The future prospects of the E-Business Suite are good, but how good? As even Gartner has acknowledged, it is stable, mature, and comprehensive. Over time, Oracle should be able to prove that architectural purity brings with it a host of real-world benefits—the promise of being able to do more with less. As customers turn on more and more of the modules in the suite, they should increasingly leverage its power. The Daily Business Intelligence will also be a proof point for Ellison’s approach: the “golden nugget,” as Mark Jarvis described it. But as with almost everything to do with the E-Business Suite, that has proved much harder than expected to do. It is now expected to debut at the end of 2003, almost two years since the product announcement in Amsterdam.
A more unambiguous and, in some ways, unexpected triumph has come in the shape of Linux. When Oracle 9i was launched just after the E-Business Suite’s problems had started to surface in the press, Ellison had been certain that it would be “the last database”—RAC (Real Application Clusters) was even capable of making Windows unbreakable. But if it could do that for Microsoft, it could also do it for the free open-source operating system. Thanks in good measure to the campaigning of IBM and the cooperation between Intel and the PC server makers such as Dell and Hewlett-Packard, determined to reduce their dependence on Microsoft, Linux had acquired credibility as an operating system for the enterprise. With Oracle’s RAC, Linux could make a huge additional step. Corporate data centers could now be filled with racks of cheap two-processor Intel boxes. What’s more, they could provide availability and speed superior to those of million-dollar multiprocessor computers or giant mainframes.
The next version of the Oracle database—10g (the “g” stands for “grid”)—which is likely to be released toward the end of 2003, will have an extension of clustering that will make it the computing equivalent of the electricity grid, automatically balancing loads, allocating resources, and scheduling jobs. Ellison says, “Oracle 10g is designed to run on a grid of 8 to 128 cheap Linux computers. Any application that runs on the Oracle database—SAP, PeopleSoft, Siebel—will run much faster and more reliably on the grid. The grid is Oracle’s answer to high-performance, low-cost, fault-tolerant computing. Our Linux grid approach is the opposite of the ‘one big computer’ approach to high-performance computing invented by IBM a long time ago. Since neither IBM nor Microsoft can run a standard application like SAP on more than one database server computer, their only approach to high performance is to make that single-database computer as big as possible. IBM is very good at building software for big computers because they’ve been doing it since they invented the mainframe way back in 1964. What’s mind-boggling is that Microsoft has just introduced software for their first mainframe—a very expensive thirty-two-processor Windows mainframe. Can you believe it? Microsoft reinvents the mainframe forty years after IBM. Bill is the king of ‘innovation,’ but this is something truly special. The master copiers are copying the wrong stuff. I think they meant to break into the IBM research lab, but they broke into the IBM museum by mistake.”7
And from Oracle’s point of view, Linux provided something else. For years, its nightmare had been that Windows would eventually be strong enough to inflict a slow death on UNIX. Although UNIX would continue, new database business would depend on running Oracle on top of the operating system of its most hated and dangerous rival. While Linux may never displace Windows from the desktop, there is now every chance it will stymie its assault on the corporate server market, considered crucial by Microsoft for both growth and computing influence. Chuck Rowzat, who runs Oracle’s platform business, says that Microsoft has no good arguments to range against the cost and flexibility of Linux, and what’s more, it is trying to argue against fashion, which, as Ellison concedes, is a very hard thing to do. “Linux,” he says, “is the first thing that customers always ask about. They love it.” Mark Jarvis says that Microsoft has no idea what to do because it has been caught up in a form of asymmetric warfare: “When they felt threatened by Netscape, it was just another company with a known HQ they could go out and bomb. But that won’t work with Linux, just as it didn’t work with Apache [the open-source Web server]. Apache creamed them, and so will Linux. Microsoft has lost the server war.”
When Ellison announced RAC, there was widespread skepticism about his claims for it. But now it has impressive traction—in less than nine months to March 2003, the number of RAC users went from 210 to 1,864. Jeff Henley expects that very soon, more than half of the installed base will be running the clustering software. Henley says that customers now believe that even compared with Microsoft’s SQL Server database, Oracle on Linux is now the low-cost option, as well as working much better. The Collaboration Suite has done something similar, giving Oracle a direct play against Microsoft with something that is not only far more capable but also a great deal cheaper. Keith Block says that more than twenty Fortune 500 companies are piloting the Collaboration Suite and that some large installations, such as 100,000 seats at Credit Suisse First Boston, are under way. Partly as a result of new regulatory requirements, firms are beginning to realize that their e-mails are as important a source of data as their accounts and that the right place to keep and manage them is inside the database.
If Oracle’s strategy for taking on Microsoft is increasingly to win market share by imitating its rival’s volume pricing model, it is also taking a leaf out of IBM’s book with its outsourcing strategy. Ellison doesn’t think much of Big Blue’s software, but he has been forced to admit the power of its services organization: “I want us to imitate the one brilliant thing IBM has done over the last decade. They got more money from their huge installed base of mainframe customers by selling them a much broader range of services, including taking over and running their customers’ data centers. We would like to sell outsourcing services to our fourteen thousand applications customers. We have hundreds of applications customers who are saving money using our outsourcing. We need to grow to thousands of outsourcing customers. It’s a great new business for us, and the customer saves a lot of money. We buy the computers, back up their data, run their applications, and upgrade their software much more cheaply than they could ever do it themselves. It is simply a matter of finally applying specialization of labor and economies of scale to the running of computer systems.” In other words: the information utility, Oracle style.
What excited Ellison was his conviction that the utility model played to all of Oracle’s strengths. Although IBM was spending a fortune on a typically well crafted advertising campaign to popularize and get people thinking about the information utility, Ellison argued that IBM could never achieve the same-scale economies as Oracle because its model meant never building exactly the same data center twice. “IBM’s approach to outsourcing is highly customized on a customer by customer basis. In comparison, our outsourcing has little to no software customization. We have a true low-cost, high-volume utility model. So once again, IBM has a great marketing campaign around something they don’t do.”
SAP would also be at a disadvantage: its software was less flexible than Oracle’s; it was present in only one part of the “stack,” whereas Oracle had all the pieces; and, compared with Oracle, it had only a tiny service organization. Both Oracle and SAP had targeted the relatively unpenetrated midmarket as the main driver of applications sales growth in coming years, but Ellison was now convinced that 99 percent of that market would opt for the utility approach that Oracle was best placed to deliver. With the “Oracle guarantee,” Oracle would provide all a firm’s computing needs for a fixed price. Keith Block reckoned that already 25 percent of new applications business was based around the “software as service” model. And what was Ellison’s answer to the worried CIO who feared being put out of a job? “CIO stands for Chief Information Officer. CIOs should focus on providing people in their companies with the information they need to do their jobs better. Currently CIOs spend most of their time evaluating, buying, and assembling cool little technology components in
to expensive computer systems that don’t work very well and provide precious little useful information to the people running the business.”
So did Ellison believe that the race to be the dominant software firm of the twenty-first century was still Oracle’s to lose? “Yes. We’ve had some significant screwups, but we’ve still managed to move far ahead of our competition in both database and applications. You don’t have to be perfect, you just have to be better than the other guy. We’re now far enough ahead to win. The Internet model of computing has given birth to the utility model of computing and software as a service. We couldn’t be better positioned. Our fault-tolerant grids of Linux database servers provide the ideal low-cost, high-performance infrastructure for utility computing. Our applications outsourcing is one of the largest examples of software as a service in the industry. I know it won’t be easy to catch Microsoft. They’re more than three times bigger than we are, but they make their money on desktop computing—Windows and Office. They’re nowhere in utility computing. SAP is nowhere in utility computing. IBM is advertising utility computing but delivering labor-intensive custom systems. So if utility computing is the future, then the future is ours. It took longer than I thought: Real Application Clusters and Database Grids; the E-Business Suite and Daily Business Intelligence. It always does. But it was worth the wait. Much longer road, much bigger payoff.” In other words: victory not lost but postponed.
• • •
One consequence of stretching time horizons was that Ellison’s idea that he might start to disengage himself little by little, devoting himself to biotech research, was very definitely on ice. Although he liked to think that he could do whatever in the world he wanted, the one thing he knew he couldn’t do was walk away from Oracle until the last battle had been won or he no longer had anything left to contribute. Like most people who knew the company and the man, I found it almost impossible to imagine Oracle without Ellison or Ellison without Oracle.
Which was just as well, given that any arrangements for an orderly succession seemed to be as far in the future as ever. I agreed with Ellison that the “strong number two” and heir apparent whom everyone outside Oracle appeared to think so vital was irrelevant. Ellison was also right in saying that there was no shortage of management talent at Oracle. The ten or twelve most senior managers who made the place work would have had far less opportunity to develop if a “strong number two” had constantly been pressing down on them. And Ellison was lucky in having both Jeff Henley and Safra Catz to complement him in the leading “outside” and “inside” roles at Oracle. Catz, like some other fiercely intelligent women I have known, and quite unlike most men, had a degree of loyalty to her boss that transcended any personal agenda of her own. Henley was a straight arrow who was rich enough, old enough, and wise enough to tell Ellison the truth when he needed to hear it. He was also responsible for Oracle’s having, without a doubt, the cleanest books in the high-technology business8—something Oracle gets insufficient credit for among the financial analyst community. He and Ellison were among the first corporate executives in America in the wake of the Enron scandal to file sworn statements with the Securities and Exchange Commission about the accuracy of their company accounts.
Ellison was very specific about the qualities his “dream candidate” would need to lead Oracle after him: “That person must be an engineering manager who’s not only very good at building products; he or she must be very good at marketing and selling the products as well. But first and foremost, the person must be a good engineer. At its core, Oracle is a software engineering company, and we need to be run by a software engineer.” What would be less important in the future was “visionary” leadership. Ellison continued to be certain that there would be no more major platform shifts in software that you either called right or died. “It’s mainly going to be about execution—there aren’t any more life-threatening technology revolutions ahead.”
When pressed, Ellison was prepared to talk about only two of his managers who might turn out to have the necessary qualities. One was Thomas Kurian, an Indian in his mid-thirties who had arrived at Oracle in 1996 via Princeton, McKinsey, and Stanford. Kurian was intense and serious—a little dour, even, although Ellison assured me that he’d managed to make him laugh at least once. But Kurian, in only a few years, had achieved something remarkable and of incalculable strategic importance to Oracle: after its successive failures in building a competitive application server and the departure of those who had been responsible, Kurian had made Oracle, according to its own numbers, second only to the incumbent BEA in the application server market. As well as being a fast-growing and, in time, juicy new revenue earner, the application server was critical to Oracle’s ambition to be the dominant enterprise software infrastructure provider committed to using open standards. Kurian had created a strong engineering team, driven it with a combination of discipline and pragmatism, produced a quality product, and then sold it with passion and energy to the outside world. When Ellison mentions Kurian, he can’t help beaming. “Thomas has done a brilliant job, absolutely extraordinary,” he says.
The other was forty-three-year-old John Wookey. Although Wookey had joined Oracle only in 1995, he had written much of Oracle’s highly rated financial application. For the last three years he had been in charge of extending the capability of the E-Business Suite into a complete “solution” for the higher education and health care industries. After Ellison’s welding of the two applications division into one organization, it was Wookey who had been given the tasks of fixing the defects in CRM and pushing the Daily Business Intelligence toward release (it is finally due to make its debut in November 2003 as part of 11i8). There was a lot riding on Wookey. Ellison said, “John was already managing all our medical applications and our student records systems, but Ron thought that we should give him the marketing and sales automation systems as well. That’s quite a load, but John jumped right in and the progress has been amazing. John’s an excellent engineering manager and leader; he’s well respected throughout the company.”
If either Kurian or Wookey turns out to have what it takes to do the top job at Oracle—and for all their ability, I’m not sure that either has a large enough personality even to begin to fill Ellison’s boots—the second in command could well be Keith Block. In October 2002, Ellison promoted Block to be head of all of Oracle’s sales and consulting operations in North America. Block came to Oracle in 1986 from Booz Allen Hamilton, Ray Lane’s old firm. That is not something that Ellison holds against him. Block is now charged with finally delivering what Ellison hopes will be the death blow to the infamous cowboy sales culture that he has for so long despised. That was the job Lane was himself brought in to do more than a decade ago. But as Ellison put it to me, “I’ve thought a lot about what happened to Ray while he was at Oracle. I know he set out to change the Oracle sales force, but in the end, the Oracle sales force changed him. He began as their leader, but with the passage of time he became their spokesman, their advocate, and their defender.” Block is hiring naturally service-oriented people from what used to be the Big Five consultancies to help drive cultural change through the sales organization. Ellison says, “All we need are highly intelligent people who have a deep understanding of how our products can solve our customers’ automation and information management problems. That’s it. The ‘Go for the gold’ culture of greed is distant history.”
As ever, when it comes to sales, Ellison tends to oversimplification. The truth is that Oracle lost a lot of sales talent during the dot-com boom years, and it is only now being replaced. And while the days of the cowboy deal makers and their scorched-earth approach to selling have gone, Oracle still needs more of the kind of salespeople who can call high in organizations and be listened to with respect. One reform that Block has introduced is to divide the sales force into technology and applications specialists. The spread of Oracle’s technology offerings and the sweep of the E-Business Suite made it impossible for anyone to sell
both with credibility. Block also points out that while technology requires what he calls a “transactional culture”—selling on features and performance—applications require a “consultative culture” in which, over time, you learn to match your products against a customer’s business needs. The amazing thing is that it has taken Oracle so long to work this out.9
• • •
And what of Larry Ellison the man? Although much of my time with him coincided with a period of adversity for Oracle, other than during Oracle’s two months of purgatory in Sacramento, I never once saw Ellison downcast. His unquenchable optimism and almost messianic self-belief never faltered, even when events occasionally conspired to make a fool of him. It is, of course, this aspect of Ellison that many people who either don’t know him or know him only a little find most objectionable. For them, he is at best a bombastic showman; at worst, a false prophet and even a self-serving liar. Yet I am more convinced than I was at the beginning of my journey with him that Ellison is an extraordinary person, quite different from and infinitely more interesting than the caricature beloved of the media and even much of the analyst community. He’s funny and entertaining but also highly serious, always interested in ideas and eager for new ones. Above all, Ellison is intense. Even when he’s meant to be relaxing on one of his huge boats, there’s a restlessness about him.
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