales and revenues for seven of the eight quarters since it acquired Sun Microsystems, according to abacus stroker IDC.

Nathaniel Martinez, programme director for server research EMEA at IDC, told The Reg that resellers were being marginalised by Oracle and the direction of the company suggested it will “pull out of the hardware channel”.

He said it may keep some larger systems sellers at the very high-end of the market but the “volume side is a dead end”.

Mike Norris, chief executive at Computacenter, said the only reason Oracle would completely dismantle the hardware channel was if its pulled out of system space but some strategic thinking was required to fire up systems sales.

“To be successful in hardware Oracle needs to engage with the channel more effectively and sort out the direct issues,” he said.

Oracle did not respond to calls for comment.

Oracle revenues fell in its second quarter (ended November 30) largely due to declining hardware sales and software licenses. Not good news for their exa-line.

Software behemoth and systems player Oracle missed its projections for both hardware revenues and new software license sales in its second quarter of fiscal 2012. While Oracle was facing a very tough compare, the miss is something that will make Wall Street and the rest of the IT community jittery for a spell – at least until they can spike their egg nog.

In the quarter ended November 30, Oracle’s overall sales were up only 2 per cent to $8.79bn, which was lower than the 5 to 9 per cent revenue growth that Oracle’s CFO and co-president Safra Catz had guided for three months ago. Catz said back in late September that Oracle also projected for earnings per share in the range of 44 to 46 cents, and the company only hit 43 cents. Net income rose by a very healthy 17 per cent to $2.19bn, which shows that Oracle, unlike Sun Microsystems that it ate nearly two years ago, is more focused on the bottom line than it is on the top line.

Perhaps most disconcerting to Oracle, considering the very respectable Sparc T4 systems and mix of Exadata and Exalogic clusters it launched earlier this year, is that hardware sales, which includes both standalone servers and storage arrays as well as the “engineered systems” that combine servers, storage, switching, and systems software in a single stack, fell by 14 cent to $953m.

Back in September, Catz said the plan was for hardware sales to be flat to down 5 per cent, so clearly there was a little too much optimism about how the new systems would be received by customers.

In a conference call with Wall Street analysts after the market closed on Tuesday, Catz said that Oracle was seeing good demand building for the new Sparc T4 machines, but that a bunch of customers who might have otherwise bought Sparc T3 machines decided to wait and qualify T4 boxes instead.

The Sparc SuperCluster, an Exa-like cluster machine based on the quad-socket Sparc T4-4 servers, only began shipping at the end of the month, with retailer Macy’s buying two and the state of California buying one. Co-president Mark Hurd said that Exadata database cluster systems had record bookings and the pipeline is the biggest Oracle has seen since launching the product.

Exalogic middleware cluster sales doubled sequentially and are growing at twice the rate of Exadata systems at the same point in their product cycles, and Hurd added that ZFS storage array sales doubled year-on-year.

Oracle co-founder and CEO, Larry Ellison, said that the company sold over 200 Exadata and Exalogic systems in the second fiscal quarter – by systems, Oracle appears to mean “racks” – and added that the company will do 300 machines in Q3 and 400 machines in Q4.

“It’s easy to remember. We didn’t plan it that way, but that’s the way it is working out,” Ellison quipped in the call.

Ellison said that that the combined Exadata and Exalogic systems would exit Q4 with an annualized revenue run rate of $1bn by Q4 of fiscal 2012 (which ends in June) and would have a $2bn run rate as the company exited fiscal 2013. He conceded to one analyst that rather than tripling the installed base this fiscal year, Oracle might only grow the combined Exadata and Exalogic installed base by a factor of 2.5. Hurd piped up there was still a chance to hit that 3X figure, but that is currently not the plan.

Oracle’s hardware products had operating expenses of $471m, thus leaving $482m as an operating profit, or a rate of 50.6 per cent. That’s not bad, and is an improvement over the prior quarter – and a hell of a lot better than Sun Microsystems did in the past decade. Hardware support revenues came to $625m, falling 2 per cent, but operating expenses for support fell by 27 per cent to $258m, leaving an operating profit of $340m, or 54.4 per cent of revenues.

Adding it all up, Oracle’s hardware and related support businesses drove $1.58bn in sales and an operating profit of $849m. Of course, once you allocate R&D, SG&A, and other overhead costs attributed to the systems business, the actual net income from the Oracle hardware business is much lower. Oracle doesn’t report its earnings this way, so we can’t know how truly profitable the systems biz is for Ellison & Co.

While people expect Oracle to have some issues with its systems business, especially considering how many new products were announced in the fall, they might not have expected for the software side of the Ellison house to lose so much steam in fiscal Q2.

Catz said three months ago when Oracle reported its Q1 results that the company expected for new software license sales to rise between 6 and 16 per cent in Q2, but shiny new code only accounted for a little more than $2bn in sales, up only 2 per cent compared to the year-ago period. New software sales grew by 17 per cent in the first quarter, to $1.5bn, so sequentially Q3 still represented a 36.8 per cent jump. (The compare was a lot stiffer in Q2 than it was in Q1.) Software license updates and support revenues rose by a more Oracle-like 9 per cent, to just under $4bn.

This time around, on the Q2 call, Catz said that CRM software sales were up “close to 20 per cent” and that ERP “did very well,” but that as the quarter was coming to a close, there was a sudden increase in the number and level of approvals needed to close software deals, and this pushed sales that might have otherwise closed in Q2 out into Q3. Catz said that Oracle had put procedures into place to prevent such last-minute surprises in the future. She also said that wild currency fluctuations in the quarter pushed down reported software revenues more than Oracle had anticipated in its prior guidance for Q2 from three months ago.

In the third quarter, Oracle’s database and middleware products accounted for $1.48bn in new license sales (up 4 per cent), while support for these products was $2.71bn (up 11 per cent). Oracle pushed out $569m in new application license sales – down 2 per cent from a year ago and no doubt hurt by the announcement of Fusion apps for on premises and on the Oracle cloud back in October. Application support and update operations yielded $1.28bn in revenues, up 6 per cent from Q2 fiscal 2011.

Looking ahead to Q3, Catz provided guidance for Oracle in both constant currency and in US dollars as they will ultimately be reported. (We’ll ignore the constant currency numbers for the purposes of this story.) Oracle is facing a much tougher compare in Q3 than it had in Q2, and expects new software license sales to be anywhere from flat to up 10 per cent. Hardware product sales (not including support) will be anywhere from 5 to 15 per cent down compared to a year ago. Total revenues will grow by anywhere from 2 to 5 per cent.

Predictably, given the miss and the might of Oracle in the IT racket – it is not always fun to be a bellwether, is it Larry? – Wall Street will not be happy. Oracle shares were up nearly 2 per cent as the market closed, rising on optimism about the European debt crisis being resolved and housing starts in the US, but in after-market trading in the wake of Oracle’s numbers coming out, the company’s shares were off nearly 10 per cent.

Wednesday will probably not be a lot of fun for Oracle shareholders, but with Wall Street, it is always hard to say until the second bell tolls.

Oracle and Cisco claim a major benchmark breakthrough but fails to mention the key technology enabling it - Violin arrays.

Oracle claims a world-record TPC-C result with its database running on a Cisco server and not an Exadata system, although doesn’t mention that two Violin memory flash arrays were needed.

A Cisco UCS C250 extended memory server with two six-core Xeon X5690 processors, 384GB of DRAM, and two Violin Memory flash arrays (5.3TB V-3205 and 16.3TB V-6000) ran Oracle’s 11g database on Oracle Linux, and scored 1,053,100 transactions per minute (tpmC), with a cost per transaction of $0.58.

This was the third lowest cost-per-tpmC ever, only being beaten by the $0.49/tpmC and $0.51/tpmC of two four-processor HP Proliant systems running SQL Server. The $0.51/tpmC result used six Violin Memory V3200 flash arrays, each with with 2.6TB of flash.

The $0.49 HP result used flash as well; HP P2000 array with 128 300GB SAS disk drives and D2700 enclosure with 256 120GB SSDs.

Oracle says its tech “delivered more performance, and cost nearly 11 per cent less per tpmC than the nearest competition on a configuration using identical Intel processors and memory capacity”, referring to an HP result of 1,024,380 tpmC and $0.65/tpmC with a ProLiant DL380. This server featured 81 400GB SSDs plus 104 disk drives.

Both Cisco’s and Oracle’s canned quotes somehow forgot to mention the Violin arrays, which was somewhat surprising as the Violin storage represented the vast majority of the $602,316 bill for the tested configuration.

Kevin Closson, a technology director and performance architect in the Data Computing Division of EMC, tweeted about the result, saying: “Style: Get world record result and don’t mention key storage technology that made it possible. See the word Violin?”

He also said that Violin doesn’t mention Oracle on its benchmark result page, which is not quite true; the Violin page has a hot-link to the Cisco UCS tpmC result which does mention Oracle.

A month after the release of Solaris 11, Oracle releases its systems clustering product - Solaris Cluster 4.0. A lot of the third-party software and hardware that was supported by the earlier iteration are no longer supported.

Oracle has duly announced the high availability clustering companion to the new Solaris 11 operating system, and as you might expect from a company that is pitching its own SPARC-based “engineered system” stacks, a whole bunch of third-party software and hardware that was supported with the prior Solaris Cluster 3.3 code has not made it into the 4.0 release.

Solaris 11 made its debut last month after six years of development, and it runs only on modern SPARC T and SPARC M series processors sold by Oracle. Which is fair enough, given that Oracle is perfectly happy to sell the older Solaris 10 software and support it on older iron.

Similarly, Oracle will continue to sell and support Cluster 3.3 on Solaris 10 and earlier releases for those customers who want or need to stay on these earlier versions.

But if you want to cluster Solaris-based systems at the system level – not at the database level as Oracle does with its Real Application Clusters extensions to the 11g database – and you want to run Solaris 11, then you are going to have to move to Solaris Cluster 4.0.

First, let’s talk about what was removed in the jump from Cluster 3.3 to Cluster 4.0, because this is just as interesting as the new features that Oracle has added to its Solaris clustering environment.

The Veritas File System (VxFS) and Veritas Volume Manager (VxVM) from Symantec are no longer supported, and you also can’t use the VxVM cluster feature for RAC database clusters on top of Solaris Cluster.

The new clustering tool does not support Sun Management Center, a prior-generation tool from Sun Microsystems that has been replaced by Oracle Enterprise Manager. The Trusted Extensions to Solaris, which added a layer of security to Solaris 10, are not making the jump to Cluster 4.0, either, and that is more because they were not broken out as a separate add-on with Solaris 11. (Sun sold higher-security versions of Solaris 8 as well, which was a fork of the operating system, and Solaris 9 never did get a “Trusted” variant.)

In addition, storage array–based replication for machines made by EMC and Hitachi didn’t make the jump. And neither did the interesting three data center (3DC) configuration, which allows for synchronous replication of systems within a data center or campus and asynchronous replication out to a geographically distributed data center using the Geographic Edition extensions for Solaris Cluster. The former Sun’s Grid Engine and Java System Application Server EE (formerly called HADB) have also be trimmed from Solaris Cluster 4.0, as has a slew of third party software support as well as some Oracle packages.

According to the release notes, Oracle 11g databases at the 11.2.0.3 release level – in either standalone or RAC configurations – can be failed-over from production to backup machines using the new Cluster 4.0 software, and so can Apache web servers, WebLogic application servers, DHCP and DNS servers, NFS file systems, and Solaris container virtual private servers. While ZFS is the default file system for Solaris 11, QFS is still available – and popular – and works with Cluster 4.0.

If you are using logical domains, formerly known as LDoms but now called VM Server for SPARC, on SPARC T series-based machinery then you can also cluster these with Solaris Cluster 4.0.

Solaris Cluster 4.0 makes use of the new Image Packaging System (IPS) and automated installer that debuted with Solaris 11, and can coordinate with the StorageTek Availability Suite 4.0, which Sun inherited from its acquisition of that disk and tape array maker, as well as Oracle’s Data Guard, which is a database replication tool. It has been tested with the array of current SPARC servers, storage, and networking gear available from Oracle and now comes preconfigured with the SPARC-based SuperCluster made of a bunch of SPARC T4-4 quad-socket servers using the new eight-core T4 processor.

You can also use the clustering software on a bunch of Sun Fire x86-based machines, which you can see in the system requirements data sheet. There are a lot fewer machines supported on the 4.0 release than on the 3.3 release, but this is also true of Solaris 11 itself, so this stands to reason.

Solaris Cluster 4.0 costs $3,000 per processor for a perpetual license, with a year of support costing $660 per processor. And when Oracle says processor, it means core – and presumably it also means you adjust that price based on the type of processors and cores based on the company’s processor core factor pricing scheme.

More legal shenanigans from HP and Oracle over Itanium. Oracle claims that HP is paying Intel to continue developing Itanium.

Late Friday, Oracle filed a countersuit against HP, which sued Oracle back in June because Oracle said in March that it would not be developing future releases of its database, middleware, and application software on future Itanium processors.

It’s hard to tell who is stretching the truth more it in the ongoing lawsuit, and now countersuit, between Hewlett-Packard and Oracle over the fate of the Itanium processor from Intel. The reason is that the court documents coming out describing the situation are heavily redacted, with all the juicy bits that might offer some clarity being blacked out.

In the amended cross-complaint filed last Friday, which was posted on the Scribed document sharing site here, Ellison & Co’s lawyers are slapping back at HP with seven counts, including charges of fraud, defamation, intentional interference with contractual relations, intentional interference with prospective economic advantage, as well as violation of the Lanham Act and two violations of the California Business and Professional Code.

“HP engaged in a multi-year campaign of secrecy and deception designed to conceal the truth about Intel Corporation’s commitment to the Itanium microprocessor in order to extend its Itanium server business at Oracle’s expense and reap large profits from its own unsuspecting installed base of Itanium users,” Oracle lawyers wrote in the brief sent to Judge James Kleinberg of the California Supreme Court in Santa Clara.

“When Oracle announced the truth about Itanium – that Intel’s strategic focus was not on Itanium but on its competing Xeon line of microprocessors, and that Itanium was nearing its end of life – HP reacted with a ferocious effort to foment false customer outrage and to vilify and defame Oracle, all to buy itself more time to milk its customer base and falsely blame Oracle for Itanium’s demise.”

Oracle says that in the process of document discovery in the Itanium case, it stumbled upon an agreement whereby HP is paying Intel to keep the Itanium processor alive – something Oracle says it did not know when it made the decision to pull software support from the future Itanium processors back in March. Oracle’s beef is that this revised “Itanium Collaboration Agreement” was done secretly, without partners or customers being told what the deal is.

“There is, of course, nothing wrong with entering into a contract with a supplier to ensure the supply of a key input,” Oracle said in its countersuit. “Had HP simply entered into the Intel deal and revealed it – perhaps taken credit for it – Oracle would have nothing to complain about.” Oracle contends that “Intel desperately wanted out of Itanium” and that this as well as the HP agreement to essentially pay Intel to keep the Itanium roadmap alive was something that it was entitled to as an HP and Intel partner and that HP’s customers (who are often users of Oracle’s software as it turns out) are similarly entitled to.

By torpedoing the Itanium platform, Oracle can sink a big portion of HP’s enterprise systems profits, which come from HP-UX system sales and support contracts. Oracle has shown no love to HP since it acquired the Sun Microsystems hardware and operating system business and it got worse when HP fired Larry Ellison’s tennis buddy, Mark Hurd, as CEO.

It got even worse when HP hired former SAP CEO Leo Apotheker to replace him and former Oracle president Ray Lane to be its chairman. Once Hurd came into Oracle as co-president, it was a matter of months before the gloves were off. Whatever the legal, technical, or market merits of Oracle’s moves with regard to Itanium, the intended effect has been realized: HP’s Unix business is shrinking. Then again, so is Oracle’s Unix business, as the latest Gartner server figures show. So far, IBM seems to be the big winner in the tit-for-tat legal spat between these two companies.

Oracle is also filing its countersuit against HP because it says that it was fraudulently induced into entering in an agreement that allowed it to hired Hurd after he had been let go from HP. It claims that HP concealed and misrepresented the “truth about Itanium” and concealed “material information” that it was about to hire Apotheker and Lane to run the company.

Oracle also reminded everyone that HP tried to add clauses to the Hurd agreement that would guarantee HP’s access to Java, its ability to sell Solaris on x86 platforms, and ongoing support from Oracle for its software stack on HP-UX. This language was struck from the commitment reaffirmation portion of the Hurd agreement, and in a draft supplied by Oracle, all that was left was this:

“Oracle and HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms and HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership.”

The actual Hurd agreement remains under seal, so we don’t know what it says. But this portion of the agreement, however it was worded, is the clause in the agreement that HP’s lawyers are arguing is a commitment by Oracle to continue to support its software on HP-UX/Itanium machines made by HP. Oracle is seeking a recission of the Hurd hiring agreement in its countersuit.

Incidentally, Oracle’s countersuit says that HP’s allegations in its lawsuit from June that Oracle is withholding support to current Itanium customers on current Oracle software is “utterly false” and that “Oracle is fully supporting the current (and many past) versions of its software on Itanium servers, by issuing bug-fixes per its standard policies.”

In the wake of Oracle’s countersuit, HP put out a lengthy statement of its own.

Interestingly, in the week before the Hurd hiring agreement was signed on September 20, HP says that Oracle’s general counsel wrote in an email that this provision was “an agreement to continue to work together as the companies have – with Oracle porting products to HP’s platform and HP supporting the ported products and the parties engaging in joint marketing opportunities – for the mutual benefit of customers.”

While much remains murky in this suit and countersuit, what seems clear at this point is that we are going to have a Bill Clinton verb definition moment like that during the ex-President’s impeachment. It will all depend on what the definition of the word “support” is.

Oracle will no doubt argue that it is continuing to support HP-UX and Itanium with current and prior releases of its database, middleware, and application software. HP will no doubt argue that what the clause meant was that Oracle would continue to port future releases to future Itanium chips and HP-UX releases.

HP continues to contend, and reiterated in its statement, that Oracle wants to move Itanium server customers to its own Sun systems and that the “tactics employed by Oracle in support of this purpose included pricing misconduct, withholding of benchmarking scores for HP servers run on Oracle software, and abusing customers on support issues.”

The HP-Oracle lawsuit is scheduled for trial on April 2, 2012, and will also probably have both sides arguing about how long a proper server chip roadmap needs to be so it is not at “end of life,” and what it means if HP is indeed paying Intel to keep the Itanium chip alive. It will be interesting to see what that is costing HP and how long that commitment term is for, if it turns out to be true.

Oracle recently released the first post-Sun version of Solaris. Ideas International gives a long, detailed report on Solaris 11.

In early November, Oracle announced the release of Oracle Solaris 11, a major update to its UNIX operating system (OS). Solaris 11 introduces many new features, and following Oracle’s announcement of SPARC T4 systems in September, the update serves as more proof that the company is making significant investments in the Sun server platform that it acquired in 2010. Further, the release of Solaris 11 will put considerable muscle behind Oracle’s strategy to deliver a vertically integrated systems architecture that is optimized for the use of its own technology at every level. This announcement is not just of interest to Solaris users. It could strengthen Oracle’s value proposition for any users who rely on Oracle software for enterprise computing.

Operating systems remain an integral part of IT infrastructures. The rise of virtualization has shifted many of traditional OS responsibilities, such as controlling hardware, to hypervisors and equivalent mechanisms for enabling multitenancy of workloads. However, for most users, the OS still serves as the central point of integration between applications and operational processes. UNIX systems have become the preferred OS for high-end datacenter workloads in many commercial enterprises. Long before it was acquired by Oracle, Sun made a commitment to drive mainframe-grade reliability and performance functions into Solaris, and the OS has earned a notable track record for its proven ability to host a customer’s most demanding applications.

What’s New in Solaris 11

While Solaris 11 has many new features, some of the enhancements related to virtualization and cloud computing stand out in particular:

• Virtualization – Oracle Solaris Zones is a virtualization mechanism that provides workloads with a private set of OS resources that are protected from each other. Sometimes referred to as “virtual servers,” zones create the illusion that workloads are running virtually on their own machines, with a distinct set of OS resources that are visible to the applications. While virtual machines each host a complete, separate copy of an OS, zones all share a single copy of the host OS, regardless of how many are zones are deployed. As a result, zones allow workloads to be consolidated with greater efficiency than other virtualization methods. Since zones are based entirely on software, they complement other virtualization solutions available from Oracle that are implemented closer to hardware, including Oracle VM Server for SPARC (formerly called Logical Domains, or LDOMs), Dynamic Domains (hard partitions for some SPARC servers, which provide electrical isolation between separate OS instances), and on x86 servers, Oracle VM, a version of the Xen hypervisor. While zones were already available in Solaris 10, their implementation in Solaris 11 benefits from a completely redesigned networking stack, which has been virtualized and optimized for use with zones. As a result, administrators can control the network resources that are assigned to a particular zone much more precisely in Solaris 11 than before. The new virtualized network engine also helps administrators manage network resources for applications that are not hosted in zones, with the ability to define virtual network “traffic lanes” that have different priorities, depending on the importance of a particular workload.
• Scalability and Performance – Solaris has long been optimized for use on large Symmetric Multiprocessing (SMP) systems, and Solaris 11 adds new refinements for increasing its performance on servers with very large numbers of cores. The Solaris 11 scheduler has increased awareness of variants in topologies used to connect processor sockets in large servers, and it also takes I/O latencies into account when scheduling access to memory. The memory management in Solaris 11 has also been optimized specifically to improve the performance of the Oracle database on systems with large amounts of memory. The new network stack has a parallelized architecture that will improve network performance on large SMP systems, and it fully exploits hardware in network adapters to offload more network processing operations, freeing the server processors to take on more computing tasks under heavy network I/O loads. InfiniBand support in Solaris 11 has been extended with the Reliable Datagram Sockets (RDS) V3 protocol, which will provide better performance and observation for Oracle Real Application Clusters (RAC) databases.
• Security – In Solaris 11, the mechanism for auditing system behavior has become much more efficient, and it is now turned on by default (in previous releases of Solaris, the auditing mechanism could slow performance, and it was therefore disabled by default). Delegated administration, that is, the ability to give select users a limited range of administrative control, has been made more flexible to accommodate the management of virtualized workloads. Now, administrators can be assigned the rights to manage specific zones, limiting their control to that zone rather than the entire host. Immutable zones can be configured with read-only file systems, so that virtualized workloads can be hosted in an environment with a locked-down system configuration. Solaris 11 can provide transparent hardware encryption for the Oracle Database Advanced Security Option, taking advantage of the Advanced Encryption Standard (AES) cipher feedback mode in SPARC T4 processors to perform table space encryption. Solaris 11 also supports the Trusted Platform Module (TPM) specification, which can be used to give virtualized workloads a definitive ID for the hardware on which they are running…

Solidifying the Solaris Base

Solaris 11 is the first major update of the OS to be released since Oracle acquired Sun, and its new features clearly indicate that Oracle is continuing to invest in Solaris. While the new release doesn’t make any huge architectural leaps forward, it does offer a mix of practical improvements targeting key concerns that administrators have today. Many new features will be most appreciated by current Solaris users, rather than serving to attract new users to the platform. For example, the new frameworks for managing software and patches should help to reduce the burden of maintaining applications based on Solaris and will thus help build the confidence of existing Sun users to maintain their investments in the platform.

Other improvements, though, could become potent differentiators as Oracle steps up efforts to assert itself in datacenters with the server platforms that it acquired with Sun, and as it competes for new opportunities in virtualization and cloud computing. With rising interest in cloud computing, networks will play a more strategic role than ever before, and the new virtual networking functions in Solaris 11 could become a key asset as virtualization expands from servers to storage and networking. Early in its existence, Solaris was aggressively optimized for the TCP/IP protocol underlying the Internet, even as most other UNIX operating systems were still being tuned for other proprietary network protocols. Solaris 11’s developers built on this heritage in designing a new network stack that is optimized for virtual infrastructure from the ground up. As virtualization continues to mature, and users look for innovative ways to implement multitenancy beyond separate operating systems, the low overhead of Solaris Zones, coupled with the virtual networking in Solaris 11, could emerge as a compelling alternative for users seeking to host large numbers of web-centric workloads with the greatest possible efficiency.

What about Linux?

Some may question what Oracle’s renewed focus on Solaris means for its strategy to support Linux, and, given the clear optimization of Solaris 11 for SPARC-based servers, what it says about Oracle’s commitment to x86 servers. In fact, Oracle fully supports Solaris 11 on x86 servers, both from Oracle and other hardware vendors, and the prices and licensing terms for Solaris 11 are no different from those of Solaris 10. Oracle also continues to offer its own Linux distribution, called Oracle Linux, which is replicated from the same code base as Red Hat Enterprise Linux (RHEL). As an option for Oracle Linux, users can install Oracle’s own Linux kernel, called Unbreakable Enterprise Kernel (UEK). With UEK, Oracle is now also bringing some Solaris-developed features to its Oracle Linux customers. Among other things, UEK features:

• Availability functions developed by Ksplice, a company that Oracle acquired earlier this year, which allow code in the UEK kernel to be replaced “in flight,” that is, without rebooting the OS. While Ksplice is presently a feature that is unique to UEK, Oracle is investigating to see if the technology can also be incorporated into a future version of Solaris.
• Forthcoming support for container functionality (similar to Solaris Zones) in Oracle Linux.
• Forthcoming support for Dynamic Tracing (DTrace) capabilities in Oracle Linux, which will give developers a powerful tool to isolate performance bottlenecks at the kernel level. DTrace had long been a feature exclusively available on Solaris.

Oracle thus appears to be making an effort to balance the capabilities of SPARC servers running Solaris with those of x86 servers running either Solaris or Oracle Linux. However, this effort is not just a hedge against the future success or failure of either platform. In fact, each of these platforms is relevant to very different deployment scenarios, involving separate classes of users. On x86, both Solaris and Oracle Linux are suitable alternatives for users who are pursuing strategies based on commodity-style systems and who want to exploit the volume economics of x86-based servers as much as possible. These users generally install hardware and software separately, using industry-standard building blocks at both levels. While Oracle Linux will be preferable for many who prefer to install Linux on commodity systems, Oracle can also offer Solaris on x86 to those want to maintain operational consistency between their x86 and SPARC platforms. Both operating systems can be presented to customers opportunistically, offering them an OS that can inserted under Oracle software with the greatest ease of use and confidence in Oracle’s support, allowing Oracle to take control over the bare metal of x86 servers whenever possible. However, Solaris for x86 and Oracle Linux are just two of many possible levers that Oracle can exercise to help customers deploy its software on x86 platforms, and they are not instrumental to the success of its solution there.

In contrast, on SPARC servers, Solaris is a critical enabler for Oracle’s ability to match the value proposition of classic mainframe-style systems by providing:

• The ability to scale-up hardware that combines large amounts of shared memory and large numbers of processors/cores into a single hardware footprint
• Advanced reliability functions that allow a single server to continue running in the event of hardware or software failure
• Advanced optimizations that enable massive I/O throughput
• A vertically integrated software stack that takes maximum advantage of the hardware features in the platform

The original mainframes proved that this style of systems architecture was optimal for handling huge and variable workloads with the best possible economies of scale. Just as MVS (and now z/OS) represented a critical layer in the IBM mainframe stack, the value of Solaris becomes greatly magnified when deeply integrated with the layers above (Oracle database and application software) and below (SPARC server hardware).

The IDEAS Bottom Line

The assumption that Solaris will be installed as the OS, and SPARC servers will installed as the natural hardware platform for Oracle software, gives developers tremendous flexibility for deciding at which layer certain problems can best be addressed: in the database, in cluster software, in the OS, or in the hardware itself. Long before its acquisition by Oracle, Sun made a commitment to drive mainframe-grade reliability and performance functions into Solaris to complement the mainframe-like capabilities in its high-end server hardware. With Solaris 11, Oracle has followed this development direction to its next logical step. By integrating not only with Oracle hardware, but also key functions from Oracle’s database platform, Solaris becomes the centerpiece of a complete system that can be tuned and operated as a unit in order to deliver the highest possible levels of scalability and reliability for a particular workload.

A breakdown of the latest IDC and Gartner server numbers for the quarter. Two things of note - IBM continues its dominance of the UNIX space, growing its worldwide marketshare by 5% in the quarter; and stripped down “cookie-sheet” servers, modeled on the bare-bones servers that Google uses in their datacenters, are becoming a sizable part of the server business.

The cookie-sheet servers created by Google for its own use – recently commercialized by all the top-tier vendors in one form or another as hybrid rack-blade boxes – have become a sizeable and important part of the server business.

In the third quarter ended in September, the box counters at IDC reckon that end users snapped up 2.07 million machines from server makers and their channel partners, an increase of 8.7 per cent compared to the year-ago period. Revenues increased a more modest 4.2 per cent, to $12.74bn. The market is cooling a bit thanks to tough compares, and as fellow box counter Gartner pointed out earlier this week, shipment and revenue levels on a global basis have more or less recovered to the levels prevailing ahead of the server crash in the wake of the Great Recession three years ago.

Blade servers, which have been around for a little more than a decade, are in essence racks in miniature with integrated backplanes for linking servers to integrated switching and system management processors in the chassis, seemed poised to become a dominant server architecture based on the hockey-stick uptake of rack servers during the dot-com boom, but blades are a high-end product that is a tougher sell than many server-makers had expected. Still, blades are the best option for many customers, and at $2bn in sales for the quarter (16 per cent of revenues) and just under 280,000 units (13.5 per cent of machines sold) they are an important system option even if they have not knocked out rack servers, as many expected.

Blade servers are full of system management and resiliency features that most supercomputer and hyperscale cloud operators simple won’t pay for. That’s why over the past several years the cookie sheet server – which jams multiple server nodes into a rack chassis on metal trays – has become popular. These nodes are all about low-cost and ripping out any extraneous stuff in a blade box – such as service processors, integrated node management, and switching. The assumption with hyperscale servers is that compute and local storage are all that matter and the application environment itself will provide the resilience. And hence these hyperscale servers, as IDC calls them, have come into their own.

In some cases, such as those of Google and Amazon, the company is building all or some of their own hyperscale machines, and even while Facebook has designed its own servers, it still farms out the manufacturing and thus those servers get counted as commercial boxes in IDC’s numbers.

In the third quarter, the hyperscale server segment accounted for 118,888 shipments and $428.5m in revenues, which is an increase of 8.7 per cent in terms of sales and 4.3 per cent in terms of shipments. So hyperscale machines now account for 3.4 per cent of revenue and 5.7 per cent of shipments and have much lower average selling prices per node.

How much lower? If you do the math across the whole server market in the third quarter, the average server cost $6,149. There were a few thousand mainframes and high-end RISC/Itanium boxes in there to raise the class average, but x86 machines account for the lion’s share of shipments in any quarter these days. (All but about 70,000 machines in this case.) The average rack or tower server cost $6,163, and the average blade server cost $7,151. You can see now why blades have had limited appeal: they offer operational cost advantages, but you pay a premium for the hardware. The average hyperscale server cost a mere $3.604 according to IDC’s data, which shows you why you might want to build resiliency in your software stack instead of on any particular server node.

Dicing and slicing server sales

In addition to casing server sales by form factor, IDC takes a stab at estimating the shipments of servers based on the primary operating system that gets installed on the boxes as well as by price band. The System zEnterprise 196 mainframes announced a little more than a year ago gave Big Blue a big bump in sales, but that refresh cycle is starting to slow; the company only booked $970m in sales of mainframes in the third quarter, according to IDC. Windows server sales also cooled a bit, with revenues up 5.3 per cent to $6.3bn against shipment increases of only 2 per cent. That said, Windows-based machines are by far the dominant server platform in the world in terms of shipments.

Unix machines showed some life, with sales up 1.6 per cent to $2.6bn, thanks mainly to IBM pushing its AIX boxes like crazy. “IBM is really starting to dominate this market,” Jed Scaramella, research manager of enterprise servers at IDC, tells El Reg, adding that IBM accounted for 46 per cent of all Unix revenues in the third quarter and gaining five points of revenue market share.

Hewlett-Packard lost 5 points of share and Oracle lost 1.5 points, and they were in a statistical tie for second place in Unix system sales in the quarter. Linux systems saw a very nice 12.3 per cent revenue jump in Q3, to $2.3bn and now account for 18.6 per cent of total server revenues. If you want to be generous, you could say that the combined Unix and Linux markets – call it Unilinux – experienced a 6.4 per cent revenue bump to $4.9bn.

Various proprietary platforms from Unisys, Fujitsu, Bull, NEC, IBM, and HP (not including IBM System z mainframes) accounted for a mere $570m in sales, down 8.8 per cent over last year’s third quarter.

Server sales were not uniform around the world, as you might expect given the differences in regional economies and the state of IT infrastructure in different regions.

“After nearly two years of steady revenue growth, the server market began to decelerate in Q3 2011 as demand stabilized for many system categories,” explained Matt Eastwood, general manager of enterprise platforms at IDC, in a statement accompanying the server stats. “Asia/Pacific and Japan exhibited strong revenue growth while server demand in EMEA, North America, and Latin America was flat to slightly down year over year. IDC continues to believe that weakening macroeconomic conditions around the world will serve to further moderate demand for new servers in 2012.”

By segment, IDC calculates that volume servers (machines that cost under $25,000) had a 5 per cent increase in revenues as a group in the quarter. The high-end segment, which covers machines that cost more than $250,000, had a 1.1 per cent revenue bump (despite the System z decline and because of improving Unix system sales), and the midrange machines between these two bookends had a 4.7 per cent revenue increase as a group.

If you look at the server business by vendor, IBM and Hewlett-Packard were in a dead heat in Q3 as far as IDC can tell, with IBM and HP both getting $3.79bn in sales. (Technically, IDC believes Big Blue had $3m more in sales, but declares a tie when the difference between the vendors is less than one per cent.) IBM grew 3.5 per cent and HP dropped 3.8 per cent.

Dell was the number three server seller, with $1.93bn in sales, and grew at a pace that was nearly three times as fast as the market at large. Another way of saying that is this: If you take Dell out of the numbers, the other vendors only grew their sales by 2.7 per cent, so Dell accounted for two-thirds of the growth of the overall market. Oracle’s server sales declined by 3.2 per cent to $764m, and Fujitsu shrank four-tenths of a per cent to $605m. Other vendors – helped by supercomputer-makers Silicon Graphics and Cray as well as upstarts Lenovo and Cisco Systems – grew as a group by 22 per cent to $1.86bn.

Ideas International looks at Oracle’s high-end cloud play and at the overarching market for premium, workload-optimized systems.

When Oracle released Exalogic a few years ago, it was billed as a private cloud-in-a-box. At OpenWorld, Oracle doubled down on the plug-and-play features of Exalogic and Exadata by having these systems serve as the backbone for its new public cloud offering. Recently, IDEAS published a blog post offering a broader definition of mainframes as an integrated solution stack. By this definition, Oracle is eschewing commodity solutions, the architecture on which many existing cloud services are based, in favor of a high-end solution as the basis for its public cloud (see graphic below). Computing as a service has been successfully monetized (recently confirmed), but by taking the high-end approach, Oracle is trading larger potential sales volumes for a niche customer base. The strategy may prove to be as profitable, but it is not without risk.

The above taxonomy defines three types of server platform solutions, but in truth server architecture today is a spectrum along which we highlight three key points. On the one end is the commodity solution. This is the setup that is typical in most data centers for cloud-based workloads. Somewhere in the middle, further integration of hardware and software can be applied. Such converged server platforms, which include HP Matrix and Cisco UCS, have been a hot topic in recent years.

On the opposite end, a solution integrates software and hardware into a single smoothly functioning entity. Such a high-end solution is what Oracle plans to sell as its public cloud, incorporating Oracle’s Exadata and Exalogic platforms with Fusion software and other application layers. At first glance, this may seem unexpected, but as long ago as 1999 commentators were noting that Larry Ellison’s preference for a high-end solution stack was pretty clear:

“Oracle chairman CEO Larry Ellison is taking aim at Microsoft’s core enterprise strategy, mounting an attack on client/server computing, which he describes as an evolutionary dead end, and more specifically taking a pop at Microsoft’s ‘servers everywhere’ distributed computing model. …x86 server isn’t yet sufficiently scalable to rival centralised computing models based on Unix, mid-range and mainframe models… and that’s why Ellison is finally attacking the right target…distributed computing tends towards the chaotic and expensive.”

For Oracle, the verdict on how to best package hardware was in long ago. In the meantime, of course, Microsoft strategy did not fail. But mainframes did not fail either. Cassandra predictions by others about the dim future of the mainframe have been overzealous. IBM still sells plenty of big iron, and the mainframe ecosystem remains a solid, albeit cyclical, business.

A true metric to determine the winner of the commodity vs. high-end solution contest would normalize the amount of compute cycles (or I/O) that are now being delivered by high-end solutions vs. total compute cycles (or I/O). By that measure, high-end solutions have been losing ground quickly over the years to commodity solutions.

High-end systems with tightly integrated software have traditionally been applied for very specific tasks, such as:

• High-performance computing (HPC), which employed specialized hardware designs in the past, but which is now increasingly based on commodity hardware.
• Business-critical systems (in many cases, but not all).
• Code that needs to have an edge to beat competitors. An example of this would be hedge funds that pay big money to experts in multithreaded and parallel programming.

Android apps are an example of a commodity application layer at the low end, in consumer technology. Android applications have to run on many different chips, OS flavors, and hardware. Therefore, investments in optimizing an Android app may be a losing proposition for developers, because that app could be buggy or useless on nonoptimized devices.

On the high end, investment bank hedge funds may hire programmers to make sure that each instruction is matched to a thread of a specific Intel processor (Intel even has a special suite of tools to help enable this degree of optimization). Granted, the hedge fund programmer is working on a x86 platform. However, not everyone can afford a team of high-priced experts. The next best thing may be the high-end solution, in which software has been preintegrated and optimized for a specific hardware platform.

Most public cloud vendors build their services on commodity hardware, because part of their added value is the development of a software stack that provides meaningful differentiation from competitors. This differentiation is essential for avoiding true commoditization, in which the cloud service competes on nothing other than price. There may be a few exceptions where a vendor has some more exotic hardware offerings in the mix, but the majority are built on x86 servers, together with a hodgepodge of applications. This environment lends itself well to being partitioned into compute instances that are sold cheaply.

However, in finally embracing public cloud computing, Oracle faces a dilemma. On the one hand, it cannot afford to cannibalize its own margins on Exadata and Exalogic hardware, Fusion software, its enterprise database, and so forth to customers for on-premise deployment. Therefore, its public cloud offering cannot be too cheap in absolute terms. On the other hand, its cloud offering needs to promise customers genuine benefits in terms of price-performance and other metrics. These two forces are driving much of the risk in Oracle’s business maneuver – will end users choose to deploy Oracle high-end server platform solutions on premises, or purchase access to these systems from Oracle’s public cloud on a utility basis?

Oracle’s databases lead in market share, and Oracle’s middleware sales are second only to IBM’s. Big corporations, especially financial institutions, have traditionally been loyal customers of premium architectures. By accepting that not every startup is going to want to use an Exa-based cloud with an expensive relational database management system, Oracle is forsaking low margins and high volumes in favor of pursuing opportunities with high-end enterprise customers. Oracle’s approach is also a novel way to sell the Exadata and Exalogic to new clients, who run plenty of high-end solutions, but not necessarily on those two systems.

Oracle’s high-end cloud solutions may appeal to fewer customers than other public cloud platforms, and the analyst community may not fully understand the move. However, there is little doubt what the company is trying to achieve: as Ellison seemed to be predicting in 1999, Oracle will try to capture the enterprise with its own centralized, integrated hardware architecture and applications stack – deployed either on premises, or off.