The ugly Oracle-HP divorce: Customers could get hurt

The two tech giants' 140,000 joint customers are scared, confused, angry -- and powerless

Divorce is never pretty, especially when kids are involved. All too often, squabbling parents forget that children aren't pawns in a legal chess game and ignore their primary responsibility: taking care of the kids at all costs.

That's what's going on now as Oracle and Hewlett-Packard toss verbal and legal Molotov cocktails (IEDs, for you younger readers) over the future of Itanium and Oracle's decision not to develop new software to run on Intel's 64-bit processor. The two companies have about 140,000 joint customers, and the prospect of being left orphaned has them scared, confused, and angry, says Nina Buik, the chief marketing officer of the 53,000-member Connect, an HP user group.

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"Our members feel they are getting a raw deal in a squabble between two corporate giants," she tells me. More specifically, many of those 140,000 joint customers run an Oracle database on Itanium-based hardware from HP, and the prospect of having to change platforms is freaking them out, says Buik. The morning after Oracle said in March that it wouldn't develop for Itanium any more, Connect's discussion board was flooded with hundreds of comments, many blaming Oracle for the dispute.

The fight got even uglier last week when HP filed suit against Oracle, claiming that the database giant has failed "to live up to and simple promise to work with HP in the interests of both companies' mutual customers." The complaint goes on to accuse Oracle of "strong-arming" customers in an attempt to force them to move to Oracle's Sparc servers (acquired in the takeover of Sun) by refusing to fix bugs in software running on HP's high-end servers, a charge Oracle denies.

The FUD is flying

There's a huge amount of FUD (fear, uncertainty, and doubt) flying around this dispute. Most puzzling, Oracle says it has stopped Itanium-related development because Intel plans to kill the high-end chip in just a few years, a contention that Intel denied immediately. Yet Oracle executives say publicly and privately that they will prove that point when the dispute goes to court.

It's clear that at least part of the animus stems from HP's fury over Oracle's decision to hire Mark Hurd after he was fired by HP. (Don't believe me? Read the complaint.) But the real issue, of course, is money. HP's high-end server business is worth billions of dollars in hardware, software, and services revenue, says Nathan Brookwood, a principal analyst at semiconductor consulting firm Insight64. And Oracle obviously would be happy to poach HP customers and move them to its servers.

But while Oracle CEO Larry Ellison and HP CEO Léo Apotheker act like George and Martha in "Who's Afraid of Virginia Woolf?," their kids -- the IT customers, that is -- are looking like victims.

Is Itanium really dying?
The Itanium microprocessor, once meant to be the successor to the venerable x86, has never been a great success. But is it really close to the end?

Oracle says to look at Intel's processor road map, which includes Itanium versions known as Poulson and Kittson that will be in production around 2013. Beyond that, Itanium isn't there. It's worth noting that Microsoft and Red Hat have both stopped developing software for Itanium, and both Dell and IBM ceased making Itanium-based servers years ago. HP itself has steadily pulled back from Itanium, dropping its Itanium workstations in 2004 for lack of demand and ending its own development and production of Itanium chips the same year. But it continues to make and sell Itanium-based servers.

What's more, HP knows that Itanium is nearing the end, says Oracle, which claims that it was tricked into signing an agreement in 2010 promising long-term software support for Itanium. "We believe that HP specifically asked Oracle to guarantee long-term support for Itanium in the September 2010 agreement because HP already knew all about Intel's plans to discontinue Itanium, and HP was concerned about what would happen when Oracle found out about that plan," Oracle says in a statement emailed to reporters. Oracle found out about the end of Itanium in March 2011, it says.

Why would Intel's CEO say that Itanium is not nearing end of life? "HP is Intel's biggest customer. They need to be very delicate," says one Oracle executive.

Insight64 analyst Brookwood, who has followed Intel and other chipmakers for years, doesn't buy it. "As long as HP can sell Itanium [servers], I don't see any way that Intel will phase them out," he tells me. While it's true that Itanium has not been the success Intel had hoped, "they have gotten to the point that revenues have caught up the the R&D expenses to keep it going."

Is this just Oracle being its hardball self?
HP is saying that Oracle has a history of making unreasonable demands of its customers, relenting only when they push back, citing its takeover of PeopleSoft, Siebel Systems, and many other major software makers. Ellison wanted to pull the plug on development of legacy software it had acquired through the acquisitions, but then agreed to keep the applications going after customers rebelled, says HP's chief spokesman Bill Wohl.

I disagree.

I was covering Oracle very closely in that period and even sat through weeks of testimony during a trial in federal court that focused on the PeopleSoft acquisition. As far as I know, Oracle, despite its hardball reputation, surprised the industry by not forcing customers onto its own competing applications. Indeed, PeopleSoft HR has been revved a number of times by Oracle developers. When I spoke to the Connect user group's Buik, I asked her to cite a single instance of Oracle backing down after customers complained about that kind of pressure. She could not.

Is Oracle refusing to fix bugs as a way to pressure customers to drop HP's Itanium products as the suit maintains? If that's the case, I'd like to see the evidence. No one has come forward with any. It is, however, possible that some customers who are complaining were running very old versions of Oracle's database, in which case the company would be well within its rights to say the customer needs to upgrade. After all, you don't see Microsoft offering bug fixes for Windows 2000 or even Windows XP.

Yes, I could be wrong. Maybe there's something I'm missing, and one of these companies is altogether at fault. If this goes to trial, we'll discover a lot more about who's telling the truth and who isn't. But the plans of thousands of customers are up in the air because of a complex dispute between a pair of giants. Larry and Léo: Cut it out. You owe it to your customers.

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This article, "The ugly Oracle-HP divorce: Customers could get hurt," was originally published by Read more of Bill Snyder's Tech's Bottom Line blog and follow the latest technology business developments at For the latest business technology news, follow on Twitter.

Copyright © 2011 IDG Communications, Inc.

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