Strategic Impact of Acquisitions: Oracle Acquisition of Virtual Iron Example

This week’s announcement of Oracle’s (NYSE: ORCL) acquisition of Virtual Iron caused a bit of a stir. Oracle’s press release is a bit vague and financial terms were not disclosed:

http://www.oracle.com/us/corporate/press/018535

The acquisition acknowledges an architectural shift toward a collapsed stack. Today’s stack includes layers for applications, platforms and infrastructure. A future stack would eliminate the middle layer. Platform components move into the application and infrastructure layers. Applications become more “infrastructure aware”. Infrastructure becomes more accessible to applications. The traditional abstraction layer goes away.

What significance does this have on strategy? This is important for a number of reasons. First, it signals a maturity of the model and readiness to evolve to the next version. Second, it provides a streamlined model for developers to model against. Third (and related to #2), a collapsed stack affords tighter integration between the other two layers. All three of these reasons allow a faster development cycle through streamlined operations.

Moving forward, we should expect to see more consolidation of the platform providers by the larger software and infrastructure players. VMware (NYSE: VMW) is noted as a likely target. However, with a market cap of $10.58B, it becomes harder to swallow. Companies like Rackspace (NYSE: RAX), with a market cap of 1.1B could be a target. Larger organizations such as IBM (NYSE: IBM) or HP (NYSE: HPQ) could acquire a good infrastructure player. Larger software companies such as Microsoft (NASDAQ: MSFT) and Oracle become good candidates to acquire the software end of the spectrum.

With markets down, expect to see an increase in consolidation over the next 6-12 months. For consumers of these services, it becomes even more critical to understand the potential business opportunities. Provider evaluations will continue and you should hedge your bets on the services they provide.

Tim Crawford is ranked as one of the Top 100 Most Influential Chief Information Technology Officers (#4), Top 100 Most Social CIOs (#7), Top 20 People Most Retweeted by IT Leaders (#5) and Top 100 Cloud Experts and Influencers. Tim is a strategic CIO & advisor that works with large global enterprise organizations across a number of industries including financial services, healthcare, major airlines and high-tech. Tim’s work differentiates and catapults organizations in transformative ways through the use of technology as a strategic lever. Tim takes a provocative, but pragmatic approach to the intersection of business and technology. Tim is an internationally renowned CIO thought leader including Digital Transformation, Cloud Computing, Data Analytics and Internet of Things (IoT). Tim has served as CIO and other senior IT roles with global organizations such as Konica Minolta/ All Covered, Stanford University, Knight-Ridder, Philips Electronics and National Semiconductor. Tim is also the host of the CIO In The Know (CIOitk) podcast. CIOitk is a weekly podcast that interviews CIOs on the top issues facing CIOs today. Tim holds an MBA in International Business with Honors from Golden Gate University Ageno School of Business and a Bachelor of Science degree in Computer Information Systems from Golden Gate University.

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