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Oracle on Monday announced plans to expand its enterprise insurance applications business with the acquisition of Skywire Software.

Skywire develops software designed to manage insurance policies from their initial creation, rating and oversight by insurance agents and brokers. Skywire's applications will be combined with Oracle's Insurance Global Business Unit and the software giant's pending acquisition of AdminServer.

Oracle's announcement marks its latest effort to bolster its breadth of enterprise software applications in targeted markets, ranging from transaction-processing specialist Tangosol to retail specialist Retek to logistics and transportation management specialist G-Log.

Roughly over 1,000 insurers already use Oracle's software, and the Skywire acquisition will bring an additional 1,450 insurance customers to the mix.

"Insurance is a strategic industry for Oracle, with growth focused on integrated packaged applications," Oracle President Charles Phillips said in a statement.

The deal is expected to close in the second half of the year. Financial terms were not disclosed.

Every so often, I wonder if Silicon Valley is all it's cracked up to be. Sure, the confluence of venture capital, universities, and lawyers make it a veritable petri dish for the formation of technology companies, but there are a lot of other great places for innovation, right?

Well, if you go strictly by market capitalization, and look at the top 10 information technology companies, 6 of them are based in Silicon Valley: Cisco Systems, Google, Intel, Hewlett-Packard, Apple, and Oracle. In fact, if you map these company's headquarters, they'd all be inside a circle with a radius of just 10 miles. Amazing, when you think about it.

And these companies are far from just "headquartered" in Silicon Valley.

Google and Apple are very much centralized from a product and technology development standpoint.

Intel has research-and-development facilities in Oregon, Arizona, and Israel, but a significant amount of its R&D occurs at or near its Santa Clara, Calif., headquarters. The same is true of Cisco, though the networking giant owns several large subsidiaries--such as Scientific Atlanta--that are based elsewhere. Likewise for Oracle.

HP is somewhat more diversified, with product development for its Compaq unit in Houston, plus R&D facilities in Idaho, Oregon, and additional cities around the globe. But still, more of its R&D occurs in northern California than anywhere else.

Three of the four companies not based in Silicon Valley have research and development consolidated near their corporate headquarters: Microsoft in Redmond, Wash.; Qualcomm in San Diego; and Nokia in Finland.

IBM, on the other hand, is the most distributed company of the 10, with R&D facilities in New York, Massachusetts, Vermont, North Carolina, Texas, Minnesota, and a number of international locations, including London.

What does all this mean? Well, the data's essentially useless, unless you compare these companies to the same group, say 5 or 10 years ago. Luckily, I've got a good memory. It's not necessarily obvious from the data, but there does appear to be a trend toward more distributed R&D among large companies--if not domestically, then certainly internationally.

Although there are a number of new and growing U.S. technology hubs, none appears to be in a position to unseat Silicon Valley as the tech mecca.

Internationally speaking, China, India, Israel, Japan, and the United Kingdom each have technology development centers with tremendous growth potential. South Korea and Taiwan are nothing to sneeze at, either. Sure, they all have a way to go to match the confluence of resources and talent that Northern California offers. But the trend is there.

And while our qualitative analysis consists only of 10 companies, I do believe that it represents the industry as a whole.

In summary, as information technology penetrates further into the lives of more and more people, it stands to reason that innovation hubs will become more and more geographically distributed, if not also technically specialized.

And someday, a new technology may take root and ultimately supplant electronics as the driver of human innovation. It might be a form of biotechnology, nanotechnology, or something else entirely. In that case, all bets are off.

Updated 5/29/08 12:23 PM - Modification to paragraph on Intel R&D.

Tibco Software's stock has been up Monday. My sources are tying it to an unsubstantiated rumor that the company is close to being taken out.

On one hand, this consolidation thing has gotten out of control. On the other hand, it remains a great time to be an open-source company, and these types of amalgamations prove how important it is to control your software environment.

A few possible acquirers of the Palo Alto, Calif.-based maker of business software:

• Oracle--unlikely in light of the BEA finalization but anything is possible
• SAP--if anyone needs some good integration software, it's SAP
• IBM--possible, just to take Tibco out and limit Oracle
• Hewlett-Packard--unlikely in light of the EDS news

Word is that things could go hostile, which probably takes IBM out of the equation. Stay tuned.

Consumer Web 2.0 applications are influencing--and changing--how business systems are developed.

That was the message from Oracle on Wednesday at the JavaOne conference in San Francisco, where Oracle executives Thomas Kurian and Peter Moskowitz showed how to link disparate applications into a cohesive order entry system.

Call it "enterprise 2.0" if you'd like. But Salesforce.com and others will argue that this form of business mashup has been around for years.

Still, the Oracle demo is yet further proof that linking, tagging and other basic technologies borrowed from the consumer Web are making it vastly easier to construct fairly complex business applications.

Oracle announced Tuesday it completed its $6.7 billion acquisition of BEA Systems, bringing to a close a contentious buyout effort that began last fall.

Oracle--which like Microsoft went public with its unsolicited bid for a reluctant acquisition target--cleared its final merger hurdle when European antitrust regulators gave it a thumbs up.

In Oracle's case, the enterprise software applications behemoth spent more than three months applying pressure to its rival BEA, before the parties struck a deal with the help of the middleware software maker's largest individual investor, Carl Icahn.

BEA initially rejected Oracle's bid as too low, prompting Oracle to pull its bid and go quiet for a couple months as BEA's stock fell. But with the help of Icahn serving as a quasi-mediator, a deal was struck at a slightly higher premium than what Oracle initially offered.

"The addition of BEA will accelerate innovation by bringing together two companies with a common vision of a modern service-oriented architecture infrastructure," Charles Phillips, Oracle's president, said in a statement. "Together, Oracle and BEA will provide a series of complementary and well-engineered middleware products, allowing customers to more easily build, deploy, and manage applications in a secure environment."

With the tech industry closing the chapter on one contentious merger effort that eventually turned "friendly," it waits to see if another will begin with Microsoft going "hostile" with its bid to acquire Yahoo. Microsoft is weighing its options this week.

As the Saturday deadline looms for Yahoo to give Microsoft an answer on the latter's takeover bid, it's time for those of us writing about this to admit something: This is getting boring.

I mean "boring" in that Village of the Damned or Groundhog Day way, in which we're doomed to write the same story over and over and over again. Tomorrow, Yahoo may or may not respond to Microsoft with a carefully worded letter. Sunday, Microsoft may or may not respond with a carefully worded letter. Monday, The Wall Street Journal, which we suspect has a bat phone to Yahoo corporate PR, likely will publish yet another article quoting "people close to Yahoo" with another plan to wiggle out of Microsoft's grip.

We will dutifully cover all of it, and we will be bored. You know what this fracas really needs? Larry Ellison.

Ellison could make Microhoo interesting

Oracle's Ellison, of course, made a fine show of his hostile takeover of rival software maker PeopleSoft back in 2003. It was all vinegar from the start. Ellison mused about the thousands of PeopleSoft employees he'd have to lay off; the PeopleSoft customers who would be forced to migrate to Oracle software (the reality turned out to be much more accommodating); and at one point mused that if he had one bullet, PeopleSoft CEO Craig Conway's dog would be perfectly safe, but Conway could have some problems. (When Ellison made that crack in an analyst presentation, I was sitting behind an Oracle corporate PR person who made a sound something akin to "AIEEEEE!!!")

Conway responded by appearing on stage a few days later with his dog--both of them wearing bullet-proof vests. That's good stuff! So in the spirit of the real animosity that consumed that takeover, rather than the passive-aggressive testiness between Yahoo and Microsoft, here are five reasons the Oracle/PeopleSoft fight was so much more fun than this one:

The hostility was no act. Yahoo's Jerry Yang has made it clear he'd sooner kiss a Wookie than sell his company to Microsoft. But at PeopleSoft, there was genuine hatred for Oracle. You couldn't have two more different companies. PeopleSoft was viewed as the people-friendly company. Its core market was human resources software. Oracle was Oracle, with a well-earned reputation for cutthroat competition inside and outside the company. Its core market was databases and financial software. People...who needs people?

That's not to say the PeopleSoft people were pushovers. They were known to chant "Kill Oracle!" at corporate pep rallies, and were just as eager to brawl over big customers; their suits just weren't as fancy.

Craig Conway worked for Ellison

The Oedipal angle. At the time of the takeover fight, the CEOs of at least four major software companies had started their executive careers at Oracle, including PeopleSoft's Conway. Say what you want about Ellison, but he's good at spotting talent, and unfortunately turning that talent into rivals as they get older. That's what he had in Conway, a smart, aggressive executive who would, ummm, sooner kiss a Wookie than sell out to Ellison. I suppose you could make all sorts of Luke Skywalker/Darth Vader metaphors here, but I'll spare you the pain.

Ellison, the swashbuckler of software. Everyone loves a good show, and Ellison delivered. Besides the initial salt-of-the-earth musings and gunplay discussion, Ellison, the billionaire yachtsman, showed few executives can swagger like he can.

When he testified at an eventual antitrust trial that could have blocked the PeopleSoft takeover, Ellison arrived in celebrity style (with cameras swarming outside the federal courthouse in San Francisco where the trial was held) in a natty charcoal suit with patriotic red tie. On his way to the witness stand, he swiped a bottle of water off the Justice Department lawyer's desk, sat down, opened the bottle, and took a deep, satisfied swig. It was a moment of pure arrogance. Classic Ellison.

Dave Duffield, savior of kittens and puppies. Conway was the chief exec, but Duffield, PeopleSoft's founder, was still chairman of the board. Duffield's public persona was the antithesis of Ellison. He often signed his name with his initials, D.A.D., and that's how many longtime employees viewed him. Duffield had a reputation for lavishing his fortune on animal shelters, while Ellison had a reputation for lavishing his fortune on himself. They were the yin and yang of software.

Dave Duffield, PeopleSoft's founder, animal advocate

(Credit: Workplace)

Oracle fought the law and Oracle won. Perhaps it's unfair to say the Justice Department prosecutors who tried to block Oracle from buying PeopleSoft were bumbling, but from the outset, their case seemed shaky. The federal judge presiding over the case started grilling them during opening statements, and didn't let up for the duration of the trial. Now I'm not ever going to argue that Oracle was an underdog, but for the anti-establishment types in the press corps, it was awfully interesting to see a government argument unravel so quickly.

Of course, there's still a very good chance Microhoo could draw government scrutiny. But I have no faith in the folks from Redmond (who have a long, painful track record with this sort of thing) to flamboyantly thumb their noses at the feds the way Oracle did.

So here's my plea to Ellison: Please, get involved, become Yahoo's white knight. It's not too late. Time-Warner's AOL and News Corp. (and probably Google, too) are just playing footsy with Yahoo. There's an opening for you. This is a great opportunity to piss off Ballmer and Gates & Co. Sure, you've got lots of other acquisitions to deal with, but you'll figure this out.

Help us, Larry Ellison. You're our only hope.

With the appointment of Leo Apotheker to the post of co-CEO, SAP is trying a tag-team, two-in-the-box CEO transition strategy it has used before.

Leo Apotheker

(Credit: SAP)

Apotheker's new role had largely been anticipated, following his appointment as deputy CEO more than 12 months ago. Apotheker will assume the co-CEO position immediately and join current CEO Henning Kagermann at the head of the table. Kagermann plans to retire in May 2009.

The enterprise software giant used a similar game plan when grooming Kagermann as the successor to SAP co-founder Hasso Plattner.

"Henning Kagermann requested that the supervisory board appoint Leo Apotheker as co-CEO in order to prepare him as successor in the best possible way during the remainder of Henning's tenure," Plattner said in a statement Wednesday. "After years of massive investments and the successful launch of trendsetting innovations in the areas of service-oriented architecture, new solutions, and business models for the midmarket...SAP now faces the task of boosting the application of these innovations among our customers and end users."

Henning Kagermann

(Credit: SAP)

For SAP, naming Apotheker to the co-CEO slot firmly locks in the executive transition plans, which previously had been a distraction at the company when it was a two-horse race between sales chief Apotheker and whiz kid technologist Shai Agassi. Agassi resigned last year from SAP.

Kagermann's contract originally was due to expire at the end of 2007, but partway through that year it was extended to May 2009.

SAP also announced three new members to its executive board: Erwin Gunst, president of SAP's Europe, Middle East and Africa region; Bill McDermott, CEO of SAP Americas and Asia Pacific Japan; and Jim Hagemann Snabe, managing director of the SAP Nordic region and general manager for SAP's global industry solutions development.

The three executives will join the executive board July 1.

After joining the board, Gunst will fill the newly created position of chief operating officer; McDermott will eventually take over SAP's sales efforts worldwide, a role formerly held by Apotheker; and Snabe will oversee development of SAP Business Suite and SAP NetWeaver, two major focuses for the company. NetWeaver serves as the back-end middleware that connects SAP data with other applications and its SAP business suite.

With the addition of the three new executive board members, SAP's Peter Zencke, who heads SAP's application platform and research will step down this year, when his term expires. Zencke was responsible for SAP's major mid-market on-demand applications effort Business ByDesign, and had only wished to extend his contract long enough to complete the work. Zencke, who wants to send more time on his family and himself, will continue on as a consultant to the company through next year, however.

SAP's chief financial officer and executive board member, Werner Brandt, has a contract with the company that is due to expire next year. The issue of whether Brandt's contract will be extended will be addressed far in advance of its expiration, said Kagermann during a conference call with reporters Wednesday.

Kagermann and Apotheker together addressed the media in the conference call, noting such highlights as:

• Apotheker, in his new role, will be responsible for industry development; and, in the second half of the year, work with his new team to develop SAP's budget. And as Kagermann begins to hand over an increasing number of his duties to Apotheker next year, one of those tasks include serving as the front man to communicate SAP's strategy to the market, customers and industry.

• Apotheker cites execution on SAP's strategy as his top priority and challenge as the new co-CEO. "We want to delight our stakeholders, our customers," he noted. SAP has a growth strategy that includes business intelligence via its mega-acquisition of Business Objects, a revamp of its product line to run on a service-oriented architecture (SOA) , and its on-demand offering via Business ByDesign.

• SAP plans to slightly reduce its spending on research and development, now that it has a number of its major technology efforts winding up. And, the enterprise applications giant plans to put some of that focus on delivering those technologies to customers, a.k.a. sales.

• Henning, as he enters 2009, will begin to consider how he will spend the next chapter of his life, once he retires next spring. For now, he hasn't made any decisions.

See also: Dennis Howlett's take on ZDNet

Both Red Hat and Oracle had excellent quarters, but Oracle's was apparently not "excellent" enough for Wall Street's tastes. Its shares and the market went south this week on fears that technology spending is in decline.

In addition, Wall Street apparently didn't notice that Red Hat actually raised its fiscal year 2009 guidance this week.

Consolidation is one way to improve earnings in a down market, but open source may well be a better way as The New York Times opined.

Oracle's total software revenue was up 21 percent, to $4.2 billion. Pretty good. Unfortunately, it was well under the 30 percent growth Wall Street was expecting.

More unfortunately, Oracle's third-quarter application license revenue only increased by 6.6 percent, to $451 million, which was well below the 30 percent growth ($553 million) that Wall Street expected.

As Sarah Friar explains in The Wall Street Journal,

...(C)ompanies typically buy such software when they are embarking on new projects and are likely to dial back such purchases in tough economic times.

But the same affliction isn't showing up in Red Hat's earnings. Red Hat's percentages were roughly the same. Red Hat's quarterly revenue rose by 27 percent over the fourth quarter and annual revenue in fiscal year 2008 was up more than 30 percent. Red Hat's numbers are much smaller compared with Oracle's, of course, but one thing that really stands out is its deferred revenue number, which was up 40 percent.

As I read that number, Red Hat is doing more longer-term deals. Basically, it's sitting on a growing mountain of cash that is just waiting for services to be performed before it can recognize that revenue. It means that Red Hat's future is demonstrably, tangibly bright.

Here are some salient facts from the Red Hat announcement:

Total revenue for the quarter was $141.5 million, an increase of 27 percent from the year-ago quarter and 5 percent from the prior quarter. Subscription revenue for the quarter was $121.9 million, up 27 percent year over year and 5 percent sequentially. For the full year, total revenue was $523 million, an increase of 31 percent over fiscal 2007 revenue, and subscription revenue was $449.8 million, up 32 percent from the prior year.

Oracle is projecting 10 percent to 20 percent sequential quarterly growth. Red Hat, too, needs to find ways to super-charge its growth. But for the moment, I think it's enough for the company to be demonstrating a flight to value in recessionary times. Investors may bemoan the fact that it's harder to mint money with an open-source company, but this may simply be a new reality for the software industry.

We had a few decades of anomalous growth when there was a mismatch between the economics of production and consumption (i.e., write once, manufacture an infinite number of my products for roughly zero cost, but charge customers steep prices as if the economics of digital production didn't exist). Open source and the Web are going to bring things back into alignment.

For now, Oracle is a good bet in the stock market. If any company is going to weather the recessionary storm, I'm betting it will. But for those with a longer-term view on the software industry, it would be wise to bet on open source.

Want a tax break?

Then be like Larry Ellison. All you have to do is spend around $200 million on a replica of a 16th-century Japanese summer palace. Add extreme landscaping, such as a few hundred mature maple and cherry trees and a man-made waterfall carved into rock to look as though it had been put there "by the hand of God." Make sure this thing is so insanely over the top that no one besides you could possibly imagine living in it. And put this 23-acre estate in tony Woodside, in the hills above Silicon Valley.

Larry Ellison beat the tax man

Do all this and you too could be eligible for a $3 million tax break from the San Mateo (Calif.) County assessment appeals board. The lead story in Thursday's San Francisco Chronicle is what can be charitably described as a galling piece that proves the rich really are different from the rest of us, particularly when the rich person is billionaire adventurer, tech pioneer, and shameless rogue, Oracle CEO Larry Ellison.

Ellison, it seems, was displeased with the tax bill for his Shogun estate. Why, you ask? Well, turns out it suffers from "significant functional obsolescence," according to the Chronicle. Shocking as it may seem, there's a finite market for really, really high-end luxury homes and a limited appeal for 16th-century Japanese architecture. In other words, there is no one on this planet other than Ellison crazy enough to buy this place.

And think you're getting creamed by the housing market collapse? You should be in Ellison's shoes. Ellison spent $200 million on his palatial abode, but his lawyer says it's only worth $64.7 million, per the Chronicle. That's rough, considering the average price of luxury homes in San Mateo County only dropped 6.3 percent last year.

Ellison didn't do anything illegal, of course. He went to the appeals board with a complaint and they agreed with him. Fair enough. But the Chronicle also helpfully points out where that $3 million would have gone, including $1.4 million for public schools.

So while the rest of were wondering whether we'd qualify for a $600 ($1,200 for couples) IRS refund under President Bush's economic stimulus package, Ellison had bigger fish to fry. But here's another way to look at it: $3 million to Larry Ellison is equivalent to $300 for the average homeowner, according to the Chronicle.

So if you think about it, Ellison's getting a raw deal. While the rest of us may get $600, he's only getting half that! OK, so it takes some mental gymnastics and a good deal of hallucinogens to reach that conclusion. But what else are you going to do? Getting angry about this is like feigning shock that a billionaire prefers to spend on credit rather than cash out his company stock.

Oh wait, Ellison used to do that, too? OK, so what was that about the rich being different than the rest of us?