Although Lane was excited by Ellison’s pitch that the combination of the forthcoming Oracle 7 and a reformed, professional sales force represented a great opportunity, he played hard to get, claiming that he stood a good chance of eventually becoming CEO of Booz Allen, which, compared with Oracle, was a global and highly respected firm. But if Lane was cautious, Ellison was convinced. “Larry tripled the number of options on the spot and said I could run things from Dallas—it’s Oracle USA, not Oracle California—and just turn up at Redwood for management meetings.”
Lane returned to Dallas without having given Ellison his answer and continued looking into the kind of company he might be joining and what working for Ellison would be like. “I started talking to people I could trust about Oracle, about ten people in all. All but one said that the company was gone and the earth would be better if it was gone, and everyone said Larry couldn’t be trusted, was the scourge of the earth and was legitimately hated. They were saying ‘You’d be going from a classy, professional environment to a bunch of wolves. If you go, don’t call me—I’ll never buy an Oracle product, even from you.’ I was hearing that there was a true love/hate relationship with every employee who works at Oracle. It’s an exciting place to work because you’re in the middle of everything. You make good money, the sales force makes incredible money. Yet every day, you’re dying to go home and you’re saying ‘I hate this place, I hate this company.’ ”
The one dissenting voice was a friend of Lane’s named Robert Shaw, a burly, dynamic ex-marine who ran the Booz office in San Francisco. Shaw, who was willing to back his judgment by going with Lane to Oracle, said that he thought Oracle had more potential than any other company in the Valley. Lane says, “I trusted him. He knew something about Oracle and had worked with them in the past. He thought they had just been mismanaged. Larry was a lunatic, but a lunatic with vision. They had kicked ass in the 1980s, and they could kick ass again. Robert was very influential with me, saying, ‘Gee, if you go, I’m going with you.’ ”4
Lane had also more or less convinced himself that he could work with Ellison because they were so complementary and that Ellison’s propensity for delegation would result in “a degree of separation.” He felt, too, an urge to move to California: “If you’re in the oil business, Texas is the place to be. If you’re in the computer business, you’ve got to be in California. Also, at the time, I was not close to my wife and we had already talked about splitting up.” If there were attractions in making a new life, Lane is candid enough to admit that it was the prospect of getting rich that made up his mind for him. Speaking of himself and Jeff Henley, he says, “I think Larry bought both of us. I think it’s an MO—Larry will first charm you and then he’ll buy you. With three hundred thousand stock options, he knew I could do the math, and if Oracle stock moved five points it would be more than I would ever make at Booz Allen.”
The funny thing is that Ellison was so desperate to hire Lane. As Geoff Squire says, “If you had done a criteria matrix, you wouldn’t have picked Ray. He’d never really seen software, and he’d never run an organization doing more than $50 million. Conrades had more ticks on the scoreboard. But he was intelligent, a good consultant, very quick to understand things. I think it was actually quite an inspired decision.” As for Lane, whatever his initial doubts about joining Oracle, his relationship with the “lunatic” Ellison would be pivotal in creating the company that Oracle became in the 1990s.
Lane’s timing couldn’t have been better. His first day at Oracle on June 14, 1992, coincided with the launch of Oracle 7 in New York. “Larry stuck some makeup on me and threw me up on stage. After he had introduced Oracle 7, I ran a little analyst panel that was to talk about why they thought it had the right features and how if we delivered on time, the prospects looked pretty positive.” In fact, Oracle 7 was a little late to ship and didn’t get out of the door that day. But it quickly became apparent that it was the product that Oracle’s long-suffering customers had been waiting four years to get their hands on.
Ellison says simply, “Oracle 7 was a working version of Oracle 6 plus a few very important new features.” Specifically, it had all the features that Sybase had differentiated itself with and more. Oracle 7 had an advanced architecture and, like Sybase, was fully programmable via its elegant new PL/SQL programming language. And Oracle 7 one-upped Sybase on both referential integrity and two-phase commit. Ellison says, “With Sybase you had to write hundreds of lines of code in their server programming language to get two-phased commit or referential integrity to work. In contrast, Oracle 7 implemented both of those features using standard SQL. What took hundreds of lines of code in Sybase, we could do with a few keywords. The two features Sybase had marketed most heavily suddenly became technical advantages for us, not them.” Whereas Sybase supported neither standard SQL queries nor update transactions that accessed data on more than one server, Oracle 7 could automatically retrieve and modify data on multiple computers using standard SQL, even when some of that data was stored in the databases of rival vendors, making it much easier to build client/server applications that worked with the database than before.
In addition, Oracle 7 was much faster than any other database on the market, thanks to Ellison’s passion for the clustering and multiprocessing technology that had made its first appearance in Oracle 6. Although it would be nearly a decade before the full fruits of Oracle’s commitment to clusters based on the pioneering Oracle 6 shared-disk architecture would become evident in Oracle 9i, there was already one important marketing benefit. Ellison says, “We were the first to use clusters in performance benchmarks. We won the TPC benchmarks by such huge margins that everyone else just gave up.” Running on a pair of UNIX servers, Oracle 7 supported more than ten thousand users and smashed through the thousand transactions a second barrier. Clustering may not yet have been of much practical benefit to customers wanting to run real-world applications, but combined with Oracle 7’s other strengths, it was to prove a knockout blow to the likes of Sybase and Informix. Jay Nussbaum, who had joined Oracle from Xerox in early 1992, summed up what Oracle 7’s product superiority meant to the sales force: “A dog with a note in its mouth could sell it technically.”
Apart from having a great product to sell, Ray Lane was also pleasantly surprised by the quality of the people he discovered at Oracle. He was expecting to “find people who were kind of average—not thinkers, but doers.” But “everywhere, there were a lot of very creative people.” Even so, Lane resolved that if Ellison didn’t pass two “tests” in the first few months, he would return to Booz. The first of these was whether Ellison would back him in choosing his executive team. Lane says, “I had to figure out who the good apples and bad apples were. I fired about seven people, and one was a particularly bad apple, Craig Conway, who’s the CEO of a big company [PeopleSoft] today. Craig was a smart guy, and he was also a friend of Larry’s.”5
Although Lane at first wanted Conway on his team, he soon changed his mind. He came to the conclusion that Conway had undermined the still popular Mike Fields by constantly feeding Ellison with poison about him. Lane says, “Poor Mike was trying to sell a bad product [Oracle 6] against Sybase and he was doing a great job trying to correct the years of bad behavior with the customer, always out on the road. And back at the ranch, there’s Craig saying to Larry, ‘Why don’t you give it all to me, I’ll make it work.’ He was very smart, very Machiavellian, always trying to figure out an angle, and so he got Mike Fields.” What convinced Lane to get rid of Conway was not only the belief that he was also plotting against him but the ill feeling against Conway that he found during the annual company jamboree in Hawaii for salespeople who had met their quota (the “Hundred Percent Club”). “It was like hell. Everybody was calling my room . . . all the fingers were pointing at Conway. It was such an easy decision.”
Whether it would be so easy for Ellison was another matter. When Lane told Ellison what he was going to do, Ellison asked him whether he was sure, b
ecause he might need some help getting through the next couple of quarters. Lane said, “I’m very sure and . . . I want your commitment that when he comes to you, you will either not talk to him or you’ll tell him that it’s Ray’s decision.” Ellison told him he had it, and when Conway duly went to Ellison and demanded to be put in charge of something else, Ellison was as good as his word, saying “It’s Ray’s business to run. Ray has to make the call.”6
The second test was whether Ellison was willing to listen and respond to criticism and unpalatable facts. On his arrival Lane had tried to find out why Oracle had been losing market share to Sybase and Informix. “I was just getting stupid answers, like, ‘We never see Sybase,’ so I hired McKinsey to do a study and collect data on our customers and business practices. How did deals get approved? How did the field actually work? How do the customers actually feel? Why do they feel so bad about us? I was hearing stories like customers would call because the product didn’t work and they would get answers like ‘Bummer, dude’! When I presented the McKinsey study, it was the first time anyone had presented real data. Now here it is, we’ve talked to hundreds of customers, and now tell me we don’t lose to Sybase. Tell me Sybase is not viewed as a better company than Oracle.”
If Ellison was convinced that Version 7 on its own would enable Oracle to triumph, Lane was more skeptical: “He believed that, I didn’t. I think it certainly brought parity with Sybase. But Larry . . . thinks that ninety percent of the company’s success is made on the product. I think the product is really important, but Oracle’s problems were not going to be solved just because Oracle 7 came out. The McKinsey survey showed that Sybase was a beloved company. All I got was Larry telling me stuff that, you know, Oracle 7 gets introduced and your life is wonderful and it’s plain sailing and all that. I would talk to the sales force and say, ‘Why did we lose?’ They said, ‘We never lose.’ They had no respect for Sybase. What came back from McKinsey was that customers hated us, and Sybase was revered as a trusted partner.”
However confident Ellison might have been about the prospects for Oracle 7, he passed Lane’s second test by allowing him a completely free hand in reorganizing the sales and support operation. With Lane and Henley on board, supposedly providing the “adult supervision” that Oracle had previously lacked, Ellison felt free to revert to his preferred role, directing engineering. He was no more interested in those parts of the company than he had been in the past and was just grateful that they now appeared to be in safe and steady hands. Lane says, “He was very helpful, very supportive of what I was doing—and I was changing everything, bringing in a whole new management team [many of them from Booz Allen].”
At the same time as Lane was shaking up sales, his former Booz colleague Robert Shaw, who now reported to him, was determined to yank Oracle’s tiny consulting operation out of its torpor and turn it into something much bigger and more powerful on the back of the applications that Jeff Walker had begun to develop a few years earlier. Whereas databases were sold to the techies running corporate data centers, selling applications required understanding every aspect of a customer’s business.
Shaw says: “I walked into a two-hundred-person consulting business and probably a hundred ninety-five of them were the wrong people. The mandate was: how do you grow this, how do we get it better integrated with the sales force? I took the job because there was a real opportunity to really drive the customer proposition from a services perspective. It went from an ugly duckling losing a lot of money doing little three-day projects, and customers complaining about consultants just out of training class who think they know more than their own people, into, by the time I left in 1998, a very profitable organization with seventeen thousand people and pushing three billion dollars in revenues.”
Building a vast consulting organization was as strategically daring as it was risky. It would have enormous consequences, both good and bad, for Oracle. The danger was that if it became a direct competitor to the Big Five IT consulting companies it would risk having its immature applications business cold-shouldered by the firms who made software choices on behalf of their clients in favor of the much-better-established SAP and the promising new kid on the block, the client/server-focused PeopleSoft. On the other hand Oracle had come to recognize that developing and selling apps was very different from the database business, and having its own consulting operation was a way to gain the skills it needed to succeed.
Shaw says that in his first year the decision was revisited many times: “Larry came to me when we reached the first milestone for us, which was when we did a hundred million dollars. We were probably celebrating and we thought we’d just really pulled a coup, and Larry’s reaction was ‘Do you think you could ever make this larger than Andersen Consulting?’ I said, I doubt it, but in the back of my mind I was thinking, the next plateau is becoming a billion-dollar business and then a multibillion-dollar business. Larry was always insightful. He said, ‘Look at the evolutionary state of a set of our products. Arrogantly, you can think that we don’t really need to listen to the customers on the database because we know more about database technology than they do, so you can really drive the requirements internally towards the external market.’ But when it came to applications, the users knew a lot more about the functionality they needed to run their business.
“And at the stage we were at, of trying to integrate the core database technology with the development tools and then adding applications on top of that, Larry said, ‘This is going to be a mess to manage if I also have to integrate with a bunch of systems integrators and have them bothering my development organization. They’ll slow down the implementation of projects because they’re not serving a single master; they’re serving whatever they can generate services around.’ So I think Larry and I and Ray basically made the decision, we’re going to go for it. We’ll be channel friendly as long as the channels bring the business, but if the channel is just looking for us to hand off all systems integration business without helping us influence it, we’re probably not interested. Would a third party really invest the time to learn our products, or would it slow us down in terms of penetrating accounts with our applications? We had so many people questioning either their functionality or the integration of the technology that we decided to cover ourselves and build the business ourselves. So the decision was, let’s go build a very successful consulting business around that.”
Nine months after Ray Lane’s arrival, Oracle managed to beat analysts’ expectations for the traditionally tough third quarter of its fiscal year, bringing in revenues of $371 million and nearly doubling net income over the previous year to $29.2 million. Lane says, “The message was starting to get out that we were serious about serving customers. We’d shipped the product [Oracle 7], not empty boxes. International, run by Geoff Squire, was doing well—average growth numbers but with great profitability. People were saying that it looked like a turnaround was in progress, and that’s all you need to move the stock. The day we announced the Q3, the stock bounced eight points, from fifteen dollars to twenty-three.” The message was that Oracle had turned the corner. Lane’s gamble had already paid off financially: “I was in the game, and after the first year, I thought, I can do this. It’s going to be a good ride.”
Lane’s focus continued to be on bringing order, discipline, and a service ethic to the sales force. By the end of the 1993 fiscal year, he felt confident enough to change all the compensation plans. The two biggest changes he made were to insist that the sales organization should not be paid extra for service and to change the quotas for individual salespeople in relation to the size of their accounts. “They were saying to me, ‘If you want service, Ray, if you want us to be good guys, then pay us for being good guys.’ I said, ‘No. That’s something that comes with your DNA.’ ”7
“When I came in,” says Lane, “I also found that all the quotas were the same—everyone had a two-million-dollar quota. Even the guy at General Motors. The list price of all the Orac
le products he could sell to GM would probably come to two hundred million or more. He could say, ‘If you buy the whole book, I’ll discount at ninety percent.’ With a twenty-million-dollar deal and a two-million-dollar quota, he makes a lot of money and the CIO that buys the stuff is a hero. So the salesman leaves Oracle because he can’t sell anything more, having sold the whole book. Meanwhile, the customer is saying ‘What can I do with all this crap?’ We had thousands of customers in that situation. So I customized the quotas for potential and a lot of the cowboys left. I knew I would drive them out. Now if you’ve got GM, you’re going to get a ten-million-dollar quota, you’re going to sign up to stay, and you’re not going to be allowed to sell everything in the price book in one deal.”
Ellison couldn’t have been happier with Lane’s impact on the company. He had brought in other senior managers from Booz Allen, as well as a number from EDS and IBM, who were a different species from Kennedy’s pack dogs and who had precisely the effect on the field that Ellison had hoped. Jenny Overstreet says, “Larry was just totally jazzed to have Ray and Jeff Henley around to teach him about what happened in grown-up companies.” In fact, Ellison was so thrilled by Lane’s performance and the impression of gravitas he lent the company that when Lane began to suggest taking on more responsibility, he didn’t hesitate to give it to him.
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