In talking about turning points, was Jarvis just whistling to keep his courage up? He honestly seemed to believe otherwise. In the course of the last few months, Oracle had made its peace with the systems integrators, with the possible exception of the usually hostile Accenture. In particular, both Ernst & Young and PricewaterhouseCoopers agreed that they should be making most of their money from business process re-engineering rather than customizing other people’s software.8 (In fact, I’d recently attended a very positive meeting between Oracle and PWC’s top team in Washington, D.C., and PWC had been the lead consultant on the POSCO implementation. And in Amsterdam, I’d talked to a senior partner from Cap Gemini who was also singing from the same song sheet.) Just as important, Jarvis claimed that most of the financial analysts, if not yet the software industry analysts, had now come out in favor of the suite as the right approach over best-of-breed.
The Daily Business Intelligence, which Jarvis and Ellison were demonstrating in Amsterdam, was a dramatic illustration of what became possible with a single data model. It was one thing to show slides illustrating how SAP’s applications ran across five separate databases linked by clunky messaging compared with the Oracle suite’s tight integration with a single database. It was rather more impressive to be able to offer something that was both spectacularly useful and beyond SAP’s capabilities because of the inferiority of its information architecture. The same could also be said of business flows, but Daily Business Intelligence was a much easier concept for most people to grasp and thus to sell to them.
Jarvis admitted that while his people used Oracle’s CRM software to gather information on customers and target marketing campaigns, like most senior executives, he’d never used it personally: “I had never used any of this stuff until about two weeks ago. I’m a total convert. That . . . made me realize that it was all worth it. We’d been through hell, but wow! Look at this—a golden nugget. We’ve been searching for a long time, but we finally found the gold mine.”
Later the same day, Ellison used his keynote to explain why the Daily Business Intelligence was not just another nice feature but was pretty close to being the Holy Grail of business IT. As usual, he blamed most of the problems afflicting business computing on the fatal combination of fragmented information and incomplete automation: “Most business processes are not completely automated; they’re a combination of online and offline activity. For example, in the sales process called ‘opportunity to order’ each line of the sales order is always entered into the application system, but the price quote and sales contract might be stored separately in an Excel file or a document image file. If you store your price quotes in Excel files, that means your applications database is incomplete, so you can’t ask the system questions like ‘What is the total value of all my outstanding quotes?’ Similarly, if you use a document image file to store contracts, you cannot ask the system, ‘How many of my contracts have nonstandard limitation-of-liability clauses?,’ because that information is not stored in the applications database. In other words, if your process automation system is incomplete—and most are—then your applications database will be incomplete as a consequence. And an incomplete database makes building a business intelligence system virtually impossible.”
It’s the “completeness” of the E-Business Suite’s process automation and the single-data model, which allows you to keep all your information in one database, that makes Daily Business Intelligence possible. “Every day, Oracle sales managers see updated sales figures and sales forecasts. Every day, salespeople see how much they sold and how much they spent so far this month, this quarter, this year. They see exactly where they rank among their peers in sales and expenses. If they’re in the lower ten percent in sales and the upper ten percent in expenses, that fact greets them every day on their home page. If you’re an Oracle engineering manager, you see how well your product is selling, and you see how many service requests your product is generating. If your product is in the bottom ten percent in sales and the top ten percent in service requests, you know you have a serious quality problem that needs to be fixed. The Daily Business Intelligence system not only provides managers with up-to-date data to make better decisions, it provides every individual in Oracle with better information—so they know what to do and how well they’re doing it.”
As well as providing detailed, almost instantaneous information about every aspect of Oracle’s business, it also has a dramatic impact on the behavior of individuals: “Perhaps the most interesting aspect of Daily Business Intelligence is the comparison of your job performance with that of your peers. The reaction to these rankings is fascinating. People not only work harder to move up in the rankings, they work smarter. They study the people with the best performance and learn from them. And everyone gets daily feedback that lets them know if their job performance is improving. This makes a manager’s job much easier. The manager doesn’t have to constantly tell people that they’re doing a good job or a bad job; the system does that. When Sally arrives at work and logs on to the system, her home page pops us and says: ‘Hi, Sally, you rank in the top twenty-five percent in sales, congratulations, but you’re in the top five percent in entertainment expenses—knock it off; stop eating at all those fancy French restaurants.’ But you know what, the second that Sally realizes we can see how much she’s spending on expensive dinners, her behavior changes . . . she stops ordering the expensive wine with dinner. Constant feedback, whether it’s from a boss, a parent, a teacher, or the E-Business Suite’s Daily Business Intelligence system, encourages people to improve their behavior. Hard facts about how well you’re doing your job in comparison with other people in your company takes most of the human bias out of performance assessment. It doesn’t matter much if your boss likes you or dislikes you, it’s all about your numbers.”9
• • •
Backed up by an onstage demonstration of how the “executive dashboard” works and how easy the user interface makes it to drill down for extraordinarily fine grained data, Ellison’s presentation makes a powerful impact on the packed hall. But maybe because this is Europe rather than America, I detect a slight uneasiness in the nervous laughter that greets some of Ellison’s jokes. Impressive proof though Daily Business Intelligence is of the computing philosophy behind the E-Business Suite, how many people would really welcome the introduction of such brutal transparency into their working lives? If Ellison has his way, it’s something they’ll just have to get over.10
Before going onstage, Sergio Giacoletto, Oracle’s Italian head of European sales, has asked Ellison not to mention two things that are in the pipeline. The first is the “outsourcing with a twist” offer, which first broke cover at the New York CEO roundtable back in October. This is the deal in which Oracle proposes to take over a customer’s entire IT budget and provide all the software (suite, apps server, database), hardware, and networking gear that’s needed for a state-of-the-art computer system. Each year for the five-year term of the contract, Ellison commits to reducing that IT budget by 5 percent. Giacoletto reckons that it will give Oracle a formidable weapon to fight SAP in the European midmarket, which neither of the two rivals has penetrated much. But he wants to announce it when he’s good and ready. However, when someone asks about Oracle’s ASP (application service provider) strategy, Ellison can’t resist the opportunity to pitch his new deal.
The second thing that the Oracle execs want kept under wraps is a radical new pricing plan for the E-Business Suite, which has barely been signed off on back at Redwood Shores. But at the press conference after his keynote speech, once again, Ellison can’t help himself. From now on, he declares, the E-Business Suite will be sold to every customer in its entirety, and there will be just two license prices: $4,000 a year for power users and $400 for occasional users. What it means for the customer is that it will no longer be necessary to work out minutely in advance what modules in the suite are likely to be needed and how many licenses should be purchased, say, for financial users or
sales-force users. As Ellison says, “Our pricing didn’t match our product. Our product was an integrated suite, but our pricing was component by component. That meant when you were buying the suite you had to decide in advance how many users to buy for each application component: marketing, sales, service, financial, manufacturing, and so on. If you guessed wrong, you had to come back and negotiate a new license.” In other words, customers had to predict their future business needs and processes in a way that was inherently spurious. From now on, they would be able to turn on whatever parts of the suite their evolving requirements justified, and users would be allowed access to any applications they wanted to work with.
From Oracle’s perspective, the new pricing model made even better sense. The bundling of features into the database and the apps server that customers could either use or not use was a neat way of locking competitors out of profitable niche markets—as Microsoft had proved over and over again (the legal difference was that, sadly for Ellison, Oracle was not a monopoly). If an ERP customer had already installed the whole suite and was thinking about deploying CRM, why not just switch on the Oracle stuff it already had rather than go to all the bother of buying and implementing a system from Siebel? The new pricing model leveraged the completeness of the suite without imposing it.
There were two further advantages from Ellison’s point of view: first, it would no longer be a stretch to claim every 11i customer as a suite customer;11 second, it might help to diminish some of the internal sniping between the Wohl and Barrenechea teams. Ellison told me later, “We’ll now be measuring Suite sales in total, rather than ERP and CRM sales separately. That should take some of the edge off the intramural competition that’s been going on between the different applications development groups. When a customer buys the entire suite, our sales system will record it as a Suite sale, but our support system will tell us exactly which applications in the Suite are actually being used.”
Ellison’s premature announcement at the press conference had two effects, one predictable, the other less so. The first was to send Oracle’s marketing machine into a spin. When Ellison started to reveal the new pricing plan, Mark Jarvis exclaimed, “Oh my God. He said he wasn’t going to do it. He always does this. This will be running on the wires, and the press will start calling Safra in a couple of hours [it was still 7 A.M. in California], and she won’t know what the hell’s going on.” Jarvis had to prepare a detailed press statement in a couple of hours. The second, more positive, was that for the first time in a large gathering of skeptical journalists, not a single question about the value of the suite versus best-of-breed had been asked. A corner turned.
On the plane from Amsterdam to London, I discussed the last few days with Ellison, including an edited version of Barrenechea’s attack on Ron Wohl. As to the latter, his reply is terse: “You know, Mark Barrenechea is a very smart guy, and he has some interesting theories that explain our CRM sales results. Indeed, our CRM sales are influenced by lots of things beyond Mark’s control: the quality of our ERP software, the size and experience of our CRM sales force, the state of the economy, and the relative strength of the CRM competition.” I asked him whether he agreed with Jarvis that Oracle had suffered real brand damage during the last twelve months.
He sighed; the expression “brand damage” had come from him a few months earlier, when he had wanted to draw attention to the fact that the quality issues affecting some 11i customers were the overriding priority for development. “We were all very pleased with the progress being made on our applications product quality issues, but I didn’t want to let up. I wanted our developers to stay intensely focused on quality, quality, quality. So I casually said that the early versions of 11i had done some ‘brand damage’ to Oracle, and to repair that damage we’d have to constantly improve quality. I’m sorry I ever used the expression ‘brand damage.’ The phrase ‘brand damage’ caught on, and everyone started using it. A negative article in the press caused ‘brand damage.’ A sale didn’t close because of ‘brand damage.’ I’ve been plagued by the expression ‘brand damage’ ever since I first used it. Never use catchy phrases to describe something negative about your own company. Aim the dark marketing at the competition, not yourself.” Interestingly, Ellison added that the rollout of Daily Business Intelligence within Oracle had made it much easier to dig down into finding where the problems were and who should be responsible for fixing them: the transparency ended what had been a blame game between support and development.12
For all that, I suggested that from what I had seen over the last few days of Oracle’s customers and integration partners, the technology press, and even some of the analysts, the idea that a corner had been turned in Amsterdam didn’t seem far-fetched. Ellison wants to agree, but he also wants to put things into context: “A big technology transition—a massive rewrite of one of our major products—happens infrequently, once every ten or fifteen years. When it does happen, it puts a huge strain on us and our customers. It’s a little bit like childbirth. It’s painful for what seems like a very long time, but the pain is suddenly forgotten when you see the beautiful baby. When Oracle 7 came out, nobody remembered the pain of Oracle 6. Rewriting the applications was a much easier transition than rewriting the database. But nobody remembers the extent of the problems we had with Version 6 of the database. Everyone’s repressed it. It’s just fascinating. Somebody said to Jeff Henley, ‘Oh my God, this is as bad as the database rewrite back in 1991.’ Jeff and I had to laugh. During the database rewrite we almost went bankrupt. Today we have $6 billion in cash and profit margins of around thirty-five percent. But more important, we now have the only suite of applications integrated around a single applications database. We have the only applications database with built-in business intelligence. In other words, we have the smartest, best-looking baby in town.”
Maybe the only thing that mattered was a return to sales growth? Ellison had said to me more than once that the one thing that would make a difference was a quarter that beat expectations. “Analysts don’t try to foretell the future; they try to explain the recent past. If you have a series of bad quarters, they explain that it must be because you have product problems. If you then have a series of good quarters, they explain that it’s because you’ve overcome your product problems. They’ll conclude that our E-Business Suite product problems are over when we start growing faster than our applications competitors. It’s that simple—they just look at the numbers.”13
• • •
The tension in Amsterdam between Ron Wohl and Mark Barrenechea would soon be resolved. Getting Daily Business Intelligence to perform all its tricks proved to be difficult, and as a consequence, soon after returning to Redwood Shores, Ellison, threw himself into the effort to get the product finished: “We were getting most of the data we wanted out of Daily Business Intelligence, but not everything. There was some data that I considered very important that we were unable to track for some reason. I wanted to understand why.” As usual when an engineering problem struck, he insisted on embarking on a process of highly detailed reviews of every product element to try to identify the issues.
The urgent need to make Daily Business Intelligence a reality had an unforeseen effect: it exposed weaknesses in the integration between the ERP and CRM sides of the suite that neither Ellison nor anyone else had been fully aware of. The more Ellison drilled down into the code, the more alarmed he became: “By March, I had found a couple of database schema errors that seemed to be the source of the Daily Business Intelligence problems I was working on. But schema errors were only a symptom of the real underlying problem: the ERP and CRM components of the suite were not as tightly integrated as they should have been, because our two development teams were not working as closely together as I thought they were. I discovered I had a serious organizational problem in applications engineering. I should have seen it and fixed it a while ago. I totally screwed up.”
It may have taken Ellison longer than it should have to disc
over the defects in his applications development organization, but once he did, he acted decisively. Ellison says, “Once it’s clear to me that I’ve made a mistake, I move pretty quickly to fix it.” He determined that CRM would, in effect, be merged into Wohl’s side of the house, with John Wookey, the senior development manager who had delivered Oracle’s financials application and was currently working on health care, becoming responsible for the CRM sales and marketing modules; Don Klaiss, who was responsible for Oracle manufacturing products, would take over the CRM service modules. If there ever had been an argument for nurturing a “creative tension” between the two sides of Oracle’s applications business, by now there was none. While CRM was newer and sexier than ERP, Ellison reckoned that it was nonetheless a lot easier to do: “I believe that CRM is a layer or feature set on top of your ERP customer database. CRM is pretty easy to build if and only if you have a unified customer database, but near-impossible to build if you don’t. Once again, a single database and integration is the key. CRM applications should not be separated from the ERP applications, and we got ourselves into trouble when we tried to build them separately. The organizational structure I set up was wrong; it was my fault, my mistake—mea culpa.”
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