Everything you need to know about Oracle CEO Larry Ellison sprang out like a predator's claw during an on-stage interview last week with AllThingsD editor Kara Swisher at D10, the business news site's annual insider gathering. Swisher hardly needed to put the "H" and "P" together to get Ellison cranked up about that company's former blink-of-an-eye CEO, Leo Apotheker, who had also been at the helm of SAP when the German-based software giant misappropriated Oracle software.
Ellison called Apotheker a thief, reminding the audience that SAP later on had admitted guilt as part of a three-week trial. Then Ellison relived fond memories of Apotheker avoiding Oracle's subpeona by visiting HP customers in Bolivia and Mongolia: "They should have left him in Mongolia, because when he got to California, it got bad," Ellison said.
Upon hearing Ellison call Apotheker "Lee-o," Swisher corrected his pronunciation: "It's Lay-o," she said.
"I'm not going to call him Lay-o," Ellison responded with a smirk.
It reminds me of a classic scene from the Academy Award winning movie "Unforgiven." Fancy boy gunman English Bob, a.k.a. "The Duke of Death" (played by Richard Harris), rides into town with his fawning biographer, W. W. Beauchamp (played by Saul Rubinek). The Duke's nemesis, ruthless sheriff Little Bill (played by Gene Hackman), disparagingly refers to him as "The Duck of Death." Beauchamp corrects Little Bill: "It's Duke." To which Little Bill responds with a glare: "Duck, I says."
Something else interesting happened on that D10 stage. Ellison, whose company is gearing up for some big announcements this week, said he might tweet the announcement ahead of the formal event (never mind that he essentially revealed a good portion of the game plan during the interview). What’s next, a tongue piercing?
Maybe for an encore Oracle will embrace the cloud.
Well, yes, actually, it seems Oracle will.
Oracle Cloud Speculation
Ellison's claim is that he's never had a problem with the concept of the cloud, just the hype behind it. In his estimation, "cloud" is just another embodiment of what the Internet has been delivering for years. Thus, Oracle will announce Oracle Cloud, including a platform-as-a-service (PaaS), database service, Java service, and other services "all on top of other acquisitions, like Taleo for talent management."
Ellison noted that complex ERP capabilities will exist in this cloud, that it will all run on Oracle hardware (surprise, surprise), and that all applications will run in their own virtual machine--decidedly single tenant under the Oracle landlord.
There's plenty to unpack within that brief sound bite; a 140-character tweet is unlikely to clear things up. So let's take a few stabs at what all of this means.
--Are PaaS and Java service the same thing? Even Microsoft learned quickly that its Azure PaaS offering had better extend beyond just .Net applications. Offering a Java environment in the cloud seems a bit too rudimentary for Oracle. It may offer something extremely attractive, pricewise, or the so-called platform will really just be about crafting cloud-based applications that reach into various layers of the Oracle stack.
--Taleo seems hardly the place where you'd just start running instances of Oracle Financials. At the same time, Oracle has stated already that its Fusion apps will run in the cloud, and Oracle has partners hosting existing on-premises applications (as do SAP and Infor). So what is this new strategy, especially if it's not a unified code base for all cloud customers, served in a multitenant environment? And what role will recently-acquired RightNow play?
--A database service is a no-brainer for Oracle, and naturally it will want to evolve its Exadata and Exalytics appliances to cloud-based models.
--Do customers that choose a subscription model escape the maintenance fees Oracle charges customers of its on-premises applications? If multitenancy brings scale for the cloud provider, are Oracle's costs lower and will it pass on those savings to customers?
A Customer Strategy
Beyond this set of new products, Ellison appears to be putting forth a strategic vision. Consider that he was speaking at a press-heavy event, which he rarely ever does; that he announced his intention to be more vocal publicly, via Twitter; and that he revealed an array of cloud products, marking a shift for Oracle (though how much of a shift remains to be seen).
If there is a shift, Oracle's mission becomes more discernible than its catalog of price-gouging Exa-adnauseams. Oracle has always made (or acquired) top-notch technology, or at least it's difficult to argue with its track record. It has also been the master at locking in customers. That's a tough formula to beat, and until now Oracle has hardly had to depend on having passionate customers, the kind who wear the t-shirts and sport the bumper stickers. Sure, they come in droves to Oracle OpenWorld, but that's their job.
Oracle needs to cease being the company whose products customers are forced to pay for and start becoming a company those customers relish doing business with. The old way may have worked for years, but when there are new markets to conquer, each with more nimble and amicable players, the rules change. Oracle's competitors have long included the likes of SAP, Teradata, and Microsoft, but now they also include HP, EMC, and IBM, as well as Salesforce.com, Workday, and Infor.
Ellison doesn't need much help finding targets. After Oracle practically gave birth to Salesforce.com, Ellison and protege Mark Benioff moved from back-handed compliments to backhanded swipes to, ultimately, a few public schoolyard thwaps, the latest coming by way of a last-minute revocation of Benioff's talk at Oracle OpenWorld, following some stinging critiques from Benioff. Early on, Ellison backed and helped launch fast-growing SaaS ERP provider NetSuite, once called Oracle Small Business Suite. Will Oracle now compete with that offering, too?
Last week, Ellison also took a swipe at Workday, the fast-growing SaaS ERP company founded by former PeopleSoft principals Dave Duffield and Aneel Bhusri (among other alumni of Oracle-acquired companies). Workday, Ellison said, doesn't use a database, and because of its Flash user interface, it doesn't run on iPhones or iPads--ignoring the fact that Workday software runs on its own database and on iOS devices.
As Unforgiven's Little Bill says to English Bob as he's being dragged out of town: "I suppose you know, Bob, if I ever see you again I'm just going to start shooting and figure it was self-defense."
While it's one thing to slap your competitors around, it's another thing to do the same to your customers.
More than three years ago, my former colleague Bob Evans (who now reports into Larry Ellison as senior VP communications for Oracle) wrote an open letter to Ellison imploring him to change what he called Oracle's "one-size-fits-all, non-negotiable" 22% annual software maintenance fees. Oracle uses those fees to invest in new products and features, not to mention making shareholders happy with fat profit margins. Evans' suggestion at the time: At least change the language to "innovation and development funds." In other words, communicate a vision to your customers, not something that sounds like ham-fisted profiteering.
It didn't help that Oracle President Safra Catz had told investors that Oracle was making so much money on its maintenance fee structure that the company was having trouble spending it all.
Now, more than ever, Oracle needs to articulate a customer-centric vision. The cloud seems like a great place to start.
--Oracle should strive to make every one of its applications run as a cloud service. If, for now, that means Fusion applications must act more like hosted applications, that's fine too, but Oracle executives have said that the company built Fusion from the ground up to be cloud ready, including the ability to offer multi-tenancy. Great! Let's see. Or if Oracle builds cloud apps under the umbrella of recently acquired Taleo, it must do so quickly, at least in areas such as HR, CRM, and marketing.
--Meanwhile, all of the cloud apps must be compatible with on-premises Fusion or legacy Oracle apps, so customers can make the migrations when they wish to, without resource constraints, and even in some hybrid cloud models. In that way, Oracle would be embracing the strategy Microsoft promises with its Dynamics software: one code base, deployable however the customer chooses, allowing some components to run on premises while others run in the cloud.
--Oracle should sort out where Taleo, Fusion in the cloud, and RightNow fit into this grand scheme, not to mention NetSuite (or Collective Intellect, a cloud-based social intelligence solution Oracle announced it is acquiring). Better yet, acquire the remainder of NetSuite, create a lineup of excellent small-to-medium business SaaS offerings from the back office to the front office (ERP and HR to CRM and customer enagement), and work to make a seamless customer migration from those mid-market cloud offerings to Fusion in the cloud.
--Oracle must offer a compelling reason for customers to move to its cloud. Oracle's software pricing has been, to date, inflexible. This is a chance to change that approach. Customers should be able to order the applications and features they want, have them monitored rather than audited, and pay for what they use (storage, requests, transactions, etc.). This will certainly put Oracle's fat margins at risk, but better to manage this process yourself than to let your competitors do it to you.
--Offering Java as a platform service may not be all that special, but Oracle has several advantages here. First, it has the back-end resources (read: data center infrastructure) to power enterprise-class Java applications, and to do so at scale. This could be a big opportunity to help companies cut application deployment costs. Oracle should also put other services on top, such as its messaging and database services--things that no other Java PaaS can easily provide. Of course, Oracle should run other stacks on its PaaS, but that's unlikely to happen.
--Offer the Oracle database as a service, but make pricing and migration simple. Put Exadata in the cloud as a service, and add Oracle Big Data Appliance services, including Hadoop and the Oracle NoSQL database. And what about making the on-premises Exadata appliance a front-end cache for the cloud data services?
And finally on the strategic side:
--Don't be offensive, but go on the offensive. Everywhere I turn it seems as if SAP is popping Oracle in the mouth. SAP is rallying around its Hana in-memory database, the cloud, and mobility, and by doing so it has garnered customer and industry attention. Never mind that HR software-as-a-service (its SuccessFactors acquisition) hardly makes SAP a cloud company. Or that Hana, for all of its great promise, is still a blip on the SAP revenue chart. Or that SAP hasn't done a great job of explaining what it has really brought to Sybase's mobile portfolio. The point is, SAP has a stated strategy. State yours.
This Ellison statement isn't a strategy: "IBM used to be No. 1 in database; now we’re No. 1. They used to be No. 1 in middleware, and we're now No. 1 in middleware. They're No. 1 in high-end servers; soon we’re going to be No. 1 in high-end servers." But this Ellison statement gets closer: "Long before we bought Sun, we decided to build this database machine. We thought data centers were unnecessarily complex. People were buying storage from EMC, networks from Cisco, and all these other separate parts together. I said let's do all of it. We'll sell one building block you can plug into your data center. We're trying to do for the data center what Apple did for the consumer." Say more of that, but with more details.
Ellison has two powerful weapons at his disposal: Mark Hurd, who runs the revenue side of Oracle's business as one company president; and Safra Catz, who oversees financial and legal matters as CFO. These three executives are as smart and entertaining and acerbic and witty as any you'll find. And they're all ruthless competitors. Every time Oracle puts any of them onto the speaking circuit, they draw attention. Oracle needs to do a bit more of that.
And while you're at, Larry, talk more about the Ellison Medical Foundation (fighting diseases related to aging) and the new company you’re backing that's getting involved in drug design. Philanthropic endeavors show a man isn't entirely consumed with enemies.