Why Does Oracle Want Another Storage Provider?

Twenty-four hours after Oracle made the acquisition of struggling new-generation storage provider Pillar Data Systems, it called customers and partners together at its headquarters campus on the shores of San Francisco Bay to explain why.

After all, Oracle is still ingesting Sun Microsystems’ extensive enterprise disk and tape storage businesses and has been running them for a year and a half. These aren’t trivial business units.

So why buy a small, 10-year-old storage company with good product reviews but with only marginal success in a marketplace full of large sharks named EMC, HP, Dell and IBM?

We can think of at least three good reasons.

Company Line: Pillar Fills a Need

The company line, as put forth on 30 June by co-President Mark Hurd and Senior Vice President John Fowler, is that Pillar Data brings new storage IP options to the company’s overall product set. No argument there; nothing in the former Sun catalogue has the software agility and ease of use that Pillar owns. Customers, especially those in the mid-range and SMB markets without a lot of on-site IT help, tend to like “easy” and “quickly deployable.”

Reason No. 2 Oracle did this transaction is that CEO and co-founder Larry Ellison (pictured) – who owns Pillar Data through his equity firm, Tako Ventures – just can. He made the deal with a flick of his pen and the blessing of his legal folks, not even needing a down payment. After all, he was buying the company from himself.

Thirdly, Ellison couldn’t have been too excited about possibly seeing another of his ventures continue to flounder and perhaps go under. Remember his TV set-top box maker Liberate and the Oracle Network Computer? Say there’s no hint of ego involved here and you’ll hear laughs from those in the know.

All that aside, the fact remains that Pillar Data’s IP is well worth continuing to develop, and Oracle as a company knows it.

Pillar Data, based in San Jose, California, has attracted about 600 customers in its 10-year lifespan and has them spread across 24 countries. It was originally backed in 2001 by a $150 million (£93m) investment by Ellison. The company launched its first product, Pillar Axiom, in July 2005.

The main idea behind Pillar’s hardware and software product portfolio is to provide highly scalable SAN Block I/O storage systems that can unify and manage SAN (storage area network) and NAS (network attached storage) environments together or separately on a single platform. Versatility, ease of use and deployment, and scalability are its key attributes – and those are important attributes.

At the time Pillar Data came into the market, no other company was doing this. This is still unique in many ways and can fit well into almost any legacy IT system. It’s designed in a modular fashion and has been described by a number of users as “one of the easiest storage systems to get up and running” they’ve ever deployed.

Deal Keeps the IP Alive

So Ellison and Oracle have found a way to keep this IP alive, in house, and in development. It takes a burden off Ellison’s equity firm, which can now look for new investments. Plus, Pillar was saved from regulatory scrutiny by not being sold to another investor or IT company – even though it would have been a plum pickup.

And now Ellison can focus on sponsoring the 2013 America’s Cup, being held on the Bay right outside his office window.