Softwar
Page 3
And so it is. The executives who have turned up are a pretty good cross section of local business: a couple of trading companies, two manufacturers, a telephone firm from the Philippines, a big e-business exchange and online marketplace, a clothing group, and the chief operating officer of Richard Li’s once megahyped Pacific Century CyberWorks. The public sector is also there in the form of Jack So, chairman of the MTR rail system, and Nancy Tse, the deputy director of the hospital authority. But there is no buzz in the room. It’s as if the guests are overawed by Ellison’s presence and are not quite sure what’s expected of them.
Ellison starts the meeting with his well-honed account of what it means to be an e-business and Oracle’s own epiphany and redemption. The story is rambling and funny, but the message is clear. By streamlining its processes and using its own software and the Internet to automate them, Oracle not only saved $1 billion in annual costs but became an organization that was far more responsive to the needs of its customers. What’s more, as all this had been achieved by centralizing information and going from literally thousands of server computers to just a handful, it meant being prepared to spend less, not more, on information technology. The obstacle to realizing such gains was no longer technological, it was whether the people within a company were prepared to embrace change, and that wouldn’t happen unless senior management was ready to think how the business should operate for the next twenty-five years in the light of the Internet. Ellison ends with the challenge “Are you willing to pay less? That really is the question.”
Perhaps the guests think the question is rhetorical, but after an uncomfortable pause Ellison cranks himself up again with an amplification of why spending less can result in better information. It’s a bit repetitive, but it gives Williams the chance to add that you don’t need to be a software firm like Oracle to do these things. GE Power Systems—Oracle’s top reference du jour—is a classic bricks-and-mortar company, and many other customers were also proving what could be accomplished in a short time. That seems to get them going. From then on, it’s a competition to show how switched on they all are. They want to know about the future of e-commerce after the dot-com crash, how to train their people to use the new technology, and what should be done to bring trading partners with them into e-business networks, especially small firms with limited IT resources and skepticism about what’s in it for them.
Ellison has an answer for each of them. His line on e-commerce is that the Internet can make good companies better, but it won’t turn bad businesses into good ones. He reckons that there won’t turn out to be that many brand-new companies created by the Internet; mostly it’s a question of existing firms getting smarter and more efficient. “Dot-com mania,” he says, “was a fantasy, the world had gone a little bit crazy.” On the training issue, he says, “When we say there’s a training problem, it’s usually because a product is too difficult to use. If you can use Yahoo! or Amazon without any training, you should be able to use most business software with little or no training. Unfortunately, our engineers usually stop short of making our products as easy to use as possible. The best and most leveraged approach is to make our software as easy to use as eBay, where seventy-year-old first-time computer users manage to buy and sell antiques.”
The key to encouraging business partners to join online procurement exchanges and marketplaces is to convince them that it would make life easier for them, by giving them the opportunity to increase sales through better and faster information about market trends and to cut the cost of inventory and transaction processing. Patrick Wang, the very on-message chairman of Johnson Electric, a fast-growing $700 million manufacturer of microelectric motors, asks Ellison about Covisint, the giant auto industry exchange that Oracle is involved with. Covisint is a sore subject with Ellison—it was one of the last big deals brought in by Ray Lane, the powerful second in command at Oracle with whom Ellison, to a chorus of disapproval from Wall Street, had abruptly parted company nine months earlier. “Actually,” Ellison says, “competitor collaboration is quite difficult; nothing quite like this has ever been tried before. Getting the Covisint partners [which include all the big three U.S. automakers] to cooperate over the long term will just not work, in my opinion.” He reckons that it will go back to being a Ford-only exchange. The model for business-to-business (B2B) exchanges, he argues, is the one that Oracle has built for Sony—you need an exchange to be built around one “nucleating” company, strong enough both to drive and to provide liquidity, he says.
Mr. Wang looks a little taken aback. Ellison repeats his mantra that the watchwords of e-business are “automate and monitor,” and the meeting breaks up. Although the guests seem happy enough and are making all the right noises about wanting to work with Oracle on their e-business plans, it’s hard to gauge whether it’s been a success. After the long flight and the distress over the cat, Ellison’s performance has been, by his normal standards, a little flat. And without much coming back across the table to stimulate him, he’s been mostly on autopilot.
• • •
The next day Ellison visits China Resources, one of the largest mainland enterprises in Hong Kong. With a spread of businesses similar to the giant Jardine Matheson, it provides about 40 percent of Hong Kong’s food staples, trades in oil and gas, and has interests in supermarkets, hotels, and port developments. China Resources’ president is Frank Ning, a tough, forty-something Chinese national who spent some time at a university in America. Ning comes over as a pragmatist, relieved that the dot-com fever has passed and interested in the practical ways the Internet can improve his sprawling $5 billion business. He uses the example of how his grandfather, as the boss of a trading company in Guangzhou during the 1920s, had approached the coming of the telephone. “He used it to improve his business, not set up a telephone trading company.” Ning also points out that with capital markets in headlong retreat, everybody is slowing down their IT investments, and that might not be such a bad thing.
Ellison has been happy to agree with most of what Ning has said up to then, but he bridles at the idea that anyone should delay getting their business onto the Internet. “Yes, but the Internet is a tremendous efficiency tool. We can deliver a very rapid return on your investment. We focus on rapid, low-cost implementations—our CRM [customer relationship management] and distribution software can go in very quickly. You should use the Internet not because it’s new and cool, but because it will save you money.” Ning changes gear. “We used to be a trading monopoly with China, although now we’re a public company. Use us as an example for Chinese companies on the mainland, many of whom we do business with, of how Oracle software can help them. We’re doing okay now, but we’re determined to deliver more of the trading process online in a practical manner—we’re moving online because it makes it better for our customers.”
Ellison spots the opportunity. He suggests that China Resources could become the center of an online trading network, hosting e-business “hub” software and extending a new level of service to trading partners. That way, China Resources could, for example, link silk makers in China directly to designers in Italy; local manufacturers would know what to produce almost as soon as the fashions are penned. In other words, there may be advantages for Ning that he hasn’t even thought of yet. It’s a subtle way of deflecting Ning’s hint that Oracle should give him a special deal because of his connections with businesses on the mainland.
The last meeting in Hong Kong is in the paneled boardroom of the powerful Wharf Group with its owner, Peter Wu. Wu is expected to be the next chief executive of the Hong Kong “special administrative region” when C. H. Tung’s five-year term runs out in 2002. He’s a hybrid businessman/politician—smooth and fluent in a way that Frank Ning was not and keen to brag about the economic prowess of Hong Kong in particular and northeast Asia in general. Both private- and public-sector finances are in good shape, he boasts, and Hong Kong, which was already doing 40 percent of its trade with China, would gain hugely from Chi
na’s forthcoming membership in the World Trade Organization. The key to understanding the dynamism of the economy, not just in Hong Kong but elsewhere in Asia, Wu claims, is the role of SMEs (small and medium-sized enterprises) as the driving force. Ellison remarks that SMEs have also become the main engine of Oracle’s own growth and points out that if you can’t automate the SMEs, the Sonys and the Hutchinsons that do business with them won’t be automated either, no matter what they spend on IT.
But Wu is doubtful whether Oracle makes the kind of simple and affordable software that these people would buy. “They are not like dot coms,” he says. “They have never heard the words ‘burn rate,’ and they can’t afford to spend millions on complicated and interminable systems implementations.” This is just the opening that Ellison wants. A big part of his message is that Oracle’s customers should install the software in “plain vanilla” form and avoid expensive modifications. But he suddenly makes the extraordinary claim that Oracle is intending to get the initial purchase price of the applications suite for small businesses down to $20,000 and get the software up and running almost before the ink dries on the contract—in other words, in just a few hours. Williams looks astonished, but it’s quintessential Ellison; because he’s already worked out in his own mind how something like this could, in theory, be done, it follows that all the practical difficulties have already been overcome.1
It’s also an opportunity to expound on a core Ellison theme: “the war against complexity.” Software has to be made much more simple. Computing has become so complex that customers have to hire experts just to explain the industry’s products. Everyone has been trying to make their products more powerful and in the process they have become more difficult to use. Oracle, by contrast, with its E-Business Suite has delivered an integrated closed loop that delivers 80 percent of what you need straight out of the box.
Also in the Wharf Group’s boardroom is Nancy Tse, the Hong Kong Hospital Authority’s number two who was at the previous day’s CEO roundtable. She’s still carrying scar tissue from the last big software implementation she was involved with—the introduction of a large-scale client/server system. It was two years in the planning, three years in execution, and cost twice the agreed-upon budget. In short, a pretty standard big IT project. She wants to know when she should introduce new technology if she’s going to have to go through the whole upgrade nightmare again. Ellison has two answers. The first is that the Internet model is the last model of computing. This is it, he says. What makes him so sure is that Internet-based computer networks work in a way similar to all the other networks that we depend on, from water, as invented by the Romans, to electricity and the telephone. The second is that migration from client/server to the Internet isn’t trivial but shouldn’t take too long. As long as Oracle can get the time with senior managers to work out how to change, standardize, and simplify every business process for the Internet, implementation can be very rapid—the model used so successfully with GE Power, he claims. Oracle was prepared to work on a guaranteed fixed-price, fixed-time basis. He promises, “We will make a very big difference.” Tse doesn’t look wholly reassured, and she’s right not to be. Putting the E-Business Suite into a brand-new plant, such as GE Power’s turbine factory in Hungary, should go fairly smoothly, but large-scale upgrades from “legacy” client/server systems tend to be a lot more painful than Ellison is admitting.2
• • •
As the cars race through the traffic back to the Grand Hyatt, Ellison casually suggests a change of plan for the weekend. “I thought that after Shanghai we might just fly down to Tahiti for a couple of days’ R and R. The boat [the 192-foot Ronin] is down there and crewed, so we might as well use it.” What really seems to tickle him is the idea of jetting straight from Tahiti on Sunday night to the next customer engagement—with HealthSouth in Birmingham, Alabama. “I bet that’s a route that nobody’s flown before: Tahiti to Birmingham.”
Back at the hotel, Ellison is treated like visiting royalty and then some. Whenever his entourage arrives, flunkeys scurry ahead clearing a path, opening doors, and bobbing heads. That evening in the Grand Hyatt’s fancy 1 Harbor Road restaurant, the chef is brought bowing and scraping to Ellison’s table to explain the special banquet that has been prepared for the most honored guest. To his credit, Ellison appears to be neither embarrassed nor blasé but goes out of his way to be charmed and express his gratitude.
• • •
As the GV drops down toward the runway at Shanghai’s slightly down-at-heel Hongqiao Airport, people on bicycles stop to take in the plane’s unfamiliar silhouette. It’s actually something of a miracle that the aircraft is landing at all. Just a few hours earlier, unknown to Ellison, the Chinese authorities had told the GV’s pilots, Geoff and Pete, that permission to land had been withdrawn. But after haggling, negotiation, and string pulling by Oracle’s advance party in China’s biggest city, everything is back on again. The usual black Mercs (albeit of a slightly earlier vintage than those in Hong Kong) are on the tarmac to meet the plane, but in Shanghai there is also a police car with a flashing light to clear the motorcade’s way through the city’s gridlocked traffic. First stop is the towering Portman–Ritz Carlton Hotel, showpiece of the modern Shanghai Centre, where rooms have been booked and another CEO roundtable is due to start in forty-five minutes.
Although superficially grand, the hotel manages to be slightly tacky. The rooms, both public and private, suffer from that peculiarly Communist interpretation of luxury that requires acres of phony wood veneer and lashings of green (preferably cigarette-burned) velour. Everything is grubby, and nothing works quite as it’s meant to. As it’s about 8:30 in the morning, several of the elevators are emptying themselves of pretty young women wearing long raincoats in a vain attempt to conceal the evening finery they arrived in the night before. The atmosphere of prerevolutionary loucheness is further heightened by the hotel’s own female staff, who are kitted out in shiny red cheongsams, slit daringly high on the thigh. Touchingly, most are wearing shabby black sneakers or what look like boots from a People’s Liberation Army surplus store. Two of these girls are standing at attention outside the room in which the roundtable will take place. Before Ellison shows up, one of the Oracle flaks orders them to find some more appropriate footwear.
The twelve guests, an impressive selection of local entrepreneurial talent, are all male, and most are in their early thirties. They lack the sleekness of their Hong Kong counterparts, and only two or three of them are sufficiently confident of their English to dispense with the simultaneous translation. But Derek Williams’s warning that this audience would be even harder to get going than the one in Hong Kong turns out to be wide of the mark. After Ellison’s opening remarks, carefully tailored to flatter Shanghai’s massive building boom—“it seems like half the cranes in the world are right here in this city”—and the prediction that China would soon have more people hooked up to the World Wide Web than America thanks to the coming of the wireless Internet, the questions come thick and fast.
Although Ellison has talked enthusiastically about how lucky they are to be able to install Oracle’s Internet-based software without worrying about legacy computing systems getting in the way—“client/server never happened here” he says, seeming to extol Chinese wisdom rather than hinting at any technological backwardness—they most want to hear his views on what’s going on in the world. They want to know what he thinks will happen to the Nasdaq—four of the firms represented are stockbrokers with a lot of very perplexed clients—and whether the U.S. economy is going into recession. They also seem fascinated by the power cuts in California. Although Ellison would clearly rather be selling software, he’s happy to oblige with his opinions and is stumped only when a banker asks him what impact the World Trade Organization (WTO) will have on the Chinese banking system and what steps Ellison would take to reform it.
After about an hour, the conversation meanders around to what Oracle actually does and might be able to do
for them. They want to know whether this e-business thing is real (it is, says Ellison); how they should deal with rapid growth (it’s risky, he says, but it’s riskier not to grow fast; our software will help you scale your business); and how Oracle is doing against its rivals, especially Microsoft. At last Ellison gets the chance to pitch the E-Business Suite. To their surprise, Ellison explains that Microsoft isn’t really a direct rival. Oracle’s main competitors are the sprawling computer behemoth IBM and the leading business application firms, such as SAP and Siebel Systems, whose products IBM and other system integrators expensively try to knit together. The contrast is their complexity versus Oracle’s simplicity. Yesterday, in Hong Kong, the idea of the E-Business Suite being installed for $20,000 and in less than an hour was an ambitious goal, but in Shanghai, Ellison turns it into something very like a product that will soon be ready to ship.3
Next stop is the Shanghai studios of CCTV, the state-owned television service. Ellison is to appear on a live lunchtime chat show that has an Oprah-style format and a claimed viewership of around 50 million people. While Ellison is wired for sound, the program’s host, Wei Zhang, a smartly groomed young woman with an American university education, assures him that despite the presence of an invited audience of several hundred, who will be given a chance to question him later, the show is actually a good deal more intellectually serious than Oprah. Ellison is understandably relieved. He’s been on the real Oprah and says that he felt like a rabbit caught in the headlights of an onrushing car.