I was laying awake early this morning thinking about Oracle.
Back when it was starting its $20 billion buying spree of companies
in 2006, analysts all said the strategy would fail. There were a lot of
compelling arguments why.
People said that the assets of a software company are the engineers
and the engineers would go elsewhere. People argued that Oracle
fundamentally didn’t know how to write good application software, and
they couldn’t buy their way into changing that DNA. People argued that
stitching together the disparate systems of PeopleSoft, Siebel, Oracle
into Project Fusion would create a Frankensteinian mess of unshippable
bloatware. I once wrote a BusinessWeek profile of John Wookey– the man
tasked with Fusion in the wake of all the purchases– called
“The Hardest Job in Silicon Valley.” It’s telling that he’s now
at Salesforce.
At the time, I was far more bullish on Oracle’s chances than all of
these naysayers for a few reasons. First off, a horrible business
application was all relative. The entire category sucked. Oracle’s
applications were worse than SAP’s, but no one relished using SAP
either.
PeopleSoft and Siebel were far better with their so-called “best of
breed” applications that focused on HR software and customer
relationship management. But even they were too hard to use, configure
and required employee training. There were famously millions of seats of
Siebel software sold in the late 1990s and early 2000s that were never
used.
Second, Oracle had nailed the hard stuff: The underlying technology
layer. SAP simply couldn’t compete on database or middleware technology.
There was so much pent up anger that companies had been forced to spend
billions on consultants to make enterprise software work together. By
the mid-2000s there was a huge push to streamine things to one vendor:
One person to call and scream at if things went wrong. One vendor that
couldn’t pass the buck. If you were going to go with one vendor, Oracle
was simply the better option because the underlying technology was just
better and that’s the stuff that had to work.
The third reason was that Larry Ellison just got what the market
wanted at that moment, and he played it perfectly. He knew that this was
a moment in time in the software application wars where the best
product simply didn’t matter, because everyone had resigned himself or
herself to the fact that enterprise software just chronically under
delivers on what the sales guy promises.
What customers wanted instead was convenience and stability. So much
work and money had gone into implementing these programs, and no one
wanted to rip them out, no matter how much they hated them. They would
happily just keep paying on-going maintenance fees to stick with the
status quo. By mopping up the cash-rich but growth-challenged enterprise
giants, Oracle could amass an installed base and bottom line that would
be the envy of the tech world.
Even a lot of the employees stuck around longer than analysts
expected. Because there just weren’t much better alternatives in an
enterprise world that was becoming a two-horse race between Oracle and
SAP on applications, and a two-horse race between Oracle and IBM on the
database front.
The wild-card was the looming threat of software as a service and
open source software. But while both were superior options for Web
business and smaller companies, both were seen to be risky bets for
large, staid organizations. Ellison saw the promise of SAAS– that’s why
he personally invested in Salesforce and Netsuite. But he knew Oracle
didn’t need to make any knee-jerk reactions because companies didn’t
want innovation back then. They wanted predictability and stability.
The best product didn’t matter.
The reason I’m suddenly turning less bullish on Oracle is that I believe that is finally changing. There are a few reasons why:
1. Time: Companies can put off installing new
technology for a long time, but not forever. We are finally reaching the
point where enough time has passed that the wounds of those horrible
1990s software implementations have healed. CIOs know they can’t keep
those stodgy old systems forever.
2. Millenial entitlement: The reason Oracle’s rollup
strategy won was because companies were pummeled into a place of
Stockholm-syndrome-like acceptance. When I was covering Oracle in the
mid-2000s, I spoke with customer-after-customer, and I can’t say any
ever
loved the software they spent millions on. No matter what
vendor they used. Most just sort of threw up their hands and said that
so many salespeople’s promises had been broken over the years, that they
were just resigned to the reality that no enterprise applications would
be easy, intuitive or do what they promised. It’s kind of like cable
companies. We just know they suck, and we don’t really expect more.
But this is one place where Millenial entitlement is a good thing.
Millenials are coming into the workforce and the generation has an
amazing capacity to demand the world revolve around their desires,
whether that’s reasonable or not. Millenials will just start demanding
better software from the companies they work for, and if they don’t get
it, they’ll start installing their own skunkworks implementations.
3. Technology: The technology underlying cloud-based
systems has gotten more sophisticated, and computing itself has changed
with the rise of iPhones, Androids and iPads. Applications can do
things now that they just couldn’t in the late 1990s.
As a result, some of those early promises of application software
that failed, may actually be possible. Take collaboration software for
instance. Billions have been spent on horrible collaboration software,
but for many teams something as simple and elegant as Yammer running on a
browser or a phone just works. Ditto, Jive and Asana. It actually
does make teams collaborate better and lessens the crushing load of email, in my experience.
Now, these tools don’t work for all workplaces and getting into real
enterprise level will still be a long land-war. Longer than most people
expect right now, I think. But these younger companies are starting with
what technology can do now, versus what it could do a decade ago.
4. Options: This ties into time and technology, but
the options on the market are finally starting to get substantially
better. So much better, that employees who work at a company with newer
tools will balk if they go to a new job with olders systems. CIOs are
finally starting–
starting– to see that truly intuitive “consumerized” technology that employees will actually use may be worth the pain of switching.
Any single one of the reasons wouldn’t have been enough to turn the
tide, but taken together, it’s a watershed moment for enterprise
software. Not only could it dramatically change how we all work, but it
could translate to billions and billions in returns for Silicon Valley
just as we enter a lull or mini-shakeout in consumer Web sites. Because
enterprise adopt technology so much slower than consumers, I’m
increasingly convinced we are at the cusp of something that only comes
around once every a decade or two.
Typically I think big public companies are inept, but I would not
count Oracle out. Ellison has long shown he viscerally gets where the
stock market, the customer and the technology are going. He may be
better at this than anyone leading a technology company today. He has
pulled off stunning and dramatic turn arounds of Oracle in the past. He
can force the company to shift out of sheer force of will, uncowed by
the near term pain he may inflict on customers, employees or Wall Street
in the process. That’s something that only Steve Jobs and Jeff Bezos
can do well.
But to win, Oracle will have to change its strategy as dramatically
as it did in 2006 when Ellison famously announced that software
innovation was dead and just started to buy everything. Buying once-hot
companies like Taleo and RightNow isn’t going to cut it this time when
there are better products in the market like
Workday and Salesforce.
I am quite sure that you have heard of 
