Oracle intends to go head to head with its smaller rival by offering full support for Red Hat's version of Linux, writes Karlin Lillington.

Oracle chief executive Larry Ellison dropped a bombshell during his keynote at the company's annual Oracle OpenWorld conference in San Francisco on Wednesday. The database giant will offer full support for the Red Hat version of open source operating system Linux.

In addition, he said, Oracle would go head to head with Red Hat in offering full Linux support at a significant discount to Red Hat's own service. This move will undoubtedly encourage many organisations to migrate to the operating system, but several analysts at OpenWorld expressed concern that it threatens the existence of Red Hat, which offers the most widespread version of Linux in businesses and organisations.

"Our goal here is to enhance and speed the adoption of Linux and give its mission critical support," said Ellison.

The move is strategically significant for the spread of Linux in the enterprise space because, for the first time, a major software and services vendor will fully support and legally indemnify users of the open source operating system. Because Linux is developed by thousands of programmers and companies that offer different versions, or "distributions", of the system tend to be very small entities, large organisations worry that they cannot point a finger at any responsible party if something goes wrong.

And lawsuits brought against technology giants like IBM by a small company, SCO, which claimed that Linux was built in part on its own proprietary code and that, therefore, anyone using it must pay SCO licensing fees, introduced additional jitters in the boardroom.

Ellison said these and other concerns had hampered the spread of Linux but would now be irrelevant.

The announcement is a possible sign of a coming shift in the Linux landscape. If Oracle is successful with its offering, it may become increasingly difficult for any small company to build a business, usually based on service contracts, around its own distribution of Linux. Red Hat, which has become the de facto "poster child" for Linux and open source programming, has been the most commercially successful of several such companies, but most of its revenue is based on service contracts that Oracle will now undercut by more than half.

And if Oracle is offering its own version of Red Hat Linux - a situation referred to as a "fork" in a distribution - then Red Hat Linux by Red Hat could become increasingly irrelevant.

Ellison said Oracle would take each new release of the Red Hat distribution of Linux, remove any copyright elements such as Red Hat trademarks and images, add in any new bug fixes, recompile the code and offer the version freely on Oracle's website.

While the code for any version of Linux must, as part of its licensing system, be publicly and freely available, it was not immediately clear how the company could strip out proprietary elements in Red Hat and offer an alternative version. The company declined to comment further on this aspect of the offer.

Ellison's intent in winning over Red Hat customers was clear from his keynote. Oracle will offer its version of Red Hat Linux for free; will offer support starting at $99 (€78) to anyone, not just Oracle customers; and for the next three months will offer all its support contracts for Linux at half price. Oracle customers can try the service free for three months as well.

In addition, it will provide bug fixes to current, future and back versions of Red Hat Linux - something Red Hat does not do. Bug fixes are only made in Red Hat's latest release of Linux, which forces users to install a new version of the operating system every time bugs are fixed.

During a question-and-answer session with his keynote audience, one participant asked whether "killing Red Hat was an unintended side-effect" of the Oracle offer. "I don't expect Red Hat is going to be killed. I expect they're going to compete very, very aggressively," said Ellison. "This is capitalism. We compete."

While Oracle had been expected to announce support for Linux, and was rumoured to be ready to reveal a deal with tiny Linux distributor Ubuntu, the actual announcement and its implications for Red Hat, an Oracle partner for six years, surprised many.

Red Hat shares dropped 16 per cent in after-hours trading following the announcement, but Red Hat chief executive Matthew Szulik told technology news site News.com that he didn't expect to alter Red Hat's pricing or strategy in response to Oracle's announcement.

Some analysts said they thought the announcement would not harm Red Hat and could actually bolster the firm's pre-eminence among Linux distributions.

In other announcements, Oracle also signalled the mainstreaming of a range of so-called web 2.0 technologies: wikis (community-built websites); mash-ups (overlays of interactive web features like maps with niche data); discussion forums; web-based telephony; and RSS feeds (the ability to subscribe to or broadcast web content).

A new product called Oracle WebCenter Suite will provide a way to build such elements into applications. Many of these technologies have been considered trendy and cutting edge but without any self-evident commercial use.

"[ Web 2.0] technologies are fundamentally changing how people interact with information on the internet," said Thomas Kurian, senior vice-president of development, during a keynote. The suite would enable developers "to build applications that use web tool technologies within their corporate enterprise".

Even as analysts were giving the company generally good marks for successfully integrating its two major acquisitions from last year - former rivals Siebel Systems and PeopleSoft - Oracle president Charles Phillips announced another acquisition.

The company paid $219 million for MetaSolv, a telecommunications software company. Phillips said costs for integrating such purchases were now incremental as it already had a framework in place for folding in acquisitions.

As usual, the five-day conference - which had a record attendance of more than 41,000 - also featured keynotes by high-profile executives from Oracle partner companies, including Dell's Michael Dell, HP's Mark Hurd, Cisco's John Chambers, Sun's Jonathan Schwartz, and AMD's Hector Ruiz.