In order to truly replace Java, any language really, really needs to think about the ecosystem around the language. Smalltalk vendors really do not have a good deployment strategy, certainly nothing as comprehensive as Java.

The other problem is that Smalltalk is pretty alien to a Java programmer (image vs. text, block based control flow vs. traditional control flow). Garnett and Forester's recommendations might be key.

Although, I still would argue the premise and say most of these institutions know Oracle and understand dealing with them. I don't see people giving up their Oracle databases and having bundled, recommended Java might make Java more of a lock.