Interview: Oracle president Charles Phillips

8th Aug 2007

Charles Phillips, co-president of Oracle, talks to during his flying visit to London, sharing his thoughts on financial results, acquisition strategies, on-demand and Fusion.

By Stuart Lauchlan, news and analysis editor

“Customers aren’t just understanding what we do; they are aligned with it,” insists Charles Phillips, co-president of Oracle on a flying visit to London. “We’re not trying to preserve something from the 1970s like SAP is. As a company, we were in infrastructure first, then we moved into applications. That brings out entire product line together.”

Phillips is on buoyant form. Oracle is, he argues, doing extremely well in the industry, citing the most recent financial results as proof. These saw sales of new software licences grew 17 percent to $2.48 billion. New licence revenue from database and middleware increased 18 percent, although license revenue from its application software was somewhat lower than some analysts had expected, up 13 percent.

The company is embarked on a dual strategy of acquistion and innovation, says Phillips. But how much more can any company – even one with the credit rating and the cash at hand of Oracle – continue to buy up marketshare. And how can customers be confident that acquistions are based on a sound, long-term strategy rather than a Borg-like desire to assimilate lesser companies on an opportunistic basis?

photo of Charles Phillips"We view acquisition as successful R&D without risk. Customers are actually getting access to the whole industry’s R&D." Charles Phillips, co-president, Oracle

“We buy companies that add value to our customers,” he insists. “In fact, many of our acquisitions are driven by customer advice. Customers will suggest to us firms that we might buy or categories of the market that we should compete in. These are market-driven acquisitions. The completeness of our technology stack and our applications suite is a result of analysing customer requirements and part of a broader strategy of analysing customers needs. We also view it as successful R&D without risk. We’re only going to buy something if we know it works. Customers are actually getting access to the whole industry’s R&D.”

Software as a service

A fundamental plank of the Oracle battle-plan is its ‘Surround SAP’ strategy, whereby it extends its applications offerings into areas that enable it to compete on its German rival’s traditional home turf. This is delivering results, says Phillips. “You only have to look at the numbers,” he argues. “We could not be reporting those numbers without competing among SAP customers. A significant proportion of our new customers are also SAP customers who we can now add value to.

"I know for a fact that there are far more SAP customers calling me now than there were three or four years ago. You have companies who maybe started with SAP for general ledger, but now we have acquired firms like Hyperion, so we can sell into those accounts. We have entire sales territories that are now just based on SAP accounts, our salespeople can make a living out of just selling to SAP accounts.

"We are gaining marketshare on SAP and we have outgrown them any way you choose to measure it." Charles Phillips, co-president, Oracle

“Of course, we both eat into each other’s accounts. There are companies out there who will continue to have both of our products installed for some time to come. In the applications business, they had the larger installed base to start with so the more customers who say that they will run both Oracle and SAP software, the better is it is for us. SAP doesn’t want that co-existence so they haven’t made it easy for their customers. But we are gaining marketshare on them, we have outgrown them any way you choose to measure it.”

When Oracle first moved into the applications game, it had the bonus that every deal it lost to SAP was also a win in that it represented a database sale to underpin the SAP products. Now the software as a service (SaaS) movement threatens to offer a similar opportunity. “SaaS is very database intensive,” acknowledges Phillips. “Normally people don’t want all their data resident on an on-demand product. So if is hosting data for a large company, they are forcing them to create a replicated database behind the firewall, which means that companies are creating more and more databases.”

The F-word

That said, Phillips makes the startling – and unquantified – claim that Oralce is going to be the on-demand leader, seemingly using the terms on-demand and SaaS interchangeably. “On-demand is going to be one of the growth markets for us,” he says. “We can give customers a choice in that we offer and integrate both on-demand and on-premises and make it look like a single architecture. From a customer point of view they can have CRM on=demand or on-premise or both. We can sell to Siebel customers who want to do something thing on-demand and keep some things in-house. Whatever decision they want to take, we can accommodate it.

“We have about two million users of on-demand. We’ve been doing on-demand for about nine years. We have customers who wanted to own the software, pay for the licence and then decide if they wanted to run the software themselves or have us do it for them. They really want those decisions seperated. They might want to bring it back in-house one day. The issue they have is whether they want the running of it outsourced or not.”

"We have about two million users of on-demand. We’ve been doing on-demand for about nine years." Charles Phillips, co-president, Oracle

But that’s outsourcing surely, not SaaS? “None of the vendors do SaaS int the same way,” says Phillips. “We been doing it this way for nine years and this is the way that our customers think about it. They can use the software themselves on premise or they can have it on-demand. We are almost indifferent about that. Multi-tenant has nothing to do with on-demand. Many customers don’t want to put all their data in one database – and in some industries it’s actually illegal to mingle data in one database.”

And finally, no meeting with any Oracle executive can go without the F-word - Fusion. What’s the status of the grandiose project to pull together the code bases of all the applications that Oracle has gobbled up in recent years? “We have not been giving detailed updates about where we are with different stages,” offers Phillips. “We continue to make progress.”

To some ears that might sound like an evasive medic telling a patient’s relatives that their loved one is doing as well as can be expected, but it seems Oracle has learned its lesson about being too specific in its claims for Fusion, which is by necessity an evolving entity. And with that, Phillips is gone – off to charm financal services customers with Oracle’s ‘buy and build’ strategy. “Our strategy is logical to people,” he insists. “Customers are pleased with how things are going.”

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