Exclusive Little more than a month after acquiring Virtual Iron for an undisclosed fee, Oracle is effectively killing the company's virtualization product.

In a letter to Virtual Iron's sales partners, Oracle says it "will suspend development of existing Virtual Iron products and will suspend delivery of orders to new customers." And in a second letter to a partner speaking with The Reg, the company says it will not allow partners to sell new licenses to anyone - including existing customers - after the end of this month (i.e. in 11 days). Before then, partners can only sell licenses to existing customers under certain conditions.

"Until June 30, 2009, Oracle may approve granting add-on licenses to existing Virtual Iron end customers, or licensing end customers who had demo’d or otherwise evaluated the former Virtual Iron products and do not require further delivery," the second letter reads.

As many expected, Oracle intends to meld Virtual Iron's product with its own Oracle VM. Both are based on the open-source Xen hypervisor. "Oracle has completed a thorough review of the Virtual Iron product portfolio, and intends to fully integrate Virtual Iron technology with Oracle VM, Oracle's server virtualization and management product," Oracle's letter to partners reads.

"When the integrated product becomes generally available, Virtual Iron customers will be able to move to the new, integrated product and benefit from a more feature rich-solution than is available today." But Oracle has not said when the combined product will arrive, and Virtual Iron's partners and customers may feel that Oracle has left them out to the cold in terminating the company's product so swiftly. Presumably, it will take several months - if not a full year - to combine the two products.

Oracle says it will still provide support for Virtual Iron. But if existing customers can no longer load the product on additional machines in their data centers, they may be forced to switch to another product - in which case, support is moot.

"So basically, anyone that built their hosting infrastructure on VI...is now totally in the shit," that partner tells us. "Unless they buy a whole bunch of licenses before the end of June, they will be unable to buy any more node capacity for their clusters. Oracle are shutting down the product, without giving customers some sort of replacement. That's a huge customer/partner channel shafting."

Oracle's letter does not say Oracle itself will refrain from selling licenses to existing customers. The possibility remains that Oracle could accommodate existing accounts on its own - "shafting" partners but not customers. But this seems unlikely.

Judging from financial numbers recently turned up by The New York Times, Virtual Iron has relatively few customers in danger of shafting. According to The Times, the company had just $3.4 million in revenue last year, after spending $17.7 million on sales, marketing, research, development, and administrative costs.

Oracle's motives are unclear - to say the least. It may have bought Virtual Iron for its engineering talent and its code. Or it may have bought the company simply to keep it away from competitors like VMware and Citrix. Or both. But it's surprising that the company would risk losing Virtual Iron's existing customers and partners. Oracle has not responded to our requests for comment.

Perhaps the company is merely looking to save on support costs. In its letter, the company says "Oracle has retained Virtual Iron support personnel, so the same people who provided support prior to the acquisition will continue to do so going forward." But our source says the company has let go all but about ten people from VI's staff, and that two are on temporary contracts.

In its letter to partners, Oracle says it will continue to provide general support of the Virtual Iron Extended Enterprise Edition product through September 3, 2009 for version 4.4 and through January 14, 2010 for version 4.5, according to existing agreements. And it will offer lifetime support for all products. But, again, this may be a moot point if customers can no longer buy new licenses.

"Oracle offering 'lifetime support' to existing VI customers...is a joke, as the product will effectively be dead," the Virtual Iron partner says.

Meanwhile, Oracle has urged Virtual Iron partners to become Oracle partners. "We value your investment and expertise in server virtualization, and encourage you to begin your partnership with Oracle right away," the letter reads. "In order to start the process, a letter terminating your current Virtual Iron partner agreement is being sent to your company." ®

Update: Former Virtual Ironer speaks

According to a former Virtual Iron employee speaking with The Reg, the company has roughly 1,500 resellers and between 2,000 and 3,000 customers worldwide. And many of these customers have purchased between 500 to 1,000 licenses. Large customers include the FBI, Lackland Air Force Base in San Antonio, Texas, and several ISPs in both the US and the UK.

"To know that you can't buy anymore licenses in the future is pretty disruptive," the former employee says.

He suspects that Oracle has no interest in courting Virtual Iron's partners or customers. He says that Oracle only negotiated with Virtual Iron through Oracle's CTO office. "Marketing and sales were never involved," he explains, "which led me to believe they were only interested in the technology itself."

Oracle is on the verge of acquiring Sun, which offers its own virtualization products, but during discussions over the purchase of Virtual Iron, Oracle said that it preferred Virtual Iron's technology.

He says that Oracle has retained maybe 15 employees, and he believes Oracle has retained most of the support staff because it is legally obligated to provide support for existing Virtual Iron customers.