[via Marc]

Food for thoughts in this post from Tom Foremski. It is about software licencing, the new positioning of Oracle, the great and healthly pressure coming from Open Source Software models.

Mr Nolan’s view is that Oracle is probably assembling a middleware stack and wants to use open-source components so that it can offer a subscription based pricing structure. This is exactly the direction that Sun Microsystems, Computer Associates and other IT vendors are moving towards.

He is right, we are coming to the end of the licensing model for enterprise IT software, and in Sun’s case, John Loiacono, Sun’s Software chief, told me late last year there would be a time when Sun would even throw in the server hardware for “free” as part of the monthly subscription price per user.

And SAP is riding that trend but so are others. IBM is very strong in middleware but Mr Nolan points out “this whole middleware stack is becoming commoditized very quickly.” SAP’s strategic strength is in its dominant position in enterprise applications and business process; and with a very broad customer base of more than 32,000 companies.

Oracle’s strategy is based on the belief that owning the database is the key to owning the glass house of the IT organization. And its database is used by most of the Global 2000 enterprises, which is a trusted role.

It can try to commoditize the middleware through the use of open source components, and use the open-source platform to integrate its PeopleSoft and Siebel enterprise applications which would create a powerful alternative to SAP.

Oracle could hurt IBM because IBM does not have any enterprise applications. (BTW, Ray Lane, former president of Oracle and now a leading VC, at Kleiner-Perkins has advised IBM that it should acquire SAP. Otherwise its lack of apps will hurt its software business.)

IBM also has a large database business and a strong middleware business but the commoditization of middleware by Oracle and Sun mean that Steve Mills, IBM’s Software chief, has to scramble higher up the stack. And for IBM that means automating business processes, and a creating a closer partnership with its top business consultants from its acquisition of PricewaterhouseCoopers.

SAP could become squeezed at the top by IBM’s business process push–and Oracle pushing from its database customer base–into enterprise applications. Then there is the roll-your-own software brigade, or what I call skinny apps, custom crafted IT applications created by departments using powerful application development platforms. Jotspot and SocialText are examples of this type of technology, which will only improve over time.

Then there are the numerous web services applications companies using AJAX-type technologies that will allow organizations to create mashup suites of IT applications.