Did anyone else catch Dan Wood’s Forbes article on hosted Oracle appliances today? I’ve read it ten times. I’m still not sure what he is saying. Let’s take a closer look, as I believe the inherant aporia of his argument reflects on the complex collision between cloud services and existing enterprise IT.

He starts with a prediction:

My opinion is that Oracle is going to deliver the benefits of cloud computing by selling software that is delivered through remotely managed appliances.

Got it, way to be bold and put a stake in the ground. Oracle’s answer to Salesforce is going to be an on-premise remotely managed, fully integrated hardware/software, turn-key solution. He supports his assertion again saying:

But the bigger news was that Ellison figured out a market that competitor Salesforce.com wasn’t targeting: software hosted and stored by a customer but managed by a software vendor.

Wow how did this huge market go unnoticed for so long? There must have been something holding it back right?

The problem is that Oracle’s software is not ready to be deployed in this manner. The first two benefits of the cloud, software that is easier to configure and accessible through almost any browser, is not something that Oracle’s products or any enterprise software vendor’s products can deliver as well as Salesforce.com.

You could argue that Oracle could deliver its application without modification in a box. But why would customers bother making such a change without a significant advantage?

Sounds like a pretty big catch to me. In fact he finishes saying:

Will the software in a box be better software or just the same stuff that’s on the market now? These are the questions Oracle has put before its customers by bringing up the cloud. Customers shouldn’t expect answers anytime soon.

To recap Dan’s points:

1. Oracle will definitely make a major strategic shift to hosted appliances, despite not having much if any presence in the appliance or remote management market today.
2. None of Oracle’s Fusion products, which by the way just took three years to release, are built to do this.
3. There isn’t much value in the remote management really, its all about the application simplification anyways.

Is it strategically responsible to assert a position and then spend the rest of the piece arguing it away?  If this really is their strategy isn’t it huge news that Oracle suddenly has to transform itself so massively? Shouldn’t this headline read "Oracle in deep trouble, only road out is appliances and they aren’t ready for them."

I could spend a lot of time here wading into the nuance of why software companies traditionally haven’t offered appliances successfully, none of which have changed with the advent of cloud computing, but Dan actually does a nice job of shooting down his own idea– so why pile on.

My big takeaway here is simple. Many of the value propositions of cloud computing are incompatible with the value propositions, IP and value-chain of legacy enterprise IT.  Accenture had a $1B business integrating and customizing BEA software alone.  Entire towns have changed their employment in places like Chenai India to revolve around piecing together Oracle’s software and managing the hardware remotely.

Transitioning that eco-system and value prop (robust, custom, reliable) to a cloud one (scalable, immediate, simplified) is a massive task. It might be easier to ask GM to build airliners as its recovery plan.

I’ve labeled this clash of value propositions the Cloud Collision. Its a collision because of the scant overlap in the value propositions and market imperatives. Dan has to work so hard to discuss Oracle’s appliance strategy because its so different from everything they’ve spent three years building with Fusion. If Dan’s rhetorical struggle today is any indicator of the industry at large, its going to be ugly.