Oracle Corporation’s acquisition of Sun Microsystems should worry the public sector because the enlarged entity could lead to price hikes and “vendor lock-in”, according to an IT analyst.
Steve Hodgkinson, Research Director, public sector IT, Ovum, told FutureGov that the deal will hold appeal to some public sector agencies because the new company can offer an “application to disk solution”, which may be seen as a lower risk approach to IT procurement.
However, he added that the merger does not come without its dangers. “Putting all of your IT services under one roof does have a plus side. But there are growing concerns that vendors can hold public sector agencies to ransom on price. Oracle has already been pushing up its server support charges, and that may continue as the company gains control of more of the market. The deal is a mixed blessing.”
Public sector agencies are under pressure by their treasuries to control their efficiency dividends and show a real reduction in costs every year, noted Hodgkinson. “The frustration for government CIOs is that they cannot do deals that lock-in that sort of logic. Vendors want more money each year, not less.”
In light of the merger, the analyst urged public sector agencies to be extra careful when negotiating enterprise licensing agreements. “It is inevitable that governments dealing with a smaller number of vendors will have to think more strategically about their contracts. This deal makes centralised procurement and aggregation even more critical.”
Oracle already has a strong footprint in the public sector, mostly through its enterprise software. The acquisition of Sun will give it a stronger hold over servers and workstations.
Tags: IT Solutions, Merger, Oracle, Sun