When I read rumors that Oracle is buying one of our former clients I wonder what we did right.

Long ago and in the earliest phase of their interesting existence, we consulted to Virtual Iron. We helped with event management, presentations and removing kinks from their messaging when Virtual Iron was vending a lost cause. In those long ago days, Virtual Iron was selling sophisticated virtualization systems that not only let you divide one big server into many smaller servers (what most buyers perceive as virtualization) but they could glue several servers together via Infiniband switches and thus make many small servers look like one huge box.

They were a few tiny steps away from private cloud computing, though they did not know it nor was there an industry buzz word to propel their value proposition.

Virtual Iron was in what I call the ‘bottleneck bypass business’, which is always a lost cause. Products in the bottleneck bypass business are designed to work around some current computing bottleneck. This business model only works for a short time because hardware geeks are perpetually inventing better hardware specifically designed to eliminate such bottlenecks. New technology makes bottleneck breakers obsolete in short order. That is why I have gigabit networking in my house.

Have you evaluated a dial-up accelerator lately? There used to be plenty of them available … before cheap residential broadband came into being. They died.

Virtual Iron was if nothing else lucky and agile. In order to make their original virtualization system appealing, they spent considerable time engineering the virtualization of the individual components in servers. CPUs, memory, disks were all virtual objects that could be reallocated on the fly. Virtual Iron also wrapped this core technology with a world class user interface making a miniature virtual datacenter a reality.

Now Oracle wants them.

Oracle can rightfully be blamed for instigating virtual data centers. They were a bit premature and thus centered design decision on grids, which are limited forms of virtualization. Grids were good enough for what Oracle customers needed at that time –the abstraction of the database server. To Oracle’s credit, they invented and gave away some key technologies in order to popularize and standardize grid computing. Yet grids were chunky forms of virtualization. As with their database itself, Oracle’s early incarnations of grids were as difficult to manage as a child-filled bus on the way back from a field trip to a candy factory.

Then came VMWare and their virtual data center gestalt. VMWare is quite successfully articulating and engineering the p-clouds (private clouds). They are also doing what we at Silicon Strategies Marketing did for SuSE Linux to make them competitive against Red Hat — focusing not on the current and well understood solution advantages, but on the next step in product mindshare. When Red Hat was talking to system admins about cost saving we got SuSE talking to executives about integrated operations. When Red Hat started talking about integrated operations, we had SuSE speak about strategic partnerships.

VMWare may well own the future data center. Total abstraction of commodity hardware to fluidly manage data center workloads — as well leverage public clouds to extend data center horsepower on-demand — is nigh. This includes the virtualization of even the most sacred part of every datacenter, the massive centralized databases … including Oracle databases. VMWare has the lead and the marketing smarts to grab almost all this open field.

Nothing ticks off Larry Ellison like someone else dominating a software market.

When it comes to the virtualization of the datacenter, the second slickest product on the market is Virtual Iron. With VMWare’s vDC (I decline to use their poorly crafted VDC-OS name) threatening to one-up the Oracle grid and removing differentiation from Oracle and DB2 and MySQL implementations, Oracle had to do something. Building more virtualization (Oracle already has a lack-luster offering) would take too much time, produce uncertain results and detract from their core competencies (management lesson: never build products that are not part of your core competencies … in fact, never in-source non-core competencies including marketing strategy development). Buying their way into a competitive position and putting F.U.D. into the path of VMWare’s new vDC offering would be a classic block-and-run maneuver.

Hence Virtual Iron. Virtual Iron leverages the popular Xen hypervisor, which fits nicely in with Ellison’s Open Source infrastructures initiatives. VMWare products are infrastructure but not Open Source. Thus anything Oracle can do to promote open alternatives further blocks VMWare’s momentum.

However, this time Larry may lose.

Virtual Iron has been artful in vitalizing hardware and the management thereof. However, VMWare has already taken a substantial lead in abstracting the entire data center, including commanding issues such as storage, security, on- and off-premise hardware and application-level service assurance. Virtual Iron looks at the hardware while VMWare looks at the mission and the people managing applications. Virtual Iron and Oracle are too close to the bits while VMWare is empathizing with the administrators and helping them achieve their expected outcomes.

There are many technology marketing lessons in this rumor. First, if you have a way to leak rumors, you can create consternation in the market and for an opponent. Be warned though — this tactic carries a cry wolf effect, so use it sparingly. Second, solving problems from the expected/desired outcomes of your key genotypes is essential and gives you nearly unbeatable advantages that even wealthy opponents cannot buy their way out of. Third, stay away from bottleneck bypassing business models unless you want to make a quick buck and exit — they never work in the long run.

Forth, figure out where Oracle is not building toward trends in the market and supply them with a second place alternative. Larry has money and he is more than happy to spend it to maintain or expands the Oracle Empire.