Oracle To Support, Indemnify Red Hat Linux

In one fell swoop, Ellison both blessed Red Hat and blew it out of the water.

On the one hand, Oracle dubbed Red Hat Linux as the de facto enterprise Linux standard. On the other, Oracle now competes full-on with Red Hat for enterprise support dollars. Red Hat makes money--or doesn't--on support contracts.

It is a very tiny step from fielding Linux support to actually offering the operating system code, observers said. And Oracle executives said the company could well do that.

"As of this moment, Oracle is announcing full support of Red Hat Linux. If you are Red Hat Linux customers, you now have a choice. ... You can very easily switch from Red Hat support to Oracle support," Ellison said to applause Wednesday at Oracle OpenWorld in San Francisco.

Customers need not even be running Oracle databases or middleware to purchase this option. Ellison characterized Oracle's support organization as the largest software support group in the world, spanning 145 countries and 27 languages.

In Ellison's analysis, Oracle support will cost $399 per year for a two-CPU box vs. $999 per year from Red Hat. A Premium Oracle option is $2,499 per year vs. $999 for Red Hat. And until Jan. 31, 2007, customers can get the Oracle support for a 50 percent discount. Existing Oracle customers can try the new support options free for 90 days.

Red Hat, which could not be reached for immediate comment later e-mailed a response putting the news in the best possible light.

"Oracle's announcement further validates open source and Red Hat's technical leadership. We will continue to optimize Red Hat Enterprise Linux for Oracle and compete on value and innovation," a spokeswoman wrote.

Red Hat's stock suffered, falling more than 16 percent to $16.32 per share in after-hours trading.

The tone of a question from the Oracle OpenWorld audience summed up overall reaction at the show: "Is killing [Red Hat] an unintended side effect?" Ellison was asked.

Ellison said he expected Red Hat would continue to compete "very aggressively."

At least one Oracle partner sees opportunity in the deal. This will lead to "lower TCO, one neck to choke - we're loving it...more dollars for services," said Scott Jenkins, managing director for the EBS Group, Lenexa, Kansas.

Oracle executives later told press and analysts that Red Hat had not been apprised of this news in advance although clearly IBM, AMD, Dell, Hewlett Packard were--all had canned quotes included in the Oracle press release.

In his keynote, Ellison said the move should clear impediments to widespread Linux adoption in the enterprise. To date, in his view, that adoption has been stymied by a lack of "true enterprise support for the Linux kernel."

"Quite often, bugs get fixed, but they're not fixed in the versions of Linux customers are running. Fixes are not back-ported," he said.

There is also uncertainty about using Linux intellectual property, since "SCO started suing everyone in sight -- customers and everyone," Ellison said. "This uncertainty is slowing adoption of Linux in large customers."

Ellison also said the industry must be careful not to "fragment" Linux. However, it was unclear if Oracle support would extend to non-Red Hat Linux distributions.

Oracle executives later said they might look at support offerings for other distributions going forward.

This move could have impact well beyond Red Hat. At least one analyst said this move could stymie Microsoft's SQL Server's move into the data center.

The relative cost of SQL Server running in a data center compared to Oracle 10g running on Linux in the data center is now roughly equal, given Linux' low cost, said Stuart Williams, analyst with Technology Business Research, a Hampton, N.H.-based research firm.

"Oracle just cut Microsoft off at the pass," he said.

SQL Server in the enterprise relies on the ever-thickening Microsoft software stack, he noted.

Oracle has been in the Linux camp since 1998, when it ported its flagship database to the open-source operating system. Four years later, it commited to fix "priority one" bugs in the Linux kernel and provided those fixes back to the community.

There is a big difference between the support announced today and that which was previously offered, said Ed Screven, Oracle's chief corporate architect.

"Before, we supported Novell and Red Hat Linux running under Oracle products. If a bug was a priority one issue, we would directly diagnose and fix it. If it was not priority one we'd shepherd it toward Red Hat or Novell. Now it's much broader. We are fully supporting Linux [even if there is no Oracle product running," Screven told reporters.

Virtually all of Oracle's business applications run on Linux, with Siebel 8.0 set to bring Linux support to that CRM application by the year's end.

This story was updated with more on the impact on Red Hat.