Oct
15
2009
Letter to the EC on the Oracle/Sun Takeover
Posted by Zak Greant on Thu 15 Oct 2009 19:53 UTC
Tags:

Dear Commissioner Kroes,

Last week, former MySQL CEO Mårten Mickos wrote you a letter urging approval of Oracle’s takeover of Sun Microsystems1, asserting that Oracle’s ownership of MySQL (as part of the Sun acquisition) will increase competition in the market.

As a long-time MySQL user, a former MySQL AB staff member2 and a participant in or consultant to a wide range of other open source and free software projects3, I found Mårten’s conclusion to be optimistic at best.

Oracle’s ownership of MySQL will lead to what the commission fears – greater costs and less choice in the DBMS market.

In making this point, I’ll challenge the three key arguments made by Mårten:

  1. MySQL and Oracle do not compete
  2. Oracle has many compelling business reasons to continue the ramp-up of the MySQL business
  3. Oracle’s ownership of MySQL will increase competition in the market

Also, please note that I have no financial interest in Oracle or Sun and haven’t been paid to write this article.4

MySQL and Oracle Compete

First, it is very clear that MySQL is a difficult and disruptive competitor for Oracle. Imagine yourself Oracle’s position: most of your present and future customers use MySQL at no cost, and the combination of open source communities and the commercial entities backing MySQL work in a distributed fashion to erode your key advantages and populate many niches in the market.

Oracle’s acquisition of Sun would provide them with a way to control this competition.

We don’t have to rely on  imagination to see the competition between MySQL and Oracle. Even a cursory examination of the market leads one to the same initial conclusion reached by the commission that, “… Oracle databases and Sun’s MySQL compete directly in many sectors of the database market …”5

A volume of evidence demonstrating the heated competition between Oracle and MySQL can be found online, including Oracle’s acquisitions of key pieces of  technology licensed to MySQL6, benchmarks7, case studies8, migration toolkits9, presentations given by MySQL staff at the MySQL conference10, attendance of the MySQL User Conference by key Oracle management11, articles in trade publications and recently leaked Sun Microsystems internal documents12.

Oracle’s Compelling Business Reasons (or, Why Oracle’s Acquisition of MySQL Won’t Increase Competition)

Mårten wrote that, “Oracle has as many compelling business reasons to continue the ramp-up of the MySQL business as Sun Microsystems and MySQL previously did, or even more”, but did not elaborate on what these business reasons would be.

We know that Oracle will seek to use MySQL to provide maximum value to their shareholders, but this is not the same as a “compelling business reasons to continue the ramp-up of the MySQL business” nor is it the same as, “(increasing) competition in the database market.”

Oracle has a large and successful business. Its net income for the first fiscal quarter of 2009 was reported at 1.1bn USD13 The direct commercial value from licensing and services that it would be able to extract from MySQL would be trivial compared to this (and would likely be at a much lower margin than services and licensing it is accustomed to.)

Some reasonable tactics and strategies for an Oracle who has acquired MySQL would include:

  • Using MySQL to price-target customers, ensuring that each customer pays as much as possible to Oracle. In the past, Oracle has reduced prices on a case-by-case basis to help retain customers who have “defected” to MySQL. The reduced competition in the marketplace will give Oracle more control, especially over large institutions who currently rely on MySQL Enterprise.
  • Using control of the non-software MySQL assets (such as domain names, documentation, trademarks, conferences, …) to  manage competition in the MySQL space.
  • Managing the rate of innovation in the MySQL product, so as to ensure that price-targeting can be effective.
  • Continued support of the open source version of MySQL, so as to ensure that other open source competitors do not become prominent enough to challenge Oracle’s business.

Oracle will engage in strategies such as these for as long as it has a compelling business reason to do so, but certainly not out of concern for or in service to the market.

Closing

Commissioner Kroes, I won’t presume to advise the commission on the best path forward, however I do hope that you have a clearer view of the facts.

Open source and the market forces that supported MySQL’s rise to prominence and allowed it to compete with Oracle will exist regardless of what the commission chooses to do.

If Oracle acquires MySQL, then the market will be hindered for the next three to five years. Customers will pay higher prices. The open source community will need a few years to route around Oracle’s control. Current MySQL customers will be faced with challenges as they decide whether or not to stay with an aggressive vendor who now has much more control of a database that they often rely on to serve the online market.

If Oracle does not acquire MySQL then it will still have significant influence, as it controls a key MySQL resource in the form of InnoDB. This is something that the open source space is still wrestling with, as various engines and forks attempt to deal with the problem.

If the commission truly wants to foster competition, a middle road would be to allow Oracle to acquire MySQL on the condition that the database, engines and documentation are released under a permissive open source licence, such as the New BSD license14. This would allow Oracle to make the acquisition that it so desires without having to spin off MySQL and would foster a great deal of competition in the market, as no single party would be able to control the integration of MySQL with other products.

  1. via Matt Asay’s CNET Blog – Mickos letter to EU: “Approve Oracle-Sun deal”
  2. from 2001 to 2004, I served as MySQL’s community liaison
  3. including multiple years serving on Free Software Foundation’s license compliance team, working as a Mozilla Foundation staff member and volunteering for the Open Source Initiative
  4. The founders of MySQL and many of the early MySQL staff are friends, which likely influences my thinking. I don’t know what options or financial arrangements friends and former colleagues who have a stake in Oracle or Sun have in place, but I’m sure that some friends will have significant benefit from a sale of Sun to Oracle.
  5. EC Press Release: European Commission opens in-depth investigation into proposed takeover of Sun Microsystems by Oracle
  6. Oracle acquired Innobase OY in 2005, followed by Sleepycat Software Inc. in 2006. These vendors licensed transactional database engine technology to MySQL that allowed MySQL to more effectively compete in Oracle’s space.
  7. MySQL.com: February 2002 eWeek Benchmarks
  8. Mysql.com case studies: ThePhoneHouse consolidates its eCommerce Systems on MySQL Enterprise, MySQL.com: Citysearch Saves Over $1 Million Using MySQL (pdf), …
  9. MySQL.com: Introduction to the MySQL Migration Toolkit, Oracle.com: Oracle Migration Workbench
  10. MySQL User Conference 2005: Migration from Oracle to MySQL, MySQL User Conference 2006: MySQL Migration Toolkit, MySQL User Conference 2007: MySQL for Oracle DBAs and Developers
  11. Oracle VP Ken Jacobs has attended and spoken at multiple MySQL User Conferences
  12. Wikileaks.org: Sun/Microsystems ‘Project Peter’ targets Oracle to MySQL migrations to boost sales
  13. As reported by BusinessWeek: Oracle’s Earnings: Summer Doldrums Set In. Note that this was a rather weak quarter, as previous recent quarters reported nearly twice the income.
  14. http://www.opensource.org/licenses/bsd-license.php