Oracle's Unbreakable Linux Slow To Draw Customers

"While Oracle has alluded to garden-variety customer 'endorsements,' it has not yet provided any concrete examples of meaningful, large-scale, in-production customer successes," First Albany analyst Mark Murphy wrote in a note to clients. "Contacts state that Oracle has internally announced a couple hundred customer deployments, consisting of mostly small customers."

Murphy's sources also said Oracle is "struggling with code quality and stability issues."

Meanwhile, Red Hat reported solid sales and 12,000 net new customers last quarter, suggesting that Oracle's competitive offering hasn't immediately dinged its rival.

But Oracle's day may be coming. Solution provider Re-Quest, a close Oracle partner based in Naperville, Ill., is seeing strong customer interest in Oracle's Linux support. Re-Quest CEO Ron Zapar has already had three or four clients sign up with Oracle, such as a midmarket customer that's replacing a Unix platform with a full stack of Oracle software.

"The fact that everybody needs to get their heads wrapped around is that customers are not going to make a fiscally irresponsible decision and jump ship in the middle of a support contract," Zapar said. "A lot of customers are waiting to make this leap when their current Red Hat contracts lapse."

Oracle declined to comment on its Unbreakable Linux momentum, citing a company-imposed quiet period around its third-quarter earnings report, due next month.

Oracle launched its Linux support offering in October, pledging full support for Red Hat Linux at a fraction of the cost. For now at least, Oracle appears to be treating the offering as a loss leader. The Redwood Shores, Calif., software company is giving its direct-sales staff commissions exceeding 100 percent, UBS analyst Heather Bellini said in a recent report, while early-adopter customers can lock in discounts of more than 50 percent off Oracle's list price, according to Linux-Watch.

Like First Albany, UBS also sees a slow uptake for Oracle's offering, but it's more bullish about its prospects.

"Our channel checks thus far indicate that the program has not yet gained much momentum," Bellini wrote. "In our opinion, the tide could turn if Oracle is able to prove the viability of its Linux strategy by signing some large customers to subscription agreements."

Oracle's best opportunity for Linux wins may be within its core customer base. Although price is a draw, Zapar said the real lure for Re-Quest's clients is the "one less throat to choke" advantage. For customers building around an Oracle stack, the chance to go straight to Oracle for OS-level support is attractive, he said.

In Oracle's last quarterly report, covering the three-month period ended Nov. 30, President Charles Phillips was vague about the demand the company had seen so far for its Linux support services. In the services' first 30 days of availability, Oracle logged 9,000 downloads of material from its Web site and had "hundreds of customers connecting their servers to our network," Phillips said during the company's earnings call.

Part of Unbreakable Linux's success will hinge on its acceptance by other vendors. IBM recently hit headlines for its wait-and-see approach. The company currently certifies its software's compatibility with Red Hat Linux and Novell's SUSE. So far, it hasn't seen customer demand for support of Oracle's offering -- but that may change as Oracle has time to build its customer base, IBM spokesman John Charlson said.

"Four months following the unveiling of Oracle Unbreakable Linux, customers are likely looking at the technology and kicking the tires," Charlson said via e-mail. "As clients demand Oracle Unbreakable Linux, IBM will work with Oracle to support it."

But First Albany's Murphy is skeptical that demand will ever materialize. His research report concludes the following: "In our opinion, [Unbreakable Linux] is likely to go the way of the Oracle Collaboration Suite: a huge blast of fanfare at the time of announcement and then a steady slide into complete obscurity and Oracle changing the subject whenever it comes up."