Oracle Scoops Up Virtual Iron, Bolsters Virtualization Capabilities

5/13/09Follow @wroush

Database giant Oracle (NASDAQ: ORCL) has scaled up its presence in Massachusetts—and placed itself in more direct competition with Hopkinton, MA-based EMC’s VMware subsidiary—by announcing its intention to acquire Virtual Iron, a maker of data center virtualization software in Lowell, MA.

Redwood Shores, CA-based Oracle already has its own virtualization technology, called Oracle VM. The software can be used to virtualize enterprise servers whether they’re running software from Oracle or other vendors. (Virtualization allows companies to run multiple applications on multiple operating systems on a single server, or to make multiple servers behave as if they’re a single machine. It’s been a hot corner of the enterprise software world for the last several years, because it helps companies exploit the capacity of their existing hardware and lower overall IT expenditures.)

But Oracle says that Virtual Iron’s software will make its virtualization technology more powerful, especially when it comes to managing how virtual servers get configured, controlling the deployment of hardware resources in virtualized data centers in real time, and managing power consumption.

Those are areas where Virtual Iron’s software excels. But as we’ve noted in past profiles of the startup (in August 2007 and again in October 2007), Virtual Iron’s products are mainly known for being inexpensive: the company’s software provides virtualization management capabilities comparable to those provided by VMware, at less than half the cost. Virtual Iron touts the fact that the core of its system is an open-source “hypervisor” or virtualization manager called Xen, which helps keep costs down; VMware uses a proprietary hypervisor.

It’s not clear yet how Virtual Iron’s enterprise virtualization package will be incorporated into Oracle’s software or what effect such a change might have on the pricing of Oracle VM (which also uses the Xen hypervisor). Oracle says it’s in the process of evaluating Virtual Iron’s product roadmap. The acquisition itself—the financial terms of which were not disclosed—isn’t expected to be finalized until this summer.

Virtual Iron isn’t talking about the deal. The standard “supporting quote” provided by Oracle’s public relations office, attributed to vice president of Linux and virtualization engineering Wim Coekaerts, goes as follows: “Industry trends are driving demand for virtualization as a way to reduce operating expenses and support green IT strategies without sacrificing quality of service. With the addition of Virtual Iron, Oracle expects to enable customers to more dynamically manage their server capacity and optimize their power consumption. The acquisition is consistent with Oracle’s strategy to provide comprehensive enterprise software management and will facilitate more efficient management of application service levels.”

The acquisition is also consistent with Oracle’s strategy to bolster its product lineup through acquisitions; nearly 50 of the company’s major product families are the legacies of acquisitions of companies large and small, from BEA to Peoplesoft to Siebel. The Virtual Iron deal comes just weeks after Oracle said it would buy Sun Microsystems (which has its own extensive suite of virtualization management products, again based on Xen).

Virtual Iron, which was founded in 2001 and was originally known as Katana Technology, will operate independently until the acquisition clears all regulatory and legal hurdles. The company has raised at least $65 million in venture funding, including a $13 million Series D round in November 2007 and a $20 million Series E round in January 2008; its backers include Intel Capital, Goldman Sachs, Highland Capital Partners, and Matrix Partners. How much those investors might make on the deal won’t be clear until Oracle makes its next quarterly financial disclosure; the fact that the financial details aren’t being disclosed now CNET’s Gordon Haff speculates, may mean that Virtual Iron was “a relatively cheap buy for Oracle.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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