This research outlines Oracle's modernization strategy, and identifies its key challenges and opportunities. Organizations considering modernizing legacy systems should include Oracle as a viable option in their application portfolio planning decisions.

• Oracle's modernization strategy includes its entire portfolio offering — Oracle Applications, Oracle Fusion Middleware, Oracle DBMS, Linux, Solaris, Unix, Windows, virtualization and now the Sun Microsystems hardware platform.
• Oracle depends on key service partners, because its own service channel is not critical to its strategy's success.
• Oracle's approach is to enable the migration of IBM and Unisys mainframe workloads, as well as IBM System i workloads, to platforms that support the full Oracle software stack.

• The Oracle infrastructure, database management system (DBMS), middleware and application offerings form the core of the company's modernization offering.
• Existing Oracle customers should consider Oracle's modernization strategies, but plan on leveraging Oracle's service and technical partners for delivery.
• Mainframe rehosting via Tuxedo is a key piece of Oracle's modernization strategy, and will play a role, along with WebLogic Server, in creating an application grid architecture.
• The Oracle-Sun database machine (Exadata v.2) will be positioned as providing extreme performance for even the most mission-critical transactional workloads, positioning itself as a viable alternative to mainframe platforms.

The completion of the acquisition of Sun will drive a much more aggressive position by Oracle in the modernization market. Oracle wants organizations on its complete infrastructure, DBMS, middleware and application stack, and will provide the modernization approaches, particularly in conjunction with partners, to get them there. Despite Oracle's success selling its DBMS into IBM Linux for System z environments, we expect the company to become more interested in moving customers to its complete stack.

Since 2006, when it announced a partnership with HP and Intel, Oracle has become more focused on its modernization strategy. The joint Application Modernization Initiative (AMI) was an important "stake in the ground" for both Oracle and HP. Although this partnership didn't yield as great a market success as the companies hoped, it still indicated an important focus by Oracle in this space.

As a software company, Oracle's focus has always been on software revenue. Any modernization strategy would only be seen as successful if it generated significant product revenue. With the completion of the Sun acquisition, we believe providing a full Oracle stack will be key to the company's revenue growth.

Through its acquisitions, Oracle has expanded from DBMS to middleware and applications. Its modernization strategy is meant to drive customers increasingly to this stack. In order to succeed, Oracle must get companies on platforms that are amenable to this stack. Thus, IBM System z (mainframe) and System i (AS/400) customers are obvious targets for this conversion. The Unisys mainframe environments (MCP and OS 2200) are also candidates for Oracle's strategy. The acquisition of Sun broadens Oracle's message to the IBM System p platforms, as well as potentially HP and Fujitsu infrastructure.

One of the key pieces of Oracle's modernization strategy is its Application Grid Infrastructure approach. Oracle wants to offer companies an application grid architecture that enables their customers to: (1) initially rehost mainframe workload off IBM and Unisys platforms (with Tuxedo); and (2) evolve the applications to Oracle's Java application server platform (WebLogic).

The Tuxedo platform will serve as the rehosting platform for COBOL, C and C++ applications. Oracle believes Tuxedo can be used to host these applications indefinitely, as the robustness of Tuxedo is well established in the marketplace. Customers that wish to move to a more open architecture may choose to evolve their applications to a Java application server environment. Oracle could bridge these different platforms in the application grid through its Coherence in-memory data grid technology, for example. Oracle supports Linux, Unix and Windows, and, over time, may provide a more compelling platform through the combination of its Oracle software and Sun hardware platform.

The use of Tuxedo as a rehosting platform does require application modifications to support this approach. Historically, Oracle has used a service partner (MetaWare) to convert IBM mainframe COBOL applications from a Customer Information Control System (CICS) or IP Multimedia Subsystem (IMS) runtime environment to Tuxedo by modifying the application programming interface (API) calls from the native IBM calls to the Tuxedo equivalent. More recently, the Oracle Tuxedo Application Runtime for CICS and Batch preserves the CICS calls in the application source, providing plug-compatible EXEC CICS APIs and required CICS services. The runtime product provides a preprocessor, which, similar to mainframe CICS environments, expands EXEC CICS calls as part of the compilation process. The recently announced Oracle Tuxedo Application Rehosting Workbench can be used by Oracle's service partners or customers directly. The workbench helps customers and service partners to automate and industrialize the COBOL adaptations across compilers and file systems; convert Job Control Language (JCL); and migrate virtual storage access method (VSAM) data, sequential files and DB2 tables.

When migrating mainframe workload that has always had significant batch processing, in addition to large transactional workload, rehosting solutions must cater to this particular application architecture. Batch processing, a hallmark of mainframe workload during the past 50 years, has been used to deliver particular aspects of a company's business process by performing large volumes of data manipulation or calculation processing over night. Developed during a time when it was accepted business practice to allow significant delays in processing orders or other business transactions, this style of workload grew significantly. Today's business environments may require a more immediate response; therefore, the modernization of batch processing can be more complicated than rehosting transactional workload. Much of the code associated with batch processing can be replaced by commercial off-the-shelf products for file manipulation or batch reporting. Data warehouse and business intelligence (BI) solutions can eliminate the need for even more of the legacy batch workload. When the batch processing needs to be replicated, the batch workflow definitions, normally defined in IBM JCL and in job scheduling systems, must be replaced. Oracle offers many product solutions that can be leveraged for much of this batch workload, and Tuxedo can be extended to support the batch workload that remains.

Customers that prefer to retain their existing COBOL and JCL workflow can use Tuxedo's Application Runtime for CICS and Batch, and the Tuxedo Application Rehosting Workbench. The runtime provides a framework for migrated JCL with a library of reusable functions, including file and database access, transaction processing, standardized job statistics and logging, common IBM utilities, start/restart, and locking. The batch execution framework runs in a Tuxedo environment and is managed by Tuxedo's job management framework, which handles job entry system (JES)-like queuing, priority management, job initiation and event management. This framework enables distribution of batch jobs over the Tuxedo grid infrastructure. Customers can preserve existing JCL workflow and rearchitect gradually based on business and technical drivers.

Gartner believes Oracle is likely to support the implementation of the Spring Batch architecture (from SpringSource, recently acquired by VMware) for modernizing batch workload in a Java Platform, Enterprise Edition (Java EE) environment. Gartner expects a continued evolution toward Java, Unix and Linux environments for much of the legacy workload that is currently the target of the various rehosting approaches in the marketplace. Oracle benefits as much as any vendor from the expediting of customers' acceptance of these technologies for large-scale, industrial-strength workload.

Oracle has recognized the significant revenue opportunity. The acquisition of Sun gives Oracle, in its view, an additional strong weapon to carry its modernization message to a wide variety of existing hardware/software combinations, particularly IBM mainframes. Oracle has a more immediate transition strategy through rehosting solutions, and a wide variety of Linux, Java and open-source alternatives, in addition to its significant line of packaged software solutions.

Oracle has stated that the combination of Sun hardware and Oracle software will be better than Sun hardware running someone else's software, or Oracle's software running on someone else's hardware. This combination could provide Oracle the beginnings of a unified stack to take on IBM and its decades-long head start in this approach.

Oracle is very much driven by sales execution, so it must get its sales force to understand the power of the Oracle modernization message. Sales reps at Oracle operate under significant pressure, and must follow the money. If they don't make the connection between this message and their compensation plans, Oracle's message will not be heard in all the places it needs to be successful. Unless Oracle quickly integrates the hardware and software message it is now bringing to its modernization initiatives, clients may become confused by Oracle's focus. Should political infighting or power plays sidetrack progress, Oracle's modernization message will suffer in the marketplace. The addition of Sun hardware does have the potential to disrupt relationships that Oracle has had with companies such as HP or Fujitsu, as they are now likely to be seen as competitors, not just partners. Furthermore, some customers may not react favorably to Tuxedo as a modernization platform, as it's an old, established transaction platform. It continues to operate and is not only supported, but enhanced, by Oracle. Nonetheless, it is not exactly associated with modern application architectures.

Oracle does not depend on its service channel to deliver its modernization solutions. A stronger service channel, combined with the company's increasingly integrated hardware and software stack, might be to Oracle's advantage when taking on IBM in large enterprise accounts, but Oracle has shown no interest in growing its service delivery capability. Consequently, it must entice other service partners to implement its hardware and software solution. Oracle currently does not insist that these service providers use Sun hardware, but this temptation can't be ignored. Whether this combination of Oracle and Sun dramatically increases the modernization opportunity for Oracle, or serves to dampen Oracle's current relationships with other hardware vendors or its service channel, remains to be seen. Oracle must walk a fine line, balancing its combined hardware/software offerings with its current hardware and service channels.