Oracle opens its pocketbook again, buys Virtual Iron

Just a few weeks after making a bid for Sun Microsystems Inc. and its virtualization stack, Oracle Corp. is continuing its spending spree with the purchase of virtualization management firm Virtual Iron Software Inc.

The business software giant said the deal will give its customers a better way to manage their server capacity and optimize virtual machine performance. The combination of Virtual Iron’s portfolio with Oracle VM’s server virtualization tools product will provide “comprehensive and dynamic resource management across the full software stack,” the company said.

The terms of the acquisition were undisclosed, with the deal expected to close this summer.

Charles King, principal analyst at Haywood, Calif.-based Pund-IT Research Inc., said that despite its position as the fourth or fifth player in the virtualization market, Virtual Iron’s suite of virtual server management and administrative tools might have been an “extremely attractive” factor for Oracle.

Additionally, the Virtual Iron’s technology is based on the Xen hypervisor, which is also used in Oracle’s virtualization products.

“With this purchase, Oracle’s got some technology that they can use in their own virtualization efforts, they’ve got some people who are deeply versed in the Xen hypervisor and they’re also taking Virtual Iron off the board before somebody else picks them up,” King said.

Oracle’s plans for integrating the Virtual Iron hypervisor into its product line — especially considering Oracle has a Xen-based hypervisor of its own — remains to be seen, he added.

Richard Jones, vice-president and service director for data centre strategies at Burton Group Inc., said the acquisition underscores Oracle’s push to compete in the hypervisor business and its need to shore up its lacklustre virtualization management portfolio.

Additionally, the purchase might also give Oracle a golden opportunity to move down-market and better compete with Microsoft Corp.’s Hyper-V, which is targeted at the SME space.

“Is Oracle going to take advantage of the channel Virtual Iron has created? Because it’s a channel that Oracle doesn’t have,” he asked.

“If Oracle plays their cards right, they can use this to bootstrap a larger, down-market channel play — if they come up with other products and really know how to do this — to start to compete against Microsoft.”

As for how the acquisition fits into last month’s Sun purchase, King said that while there might be some synergies between the two new Oracle properties, Sun’s container technology is geared toward the UltraSPARC platform and has little fit with the rest of Oracle’s virtualization assets.

“(The Virtual Iron deal) is more directly competitive to VMware,” King said. “What Oracle might be doing with both these deals is trying to offer a broader range of virtualization technologies and services out of its own shop and migrate some of its more hard line customers away from VMware technologies.”

For Jones, Oracle’s interest in Sun’s virtualization portfolio largely comes from its OS virtualization assets as opposed to hardware virtualization. “That’s what Sun was known for with its Solaris containers, for example,” Jones said.

The Virtual Iron and Sun deals solve different sets of problems in the virtualization space, he added, and there is very little in the way of redundancies.

“However, the Sun xVM hypervisor is another Xen-based one and that’s probably got end-of-life written all over it once the Oracle-Sun deal completes,” Jones said.

The timing of the deal was unsurprising, King said, especially given the length economic downturn and its affect on smaller vendors.

“They typically don’t have the deep pockets to be able to roll with a tough economy and at the same time, it’s difficult to acquire new customers,” King said. “Frankly, if the dot-com bust taught businesses anything, it’s that they were better off working with name-brand IT vendors that they knew would be around in the long-term.”

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