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Oracle and VMware: Rising Competition?

Posted by: Aaron Ricadela on April 22, 2009

VMware pulled out the stops for the launch of its latest software Apr. 21. Executives at the Silicon Valley company shared a stage at an outdoor theater with Cisco Systems CEO John Chambers and Dell chief executive Michael Dell. Hundreds of VMware employees in matching blue T-shirts crowded the company’s lawns under 90-degree sunshine.

Yet Oracle’s acquisition of Sun Microsystems this week stole VMware’s thunder. Instead of virtualization software, the computer industry this week is buzzing about Larry Ellison’s latest takeover. Yet VMware executives have Oracle on their minds for other reasons. VMware’s new vSphere 4 software aims to convince customers who’ve resisted using its products to run Oracle’s database to think again.

VMware’s growth has slowed dramatically: revenues increased 7% to $470 million in the first quarter, reported Apr. 22. To juice its business, the company will need to convince customers to move new types of programs onto its technology. More and more though, bigger vendors with competing agendas are standing in the way.

VMware, which is owned by EMC, makes software that can combine the work of several server computers onto one, helping companies save hardware, energy, and labor costs. Theoretically, the technology could also be applied to big Oracle databases to ensure those systems run more efficiently. But companies have been reluctant to “virtualize” such business applications because they don’t want to sacrifice the speed with which data flows between disks, memory, and processors. “Typically it’s a performance issue that keeps you from doing it,” says Gary Scholten, senior VP and CIO, at retirement fund manager Principal Financial Group.

One of the most important enhancements in vSphere 4 is its ability to run big databases fast. A benchmark test result VMware is touting shows a computer loaded with VMware’s virtualization software processing an impressive 8,900 Oracle database transactions per second.

That’s five times as fast as Visa's payment processing system, according to VMware. “If someone was concerned last week about virtualization of an Oracle workload, we’ve put that to rest,” says VMware chief operating officer Tod Nielsen

Oracle’s pricing has also been an impediment to wider VMware usage. Oracle charges its database customers by the number of processors they run the software on. Virtualization means more computing power concentrated on fewer processors. “It’s why Oracle doesn’t like virtualization,” Nielsen says.

Oracle sells a version of the open-source Xen virtual machine software that competes with VMware. With the Sun acquisition, it gains more software which could be “a nagging annoyance” to VMware, says Forrester Research analyst James Staten.

VMware is already contending with one industry powerhouse, Microsoft. Is a fight with Oracle in the offing? Under the April sunshine at his company’s event, VMware CEO Paul Maritz said that virtualization can help companies pare bills that result when they buy much more computing capacity than they actually need. “It’s part of the scam that we in the industry put forward on our customers,” he said. VMware’s management needs to make sure Oracle doesn’t join the list of companies trying to rain on its parade.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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