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Oracle OpenWorld: Mission accomplished, says Ellison

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20th Sep 2010
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Oracle CEO Larry Ellison respects IBM, sneers at SAP and takes inspiration from George 'Dubya' Bush. It must be Oracle OpenWorld time again...

Larry Ellison is justifiably known for his memorable quotes, but turning to the words of George W. Bush for inspiration isn't likely to go down as his best idea ever.

Nonetheless it was ‘Dubya’ that the Oracle CEO  turned to on the eve of the firm’s Open World conference in San Francisco when he said it had been his goal to ensure that the firm's hardware business was profitable. "Quoting one of our great Presidents, mission accomplished!" he quips.

Given that Bush made his comments about the Iraq war prematurely when parading around the deck of battle ship dressed in full Top Gun regalia, sceptics might ponder whether it was really the right comparison for Ellison to draw at a time when onlookers are still wondering exactly what Oracle will make of the hardware division it inherited following its acquisition of Sun Microsystems.  

Ellison seems in no doubt about what to do with it: use it to make more money. "We now have a very, very profitable hardware business that made a substantial contribution to our overall profitability in Q1," he says. "We have a profitable business and we think it's going to become more profitable throughout the fiscal year."

How he plans to do that is what will be interesting as it evolves. It’s clearly going to involve some changes of Sun’s strategy, principally a decision to ditch those aspects that aren’t returning a profit. "The first thing and easiest thing to do was to stop pursuing business that was not profitable," explains Ellison. "Let's stop chasing revenue and start chasing profits.
"So we are not selling Hitachi disks anymore. It’s a terrific product, but we don't make any money reselling it. We are not selling Veritas’ NetBackup anymore. We are not pursuing these high-performance computing deals which are big deals and very prestigious, but again I don't know anyone makes any money on these things. So, we are out of those businesses."
IBM straight ahead
Oracle now has a new strapline – Software. Hardware. Complete – which reflects the new reality of the firm’s expanded portfolio. "There really is no such thing as the hardware business or the software business; the business that we are in is a systems business," said Ellison.
"We have to sell systems. So it's really one business and since we are direct in software, we need to be direct in hardware. People think of Exadata as a hardware sale and of course it’s a combined hardware-software sale. Whenever we sell Exadata, we sell database licenses unless the customers already has database licenses and we sell storage server licenses. A sale like that is reflected in both our hardware line and our software line."
That’s a different approach for a firm that 10 years ago was still regarded as first and foremost a database firm. Now its portfolio of offerings sets it on a seeming direct collision course with the likes of IBM – a course that veteran yachting skipper Ellison shows no signs of steering away from. "IBM is a great company and I appreciate the kind words from [IBM CEO]  Sam Palmisano about us as being their number one competitor," he says. "Oracle is flattered. We look at IBM as our number one competitor and we are thrilled that they look at us as their number one competitor now. We know we have to work very hard to be successful in the competition."
 
But Ellison insists that the two firms actually take different approaches. "IBM’s services business seems to be the dominant part of their business and the product business is important but secondary to the services business," he suggests. "We look at it just reverse. We look at our products being the dominant part of our business. One of the things we are trying to do with our products is obviate the need for services. So if we do a very good job of integrating our applications together and making them easier to install and easier to upgrade, you don't need as much servicing."
There’s also still a hefty degree of co-operation with IBM on Oracle’s part. "We have actually got a very good relationship with IBM in services, which we are trying to expand, let's say in banking," explains Ellison. "IBM has got a terrific presence in banking. We have got some great banking products. IBM doesn’t sell banking software and we look for IBM to become expert in using our software to transform banks. Our partnership with these service companies is absolutely critical - the American companies, Accentures, the IBMs, the Indian companies."
SAP sagging
There’s no sign of a spirit of co-existence with Oracle’s other arch-rival SAP however "We are up to about 60% of the size of SAP in Europe now in applications. And that's the toughest market, and we are bigger than they are in North America, for example, which is our home territory," says Ellison. "We track our apps business especially in Europe as a percentage of SAP because SAP is stronger in Europe than they are any place else in the world. Clearly in certain countries like Germany, Switzerland, Austria, they have a virtual monopoly, closing in on 100% share in those countries, which makes it very difficult. But we think overall, over the last four quarters, we have done very well in Europe against SAP, taking share from SAP in their home markets."
Elliosn poured scorn on SAP’s product development efforts. "They have got this all-new product called Business ByDesign, which is aimed at, I don't know, companies of four people, between four and a hundred people or something like that, which is floundering horribly and they have done nothing new in their core ERP business for 25 years," he claimed. "Rather than focusing on their applications and upgrading their applications like we did with Fusion, they said, ‘oh no, I have a better idea’. Instead of competing with us in applications and modernising their applications, they say, 'oh, no, let's go kill Oracle and database technology.' Good luck.
"After five years of development, we will be announcing our Fusion application suite, all the ERP products, all the CRM products, all the HRMS products have been redone 100% in Java, all with integrated social networking Web 2.0 interface, brand new stuff from the ground up, and SAP is going to go and compete with us using their 25-year old technology."
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