Is Oracle Dying

Prehistory

Management System (RDBMS) market with 44% (Source: IDC 2009) – at least, for now, though, no one is sure how long that numero uno position will last. There were heady days of 1996-2008 or so when Oracle ruled the world of RDBMS. It was unchallenged crown king that could do no wrong. Hundreds of thousands of Database engineers, architects, administrators spoke of Oracle as if it was actually the famed “Oracle of Delphi”.

Conference passes to Oracle Open World were so coveted that it was distributed to star employees in any company using Oracle Products. However, after 2008, the downward spiral has been very perceptible to the database communities. The hush-hush talks could now be heard very loud and clear. Only that Oracle was perhaps hearing but valiantly choosing not to listen. It continued to maintain the arrogance of a star past its prime - denying that it was aging, claiming that the talent would always trump the age.

Codd (1970) on relational database management systems titled "A Relational Model of Data for Large Shared Data Banks”, that a software could be designed that could follow the principles of relational databases. His belief was reinforced when he read another article, published in the IBM Research Journal, and authored by Ed Oates (IBM) about the IBM System R database. System R itself was based on Codd's theories.

In 1977, Ellison co-founded Oracle Corporation with Bob Miner and Ed Oates under the name Software Development Laboratories (SDL) and in 1979, SDL was rechristened as Relational Software, Inc. nly to change its name again in 1982 to Oracle Systems Corporation. In 1995, Oracle Systems Corporation changed its name to Oracle Corporation. From 1979 through 1992, Oracle primarily focused its attention on making its flagship product, Oracle RDBMS, strong. Oracle was getting complacent after version 5 and then it came out with version 6 – this was huge fiasco product and it was nightmare for customer support and Oracle support. Corporate customers were threatening to pull off Oracle.

Version 6 was quickly followed up by version 7 which saved the day for Oracle. 7. 34 turned out to be very stable product. Version 8i, 9i and 10g added to Oracle RDBMS core competence. These versions by themselves attracted customers to Oracle. If everything was so good, continues to be good then why do I particularly feel that Oracle could be dying as a company? Lack of Level 5 leadership Oracle has been led by Larry Ellison all these years. Larry is a level 4 leader – wish he was level 5.

Under his leadership, Oracle has always focused on “what” should be done and “how” will it be done. Level 5 CEOs first focus on “who” and then on “what” and “how”. People part of the equation remains very flaky, to say the least, with Oracle. It has been notoriously uncaring about exodus of top talent. Many ex-Oracle top performers have gone on to form companies, rise to be C staff, unleash innovations but Oracle didn’t really do anything specific to stop the fleeing top talent.

Also, like many other celebrity CEOs, Ellison is getting two distracted by things that his company should not be focusing on – example, Oracle’s American Cup sponsorship, Ellison’s many prime properties, Ellison’s unflinching support for former ousted HP CEO and great friend Mark Hurd, Ellison’s purchasing Lanai Island. All these have direct impact on Oracle’s future – why? Because all these are issues that distract the CEO.

Same thing happened with Lee Iacocca – once he turned around Chrysler, he focused more on politics, image building, helping White House ith many initiatives which distracted him from his duties as CEO. And Chrysler slid back into the mess that it had recovered from. Mark’s hiring into Oracle forced Ellison to send Charles Phillips off. Charles was a great executive and leader recognized for his talent in and outside Oracle. Letting a great leader go in favor of a friend whose moral ethics are somewhat doubtful never went well with the employees. Also, Oracle doesn’t have conversations like “what can we do to stop you from leaving” with most of their top talent attritions.

5 Phases of a perilous corporation

Any company going through the general growth, if not managed in a disciplined manner, can hurtle itself into peril. Jim Collins brings this out very succinctly in his book “How the Mighty Fall – any why some companies never give in”. The 5 stages of this journey from greatness to perish are very perceptible when they happen. The Path to Destruction I suspect Oracle’s downward spiral started after 2001-2002. It could not come to terms with the ever high stock price of more than $45 and started becoming greedy.

Perhaps under some implicit or explicit mandate from Uncle Larry, the sales people were sent marching to see how much more they could milk out of their unsuspecting and totally Oracle-dependent customers. And perhaps the sales people came back with the message that customers would not mind paying more for the crown jewel product – core RDBMS as well as Oracle ERP Suite. Oracle could not stand competition – especially those then started looking at how to kill rivals – hostile and non-hostile acquisitions of rival JD Edwards, PeopleSoft and Siebel.

Every growing company reaches a point where growth starts flattening – happened with Apple, happened with Google and will happen with next big shinning company as well – Oracle was not particularly immune to it so in an attempt to resuscitate its flattening growth, largely due to its flagship core RDBMS product, Oracle started developing another front that it could open - this was business of application servers - an exploding market back in the day.

An application server is packaged software that developers use to write and deploy web specific applications. The market had exploded past decade or so since many application server vendors were trying to build dynamic applications for the web and mobile devices. For Oracle the lure was that the market had the potential to perhaps become as lucrative as their core database market.

Oracle was very late entrant into this market but it quickly acquired BEA Software (leader in the space at that point) and started competing neck to neck with IBM WebSphere. Within Oracle, Application Server business is viewed as “third business” besides core RDBMS and ERP. Oracle built its business around data bases and from the very beginning it has dominated the database market, providing the data stores and central repositories to store critical business information that businesses must maintain, use and safeguard to complete transactions.

This has given it almost a monopoly and a very superior position when negotiating with customers. Oracle’s sales team that is always scavenging to find new sources of revenues, capitalizes on such an edge and leverages it to squeeze every dollar out of the customers – rightfully earning a fearsome reputation of being “hard-line negotiators” – and they are squeezing where it hurts the customers most – at their licensing and support costs.

However, like it had opened a third front by getting into Application Servers market, it has since then opened many more such fronts via its acquisition spree - Oracle has expanded well beyond just the databases and application servers and entered the business software domain as well, acquiring leader companies in domains related to technology infrastructure, sales, employees, inventory and customers. People typically use products from these acquired companies to track information related to these important entities. Undisciplined growth In their pursuit to keep up with their YoY growth, Oracle has descended into a very undisciplined growth.

There was also very unreasonable desire to grow into every domain. While growing via acquisitions, Oracle Executive Management has forgotten that it is not simply enough to acquire good companies, it takes good and dedicated diligence to grow them into great companies.

Take a look at spread of Oracle into sectors and even a layman would agree that it is stretching itself far too thin. If people outside of Oracle can’t understand why Oracle acquired Sun Microsystems, the confusion is equally evident inside Oracle as well. No one can put a figure on if Oracle acquired Sun for hardware market entry point or MySQL or Sun Solaris OS or was it a combination of all these and then some. Oracle has come out with an integrated ERP product suite – Fusion. The sales teams do not fully comprehend how to package Fusion compared to Oracle 12 version.

As such Fusion itself is at least four years too late. In its attempt to create a unified platform for ERP software, it has managed to successfully scare customer who want just a small focused set of modules – like AR and GL or Manufacturing. There was Steve Jobs who made the famous statement that “…we tell customers what they want…”. Larry Ellison can make the same claim – but to be successful at doing that, you have to be a visionary and not be distracted so hopelessly as Ellison currently is. And, customers seem to be last thing that Oracle considers while deciding these moves.

For example, many of Sun’s largest former customers were large Wall Street financial institutions, and they were really miffed last year when Oracle wanted to restrict their server and operating system choices to only Sun technologies. They relentlessly pushed back and Oracle had to ultimately give in to their defiance, reaffirming deals that would let companies like HP and Dell offer Sun software on their respective hardware. “Customers will always gripe about giving too much control to any one company,” said Israel Hernandez, director of software research at Barclays Capital.

Larry Ellison runs Oracle likes his personal fiefdom. The Oracle Board of Directors is merely a formality that is maintained to satisfy the Wall Street and SEC. Most decisions are taken unilaterally by Ellison and his leadership team. For example the 2010 hiring of ex-HP CEO, Mark Hurd, as a co-president after Hurd was fired by HP board due to sexual harassment allegations. Analysts viewed the hiring as a positive outcome for Oracle as it looked to expand. However, Mr. Hurd’s arrival was quickly followed by departure of one of Oracle long-timer, Charles Phillips. At one time, Charles was touted as Ellison’s protege and likely successor.

Oracle customers are worried about putting all their eggs in one basket. Almost every company that they tend to do business is being bought by Oracle – much to customers’ dislike. And for hosts of Oracle’s Annual Open World program, San Francisco city officials are running into dilemma of saying “No” to Oracle at some point for hosting the event, simply because it is unlikely that city could survive the demands of an Oracle four times its current size.

The typical strategy is to first make fun of competitors, then ridicule them and finally scare the wits out of the customers who were even thinking of adopting competitors’ products. If the competition still survives all this and continues to grow then Oracle does one of the two things – either it buys the competition or simply buys the number two in that space. They did this for Sun, HP, NetApp, EMC, VMWare, Siebel, PeopleSoft, Salesforce, Microsoft (for MS SQL Server). Most of the times, customers can see through this and continue their adaptation of new products from customers.

Most recent examples are Oracle’s taking potshots for two consecutive years in Oracle Open World 2010 and 2011 at Salesforce. com and then when it couldn’t wean away customers from Salesforce. com or slow down the ramp up, it launched its own versions of cloud offerings in 2012 Open World. Sun MicroSystems “Millstone” Around the Neck Whatever be the underlying rationale for purchase of Sun MicroSystems, Oracle is now challenged to make the whole acquisition viable. It now finds itself in the territory of hardware market that its sales team is so ill-equipped to sell.

The only option it had was to turn the Sun hardware into Exadata, Exalogic and Exalytic Servers and try to hoodwink the customers into buying this “supreme” computing machines. Much to its chagrin, not many customers are biting this new set of baits. Dark “Cloud” Space For a long time – almost three years – Oracle made fun of Salesforce. com, Amazon and Microsoft – specifically for their cloud services. It positioned the Exadata and Exalogic servers as new cloud servers that could provide as much computing power as tens of commodity hosts from these vendors cloud offerings.

However, around late 2011-2012, it became very clear to Oracle that Cloud hosting and cloud based multi-tenancy software are the future and it scrambled to buy as many Cloud services based companies as it could – examples are RightNow, Taleo, Virtue – all acquired within months of each other in 2011-12. Oracle needs to realize that just acquisition of a company by and in itself doesn’t position Oracle as a leader in that space – acquisition is just the start – Oracle thereafter needs to retain the talent in that company, invest and grow the company, integrate it seamlessly within Oracle’s other relevant product lines.

Unfortunately for Oracle, these are also the areas where it has failed most of the times in the past. Grasping for straws Good news first, Oracle has not yet reached this stage yet – in this stage, very perceptible symptoms are – changing CEOs and executive staff in quick rotation and changing the product directions every so often. However, there is bound to be a moment, not in very distant future, when we will find that eople will become so weary of Oracle products that Ellison will be either dislodged by a hostile board or will leave on his own.

He has essentially no succession plan in place except bunch of execs like Thomas Kurian or Mark Hurd who can stake their claim to the crown. Thomas is well respected within the company but lacks charisma and chutzpah of Ellison. Mark may not be as respected but has good experience of cutting costs – like he did at HP.

Death Knell

In this stage, a company either slowly vanishes into irrelevance or is acquired or merged into another competitor or goes belly up. For the sake of hundreds of thousands of professionals using, preaching and earning their bread from Oracle Technologies, I just hope Oracle never reaches that stage. Out of hundreds of companies that passed through this stage and vanished into oblivion, only two companies have thus far ever recovered from this stage – Xerox and Apple. Once again, I am sincerely hoping that Oracle never reaches this stage.

Will it be able to recover from this downward spiral? Oracle can arrest this dance towards its vanishing into oblivion – question that really begs for an answer is – will it have the honesty to first admit and then stop this march? First of all, Oracle should focus and determine its core strength and then focus on building up on those. There is no prudence demonstrated in draining money on acquisitions and then selling those companies at markdown, or worst, writing off the charge as a loss.

It is about time Oracle give up its greed on squeezing more money out of its customer and first create products and value that customers will willingly play obscene amount of money for.

References

1. http://finance. yahoo. com
2. http://www. oracle. com
3. http://www. nytimes. com/2010/09/22/technology/22oracle. html? _r=0
4. http://www. forbes. com/2001/10/29/1029orcl.
5. html http://www. zdnet. com/oracles-customers-a-bit-baffled-by-fusion-strategy-says-report-7000011143/
6. http://www. networkworld. com/news/2013/011713-oracle-cloud-265922. html
7. How the Mighty Fall: And why some companies never give in – by Jim Collins

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Is Oracle Dying. (2018, Jun 09). Retrieved from https://phdessay.com/is-oracle-dying/

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