Two giant enterprise vendors announced they are absorbing major players in the SOA middleware and database worlds. Does this mean more consolidation is on the way? Not necessarily.

On Wednesday, BEA finally accepted a generous bid from Oracle Corporation, at $8.5 billion, far more generous than the measly $6.7 billion offered last fall. In a much smaller deal (only $1 billion), Sun Microsystems announced it is acquiring the largest open source database company on the market, MySQL.

Oracle appears to be evolving into a large assemblage of application and middleware offerings underpinned by a database; while Sun appears to be evolving into a large assemblage of open-source communities underpinned by hardware.

From the Oracle-BEA perspective, it’s now likely that BEA will likely sooner or later be absorbed into Oracle “Fusion” of enterprise software companies. BEA is a big player in the SOA and app server space, so this is not a trivial acqusition for Oracle, which also seeks to dominate this sector. In fact, for Oracle, the ability to dominate SOA middleware is essential to the long-term future of the company. Both Oracle’s bread-and-butter products — its database and ERP suite — could be usurped by functionality moved up into the middleware layer. Companies are alreday finding ways to do end-runs around upgrading these expensive solutions with their own standardized services and interfaces.

Sun appears to be increasingly betting its business on the open source world, with a revenue emphasis on service and servers versus actual software sales. Sun’s two software jewels — its Solaris operating system and Java programming language — have been open sourced. Sun also supports open-source middleware in the form of the Glassfish application server. Add to that the OpenOffice.org offering for desktop productivity systems.

Call it the “JASMO” stack — Java/Apache/Solaris/MySQL/OpenOffice.

From a MySQL customer perspective, the deal puts a large and deep-pocketed support structure behind the open source database. Surveys and interviews we have done here for Unisphere Research and Database Trends & Applications have consistently found a lingering perception open source databases don’t have the support structure that an Oracle or DB2 have behind them — a key crtieria for entreprise customers.

Symantec Corporation just released its annual “State of the Data Center” report, based on interviews and data collected from 900 enterprise sites throughout the world, and found, no surprise, that data centers are squeezed between tight budgets and rising end-user expectations. Looking forward over the coming year, consolidation and virtualization are the watchwords for data centers of all stripes, as managers seek innovative strategies to get more bangs for their bucks.

These are all good strategies, and companies need to do everything they can do keep the costs of data centers from spiraling out of control. However, there’s a tone to this, as well as in similar reports and vendor pronouncements in general, that has a one-dimensional aspect to it.

That is, they still reflect the old-line thinking that data centers are cost centers, and are necessary evils, like taxes and door locks. What is needed is more perspective on the growing contribution data centers are making to the business, in terms of greater agility, on-demand capacity, and improving business time to market. For every dollar invested in data center infrastructure, x number of dollars are returned to the business.

As long as data centers are viewed as cost centers, they will constantly be under pressure to do a lot more with less.

It’s not that organizations aren’t willing to keep accelerating data center expenditures. Overall, in fact, Symantec projects that data center budgets will grow about seven percent over the coming year, which is probably more than any corporate functional area could ask for. However, this is not likely to be anywhere near enough of a funding increase to the cover the rapidly proliferating growth of data and end-users demanding 24×7 availability.

The squeeze is being addressed through a number of cost containment strategies, but the impact is being felt the most in skills and staffing. Tight budgets are putting a damper on managers’ ability to hire enough talent to fulfill growing demands. More than half the data center managers said they are understaffed and are having difficulty finding suitable workers. Plus, about half indicated that retaining good employees is a huge or big problem, and about a third said they were losing people through retirement. Six out of ten said that many employees’ skills tend to be too narrow, or do not match the needs of their positions. Positions most in demand include network security specialists, application systems architects, and systems administrators.

Many organizations address this cost squeeze through outsourcing. In fact, while two out of five organizations outsource at least some IT functions, most do so for cost-saving reasons. (Only eight percent said they outsource to acquire needed skill sets.) Among the most common tasks outsourced are server maintenance, backups, storage management, archiving, and business continuity.

Symantec documented what types of cost-containment activities are prevalent across data centers at this time. The emphasis for data centers over the coming year will be adopting cost-containment strategies that make use of new technologies, including virtualization, and new management approaches, such as those that automate routine processes.

In what must be good news for the IBM mainframe division, server consolidation ranks as the top strategy for cost containment, cited by 75 percent. Virtualization is the second choice of cost-containment strategy, followed by task automation.

Storage is another area ripe for data center cost containment. Symantec found that storage virtualization is a popular strategy, now employed by two out of five data center managers. This covers two forms of virtualization – storage block virtualization, in which blocks of storage capacity on different arrays appear to be part of one storage array; and file virtualization, in which files stored in different locations appear to applications to be part of a single file system

Two out of five sites now have storage resource management (SRM) strategies in place. The great interest in SRM is primarily due to the benefits it provides when managing a mixed-vendor, mixed-device storage environment. In particular, 58 percent of the respondents who were at least considering SRM said it would help simplify management of their storage tiers; 54 percent said it would also help automate many of the manual processes they must now perform. Additional cost-containment strategies being adopted to control storage costs include unified server and storage management, internal “storage as a service” solutions, deduplication, and data lifecycle management.

The Symantec survey did not cover “Green” data center initiatives, which also play a role in cost containment, and can substantially reduce power costs. However, while Green IT initiatives are getting a lot of press, separate surveys find very low adoption rates at this point.

As the survey shows, companies are taking a range of actions to provide more data center services. However, cost containment is only one side of the story. As much corporate energy should be focused on leveraging data center assets as it is on cost cutting. The story that needs more attention is how data centers are no longer simply cost centers; they are engines for business growth.

Many of you remember Digital Equipment, the vendor that dominated com­puting in the 1970s and 1980s. What did Digital do wrong that sent its busi­ness into a downward spiral? The conventional contradictory answers are Digital had too much of an engineering culture and not a marketing culture; or too much of a marketing culture that did not appreciate the innovation the company spawned. Or, its management became too short-term profit-focused. or was too focused on long-term technology waves.

However, what if Digital did the right things — everything a perfectly functioning market leader should have done to stay on top?

That’s the view of Clayton Christensen, Harvard professor and author of The Innovator’s Dilemma and The Innovator’s Solution, who said Digital – and many companies like it – was usurped by disruptive technology forces beyond its control. He speculates that Digital, in fact, did everything it was supposed to do to ensure the viability of the company to maintain leadership in high-margin markets.

This summer, I had the opportunity to attend the World Innovation Forum in New York, in which luminaries and contrarians such as Christensen talked about the new forces that are reshaping the technology market.

The paradox many technology vendors have faced over the years of change is that when new commodity technologies emerge, they typically do not pose a threat, and are targeted at the marginal low-end space. As adoption grows from the low end up, the market leaders are even glad to get out of low-margin businesses and keep chasing the high-value opportunities. The executives at the market-leading vendors are actually not being shortsighted or making the “wrong decisions.” Rather, they are actually making very astute judgments to keep investing their resources in higher-paying customers. However, this high-margin segment keeps shrinking as the commodity solution takes hold, even among large customers. Thus begins a gradual death spiral, as the market leader is continually forced upstream and out of the mainstream.

It reminds me of that old maxim I once heard earlier in my career: “Sell to the classes, eat with the masses. Sell to the masses, eat with the classes.” Microsoft – disruptor extraordinaire – certainly seemed to know this rule.

We see this happening in computing every day. Unix, for example, emerged in the 1980s, and began to eat into the low-end space, forcing mainframe and midrange systems upstream. Later, Windows started to do the same to Unix. Now, Linux is forcing Windows upstream. Possibly, the rise of on-demand or Software as a Service may begin to even force Linux and on-site open-source applications upstream – we will see.

Technology disruption doesn’t just happen in the IT industry, of course. Christensen pointed out that such developments completed turned the steel industry on its head in the 1970s and 1980s. Large steel producers gave up the low-end rebar market, for example, to the mini-mills, a pattern that eventually moved up to angle iron, then to structural steel, and more lately to sheet steel.

Christensen points out that disruptors don’t start off going after the customers of the big established companies — rather, they serve customers who may have never had access to such products. There are some classic examples of this in the IT industry, of course. Microsoft and its resellers sold computers to individuals and departments that never had access to the mainframe glass house. The Internet emerged serving those individuals that didn’t have access to premium online services.

Now, we have applications such as ERP being provided through new delivery channels to companies that previously could not afford Big Software. Salesforce.com, for example, sells to small to mid-sized companies that never could afford full-fledged ERP solutions. MySQL provides a robust relational database to those who could not afford Oracle or DB2 licensing and infrastructure. Open source solutions such as SugarCRM are also playing to this market. And – important to remember – this is how Microsoft started out and continues to position itself.

IBM’s mainframe strategy over the past few years has been interesting – and an example of how to turn the tide against disruptive technologies. Obviously, as mentioned, Big Iron was chased far upstream by commodity priced solutions. However, IBM has been working to dramatically lower the price of its mainframe boxes in response to this trend. This all began during IBM’s dark days in the 1990s, when it cut the price of a unit of mainframe processing from $63,000 to less than $2,500 seven years later. In essence, IBM disrupted itself, undercutting its own business with products targeted at underserved markets.

There are a number of disruptive forces converging these days that promise to bring new tools, intelligence, and processing power formally out of the reach of many organizations. Service-Oriented Architecture, Software as a Service, open source, and grid computing all have something in common: they are driving the industry to highly modular, building-block, assemble-to-order approaches around software.

Modular architectures will always win out over larger, integrated architectures, Christensen said. Whereas 20 to 30 years ago IBM dominated its markets with all-in-one solutions – from hardware to operating system to database to application to sales and service – the vendors that focus on one of these areas now claim this space.

What is the greatest competitor to a market-leading company? Not the number-two company, Christensen says. Rather, it’s non-consumption. Again, there is always a segment that lies outside of the market that doesn’t have access to the tools or software or applications offered by the market leaders. That’s where new ways of computing begin to take root and move up the food chain.