Bugs Bunny and the Oracle of Delphi walk into a bar…
Oracle acquired Acme Packet for somewhere between $1.7B and $2.1B a couple of days ago. That’s a lot of money for something most folks don’t understand (Session Border Controllers) and something that’s really outside of Oracles core business. Let’s dive into the reasons Oracle might’ve made this purchase:
Oracle wants to play with the Telcos
Historically, Oracle has had some limited penetration in the very large Telcos but they’ve had trouble breaking into the long tail of the Telecom world. Particularly the rural CLECs and international minority operators represent a huge chunk of untapped potential revenue and purchasing Acme Packet gives Oracle an “in” with all of these organizations. Acme packet is the SBC provider of choice, and since it’s basically impossible to run a modern telco without this technology, it makes sense that Oracle would want their tech, but that’s also a good reason for Acme to want to stay independent. Ultimately they chose not to.
Let’s dive a bit deeper into what I perceive as the 3 biggest reasons Oracle and Acme agreed to this marriage.
Acme Packet had a lot of liabilities and was being actively threatened by open-source tech
Acme Packet was a large company with hundreds of millions of dollars in revenue. They also have very skinny margins due to their rapid growth. It seems as though Acme would continue to grow and while that might be true in the short term there’s a very real existential threat to their entire way of doing business. The so-called New Carriers like Twilio and 2600hz don’t run Border Controllers from Acme, they run open-source stacks like OpenSER and Kamailio. The differences in cost structures associated with running an open-source SBC as compared to a closed source stack are greater than those between a bicycle and a Ferrari.
Open-Source SBCs are cheap and powerful. 2600hz runs Kamailio and the hardware we deploy on costs $500-1500 per server (less if virtualized). To support an infrastructure with a few thousand calls you’re looking at spending well over $50k with Acme which is incomprehensible to a startup. I am not the target market for Acme, and yet I find myself partnering with them on a number of deals simply because of their proliferation in the market place.
Acme’s approach to Session Border Controllers plays right into the Oracle portfolio
This Open-source pressure is irrelevant to Oracle. The Acme way of selling things is eerily similar to Oracle. Acme positions its SBCs as best-of-breed and as far as appliances go they are. Oracle operates much the same way, and they both already employ the complex steak dinner/love affair enterprise sales process. They both sell large ticket hardware with perhaps even larger licensing. The hard driving sales departments at both companies will work well together irrespective of the time to integrate. Hard-nosed sales folk hit their numbers no matter what obstacles sit in their way.
It seems like a good cultural fit to say the least.
What happens now?
Folks that currently enjoy Acme Packet can look forward to awesome Oracle sales pitches. Along with their SBC, carriers can look forward to learning about Oracle DB products and other accouterments. The real question for me is: Is Oracle trying to play the Telco game?
The case for Oracle becoming a Telco Provider
Well, they already bought Acme right? Now all they really need is a switch and they’ve got a full blown competitor to the Broadsofts, Metaswitches and Ciscos of the world. Oracle is one step away from competing blow for blow with the big boys, but it’s risky to jump into telecom land. While the reward is large, the road to hell is paved with good intentions. Countless organizations have torn asunder by attempting to jump into Telecom.
The case against Oracle jumping into Telecom Madness
Telecom is a mad, mad world. It’s hard to begin to explain how ridiculous Telecom is when compared to an industry like Database. Whereas Database has had dramatic rapid changes on an almost yearly basis, Telecom has been virtually stagnant for 100 years. Oracle would love to play in the Telco world, but they do not have a lot of experience when it comes to routing technology. Real-time media management is not something Oracle specializes in and therefore in order to pursue this market, they’d have to make a considerable investment in personnel and expertise from consultants. It is also unlikely that Oracle will pick the right answer the first time as no one in Telecom ever does, and therefore the costs will be considerably larger than a one time expense.
There’s gold in them there hills, but is Oracle the miner or the Pickaxe salesman?
Acme Packet is a pickaxe, but Oracle could become a miner (or at least a better salesman) with a switch. It’s a question of ROI and I would hate to be the MBA who has to make those calculations.
In summary, Oracle bought acme packet while they were looking to exit. Their cultures line up nicely, but I don’t know whether Oracle actually wants to get into telecom or if they’re using Acme to sell more Database boxes. If it’s the latter, this investment is essentially buying an email list. If it’s the former, things might be very interesting around Q2 2014.