Oracle CEO Larry Ellison
Oracle. It’s a brand name that strikes fear into the hearts of most of its competitors. After all, how many software companies can you name that make quarterly revenue of $9bn, have been around since 1977, and whose CEO is the third-wealthiest American? Thought not.
You may have spotted a little mistake in that sentence, however. Of course, Oracle is no longer simply a software company. Since its 2009 acquisition of Sun Microsystems for around $5.6bn, Oracle is every bit the full systems vendor, just like closest rivals IBM and HP.
Having stuck almost religiously to software from 1977 to 2009, the Sun acquisition alone marked a major change of direction for co-founder and CEO Larry Ellison’s Oracle. But yet more changes are afoot, as Oracle is now making a major play for the software-as-a-service (SaaS) or cloud computing market, its CEO having earlier pretty much laughed it off as a passing fad. Oracle is having a makeover.
Oracle is Larry Ellison. Or perhaps, Ellison is Oracle. Having been CEO right from the beginning, no firm has been as intrinsically associated with its co-founder and CEO apart from Apple and Steve Jobs. And Ellison is not the shy, retiring type. His dynamism, visionary thinking and business acumen are paired with something of a rock-star personal life: he races yachts, flies his own jets, and even turned a drained swimming pool into a massive, million-dollar subwoofer for his sound system.
But even rock stars need accountants. And without using the word in a derogatory sense, Ellison has made use of a few of them. In 2003, he hired noted Morgan Stanley software industry analyst Charles Phillips as his president.
Seven years later – and after co-engineering a massive acquisitions spree that saw Oracle buy the likes of Siebel, PeopleSoft, Retek and Sun – Phillips left to become the new CEO of the third-largest enterprise software firm, Infor. With almost uncanny timing, HP’s former CEO Mark Hurd had just fallen out with HP’s board over an unfounded accusation and left, and Ellison snapped him up as Oracle president.
In keeping with his style, Ellison made no bones about the decision. He wrote at the time: "The HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago… that decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them. In losing Mark Hurd, the HP board failed to act in the best interest of HP’s employees, shareholders, customers and partners…. The HP board admits that it fully investigated the sexual harassment claims against Mark and found them to be utterly false."
Oracle had snaffled one of the most admired executives in the industry. Mark Hurd had joined HP at a difficult time in its history, remember. He had taken the CEO role after the board had forced Carly Fiorina to resign, reportedly disenchanted by how she had integrated Compaq into the business. Once on board, he set about a big restructuring, which while not particularly popular with staff (headcount reductions rarely are, after all) was exactly what HP needed.
The New York Times said Hurd had "pulled off one of the great rescue missions in American corporate history, refocusing the strife-ridden company and leading it to five years of revenue gains and a stock that soared 130%".
Under his leadership, the company became the market leader in desktops and laptops. In 2008, it increased its market share in inkjet and laser printers to 46% and 50.5%, respectively. But Hurd always had a wary eye on margins – shortly after joining he laid off 15,200 workers, around 10% of the workforce.
Other cost-cutting measures included reducing the IT department from 19,000 to 8,000, reducing the number of software applications that HP uses from 6,000 to 1,500, and consolidating HP’s 85 data centres to six. Hurd imposed a 5% pay cut on all employees and removed many benefits, and he himself took a base salary pay cut of 20%.
So Larry Ellison had grabbed an executive with a reputation for ruthless cost cutting; a money man more than a software visionary. But with Ellison still very much at the helm, there’s technology vision in abundance anyway. Hurd is considered a ‘do-er’ – someone who gets things done, and fast.
Alongside him at Oracle is another president, Safra Catz. She’s been president since 2004, working with Charles Phillips until he left, and before that she was Oracle CFO for three years. In 2009 she was ranked by Fortune magazine as the 12th most-powerful woman in business. Ellison has a pretty decent team.
Oracle’s Mark Hurd
While Oracle’s investors cheered Hurd’s appointment – adding several billion dollars to the company’s market capitalisation with some frantic share dealing – HP’s stock dropped $10bn when he left. He really is a billion-dollar executive.
Fast forward to today and Oracle is again undergoing some big changes. It’s still getting used to being a hardware as well as a software company, of course. Indeed, its acquired Sun hardware business is by no means out of the woods just yet. In its latest quarter, Oracle said its hardware systems business was down 16% year-on-year, from $1bn to $870m. If it continues like that there won’t be a hardware business in five years’ time.
"You’ve got some currency effects in there," says Hurd explaining the issue to CBR. "Inside the hardware business there are several factors at play. There were businesses that Sun [Microsystems] did that were OEM’ed from third parties, and some of those we began to phase out, such as storage. So that revenue was on the decline. But our Engineered Systems lines are growing, from zero to relatively big numbers."
Oracle’s Engineered Systems are preconfigured hardware and software systems that Oracle says helps to increase time to value and reduce the total cost of ownership. For example, it has an Exadata Database Machine that it says is suited for both data warehousing and online transaction processing applications, and the Exalogic Elastic Cloud, which is described as offering extreme performance for Java applications, Oracle Applications or other enterprise applications. There’s also a Database Appliance, Big Data Appliance, Storage Appliance and SPARC SuperCluster.
"Some of the Sun server base is slightly down to flat," Hurd concedes. "But we’ve been pretty clear that we expect revenue [from that business] to grow in the next fiscal year. We’ve been working to get out of things that we don’t have IP in to those that we do."
Speaking of IP, one of the tasks that Hurd seems to have been given is to help the firm transition towards the cloud. Perhaps smarting from the success of former Larry Ellison protégé Marc Benioff and his Salesforce.com, Oracle has become very serious about cloud computing.
Hurd says the company has spent billions of dollars re-engineering more than 100 applications to make them cloud ready. He claims the company is already making $1bn from cloud computing, and took a swipe at rival SAP, which he says won’t be up-to-speed for cloud until 2020 (a statement SAP disputes, of course).
When Oracle announced its renewed focus on cloud, Larry Ellison was on hand with a typically bullish statement of intent: "Almost seven years of relentless engineering and innovation plus key strategic acquisitions; an investment of billions: we are now announcing the most comprehensive cloud on the planet Earth," he said. "Most cloud vendors only have niche assets. They don’t have platforms to extend. Oracle is the only vendor that offers a complete suite of modern, socially enabled applications, all based on a standards-based platform."
Perhaps yes, perhaps no. There’s certainly a little bluster about the latest cloud announcements. Some of the underlying products, such as Exadata and Exalogic, are not new. But it’s clear that through organic innovation as well as continued acquisitions – it bought cloud CRM vendor RightNow late last year, for instance – it’s going to become a major force in cloud.
As usual, it’s going to prefer it if customers buy Oracle-only cloud infrastructure, rather than mixing and matching with third parties. Some things don’t change. And while Oracle’s software licenses may not be the cheapest in town, its continued momentum after 35 years is testimony to its quality and customer satisfaction; in its latest quarter, total revenue was up 4% despite the economic climate.
It won’t be easy for Oracle to become a cloud provider – its history is in client-server – and it’s not finding it especially easy to become a hardware player for that matter. But with his new billion-dollar man on board, few would doubt Larry Ellison’s ability to execute his latest vision: the Oracle Cloud.