Why Larry Ellison and Michael Dell Are Now the Best of Friends

Keep a close eye on the brewing relationship between the software giant Oracle and computing concern Dell. While today the companies announced a series of seemingly innocuous plans to more tightly integrate their enterprise management capabilities, what’s really going on is a deepening of an important strategic partnership between them.

That’s the conclusion drawn in a research paper from Moor Insights and Strategy, a research firm headed up by Patrick Moorhead, a former executive with chipmaker Advanced Micro Devices.

Four years after Oracle closed on its acquisition of Sun Microsystems, the company has sought to compete in the business of specialized hardware based on the old SPARC chip architecture that goes up against IBM Power-based systems. But Sun also had a fledging commodity server business using Intel’s x86 chips. CEO Larry Ellison has said numerous times he wasn’t interested in boosting Oracle’s share of the x86 service business, in part because he doesn’t see it as terribly profitable.

In a world where x86 servers are the basis for most of the world’s data centers, Oracle’s SPARC-based hardware gets all the attention, while its x86 business has languished. “First, since their Sun acquisition they have focused their hardware sales resources on promoting their SPARC-based systems and, as is becoming apparent, they have also focused their hardware R&D resources on SPARC technology and system development,” writes Paul Teich, a Moor Insights analyst and the paper’s primary author.

Without a credible x86 business, Dell is quickly becoming the conduit through which Oracle reaches that market. Dell has already been named Oracle’s “preferred x86 vendor,” while Dell has been reselling Oracle’s Linux and other software and services to its hardware client base.

Dell and Oracle each have access to customers and technology that the other needs. “We believe that Dell needs a better software and services play to increase their enterprise IT share of wallet and credibly challenge Hewlett-Packard at classic enterprise IT accounts,” Teich argues. “The agreements give Dell some core enterprise IT database goodness and access to Oracle’s impressive enterprise accounts, and reciprocally they give Oracle access to proven high volume hyperscale infrastructure, which enables conversations with a smaller number of very high volume hyperscale customers.”

Over time, CIOs will start thinking of Dell and Oracle at the same time. Buy from Dell and get access to Oracle, with a single point of contact, and increase the pressure on their joint rival HP in the process. “We think that today’s announcements are the beginning of a beautiful friendship.”