Softwar
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The press conference itself, in front of what looks like an audience of well over a thousand, is a fairly dull affair. Scrushy speaks too quickly, Ellison looks uncomfortable having to share the big platform with so many others, and everyone else is determined to plug their companies in the few minutes they have been allotted. The audience in the vast hall, made up largely of HealthSouth employees, is attentive and respectful, but the warmest applause is reserved for the governor when, after running through a long list of modern Alabama’s achievements, he speaks of his happiness and pride that the state is home to the world’s first hunting and shooting trail for the disabled. Welcome to the New South. The local media’s questions are pretty desultory, but Ellison is happy to field one about the threat to patient privacy from storing everybody’s medical details on one vast database. Just the opposite, he says. Right now, there’s no security. Medical records are stored on paper folders in metal filing cabinets in doctors’ offices. Anybody might get to see them; about the only privacy is that a lot of records get lost. In the future, patients will be able to authorize who gains access and to what. If Oracle databases are secure enough for the CIA and the FBI, they should be sufficiently secure to reassure most patients. And that’s it. After a couple of interviews with the TV business channels, it’s back to the Sikorsky and the airport.
But before boarding the GV for Washington, D.C., there’s a customer meeting of a rather different kind. BellSouth, the local Baby Bell, has been having a torrid time with the Oracle software it’s using to run its call center serving new broadband customers. The two BellSouth executives who feel most exposed have taken advantage of Ellison’s presence in the region to fly a company jet down to Birmingham to tell him of their problems. The meeting is to take place in HealthSouth’s hangar. The hangar itself is another testament to Scrushy’s high-rolling ways. Within is a veritable air force of some eight planes, including a couple of Citations and the GV that sat in miniature on Scrushy’s office sideboard. Ellison is taken aback and makes a joke about the kind of “shareholder abuse” that went out of style with RJR Nabisco a decade ago. To some, he is surprisingly puritanical about such things. He is always quick to point out that his own indulgences, such as the GV, are paid for from his, rather than the company’s, pocket. It’s also a reminder that Scrushy is a somewhat controversial character. Despite his achievement in turning HealthSouth into a $5 billion company in the seventeen years since he founded it with an investment of just $50,000, his brashness and towering ego have made him a target for gossip on Internet message boards—to such an extent that he has hired detectives to seek out his invariably anonymous persecutors. In 1997, he also made headlines when his pay for the year reached $106.8 million, including bonus and stock gains. He’s received a number of death threats in recent years, and a very tough-looking security force constantly patrols the firm’s headquarters.
The BellSouth team—Ralph de la Vega and Lowri Groves, respectively the heads of broadband access services and customer technologies—is waiting for Ellison and Nussbaum in a little conference room at the side of the hangar. De la Vega seems fretful, an impression amplified by his gloomy little moustache. Groves, who once worked at Xerox with Nussbaum, has the exasperated air of someone who has already heard too many excuses and is expecting to hear some more. The CRM software they have licensed from Oracle, which is supposed to provide a self-provisioning service to customers buying ADSL high-speed Internet connections, isn’t delivering. In particular, de la Vega claims that the product is missing features that were promised some time ago. Smaller, nimbler broadband operators, he says, are meanwhile stealing market share from the Baby Bell. What’s more, de la Vega reckons that he’s in danger of going $20 million over budget, and he’s looking for Oracle to find a way of helping him out. To make matters still worse, a factory supplying some of BellSouth’s ADSL modems happens to be in Chechnya and has been bombed. De la Vega grudgingly accepts that this particular misfortune may be down to the Russians rather than Oracle, but he needs some convincing. Groves says simply, “You must get Ralph back on track and whole.”
Ellison privately acknowledges that there may be some additional features that the engineering team needs to come up with. But he suspects that many of BellSouth’s difficulties are self-inflicted—not least the overspend—and are the result of using systems integrators to modify Oracle’s software: the big no-no. Rather than start an argument about what’s gone, however, he declares himself “thrilled that you want us to change the software rather than change it yourself; it’s the best way to add the features you need.” He adds that he shares de la Vega’s sense of urgency in getting in the new features: “It makes us more competitive as well as you. We want to be successful in the telecom industry, and that means we need to make you successful as well.” He then asks de la Vega if he’s ready to talk about changes to business processes to get the best out of the software. As long as BellSouth can be treated as a partner and involved in the process reengineering, de la Vega is ready to do anything that will get him to market more quickly. He says, “We agree, no customization, we’ve been through too much pain already.” The quid pro quo is that he must have Ellison—“the guy at the top”—prepared to stay involved. There’s been some friction with Oracle members of the project steering committee. Ellison confirms Oracle’s desire to make “a substantial investment in telco CRM” and promises that he will lead the development teams.5
There is still the little matter of horse trading over where the $20 million is going to be found that de la Vega needs to stay in budget. It’s kind of a challenge, says Nussbaum. De la Vega throws in an offer to be a customer reference. He suggests something along the lines of “We grew fastest, had the best customer satisfaction scores, and we did it with Oracle. I don’t mind telling the world that you guys fixed it.” Groves hints that the rest of BellSouth’s consumer business might also move to Oracle if the steering committee can come up with a really telcocentric version of the E-Business Suite. Finally, Ellison suggests that they are going to need more storage disks to mine all the data they will be collecting on customers and that he might be willing to “see if I can let you guys purchase disks off our special deal with EMC [the leading computer storage firm].” Whether it will all add up to $20 million is far from clear. But for the time being, everybody is happy and optimistic. Ellison ingratiatingly concludes, “It’s important that our developers work closely with our biggest clients, like you guys; that’s the only way we can prove our software can solve your biggest problems.” With that, the meeting ends and after a last incredulous look at the HealthSouth air force, both teams board their own waiting jets.
• • •
After Birmingham, the next trip is to Washington, D.C. The visit has a double purpose: over lunch at the Four Seasons hotel, Ellison will host a roundtable of college heads to spread the word about what the E-Business Suite can do for higher education; later in the day he is to deliver the keynote speech at the Ronald Reagan International Trade Center to four hundred of Alcoa’s top managers. Alcoa, the world’s biggest aluminum producer, is just beginning its roll-out of the E-Business Suite and is potentially a vital reference customer. Jay Nussbaum has also sneaked into the timetable a secret meeting with Kevin Fitzgerald, a senior sales guy from Siebel Systems, the leader in CRM software and one of Oracle’s bitterest rivals. With his Siebel options several fathoms under water, Fitzgerald is prepared to jump ship to Oracle. Poaching between the two firms is nothing new—Tom Siebel is himself a former Oracle salesman—but any opportunity to hire key Siebel people is too good to pass up, and face time with Ellison is deemed critical to closing the deal.
The dozen university presidents produce a different atmosphere from the CEOs who normally come to Ellison’s roundtable events. They are administrator/politicians rather than businessmen, with some of the self-importance of the latter and the stiffness of the former. Ellison, with his youthful history of not hanging around long enough to complete universit
y courses, seems slightly uneasy and goes into contortions to affect a respect that he almost certainly doesn’t feel. But higher education is potentially a huge market if enough universities can be persuaded to work with Oracle both to standardize their processes and to help Oracle’s developers adapt the E-Business Suite to their needs. Ellison is hoping that these men—and with only one exception, they are all men—have been sufficiently chastened by trying to integrate a spaghetti of specialized applications from the small software firms that focus on the academic market that they will be receptive to his message.
Almost as soon as Ellison draws breath from his preamble, one of the academics asks what kind of deal they might get from Oracle. He argues that Oracle’s pricing should reflect the possibility that students introduced to the software at their university could become valuable customers in later life. Ellison says that Nussbaum has the authority to discount deeply but that what tends to cost most money in a software implementation is the labor to put it in, which can’t be discounted. “Our goal,” he says, “is to develop software that works out of the box, so you don’t have to spend a lot of money to change it. But to achieve that, we need a much closer relationship with our customers so that we fully understand their business processes. Then we can help you modernize those processes before we help you automate them. Don’t pay us or anyone else to adapt our software to the way you’ve been doing business for the last twenty years—if you do that, you’ll spend too much money and get too little benefit.”
Ellison goes on to say that what he wants is to open up a debate about finding standard ways—best practices—of doing things across a number of institutions. That way automation of things like student record keeping becomes cheap and easy. “Okay,” says one of the presidents with the satisfied air of somebody who’s about to say something extremely smart, “but we’re going to want our own bells and whistles.” It’s as if he hasn’t heard a word that Ellison has been saying for the last forty-five minutes. Adroitly, Ellison turns the remark on its head. The question, he says, is whether those bells and whistles are innovations that will work for other universities and become best practice. If they are, they should be added to the plain vanilla product.
Next comes the inevitable question about what Oracle is doing to “bridge the digital divide” and the equally predictable answers about all the virtuous things that Oracle is doing. “We are always looking for new programs that help narrow the digital divide,” mouths Ellison piously. Suddenly, however, he has an idea. From what he heard today, he says, there’s a need to link an individual’s records from different academic institutions to create a single lifetime learning record to support accountability and validate credentials. Oracle could create such a database as a public service. “Up till now we’ve been focused on building software for individual universities. But we could build a national student record database and put it on the Internet. Every university could use the system for free. But don’t mistake this for altruism. If we create a free student record ‘hub’ database, it’s more likely that universities will purchase Oracle’s ‘spoke’ software. In fact, most of you might find it more economical for Oracle to provide a national online student record service than each of you having your own student record system.”
He goes on, “We’re trying to think through the higher education market systematically. We want to make the same commitment to education as we’ve made to health care and manufacturing. Do we need more domain expertise? Absolutely, but we’ll never know as much about your business as you do. We cannot finish the E-Business Suite for education without your help. And we can be successful only if you’re interested in modernizing and standardizing your business processes. Look at our current software as a starting point and then help us better understand what we have to add to meet your needs. Is there the collective will to make this work? This is not just a pitch to sell software.” It does the trick. As the lunch breaks up, there is a sudden rush for reassurance. “My most urgent need is the student services module. If we sign on, is there going to be a commitment of resource to match the urgency?” “If I partner with you, will you be there for me?” Ellison smiles. The exercise in humility is over. “We are the largest enterprise software company in the world. There is nobody better equipped to do this right than us.” As Nussbaum works the table, fixing follow-up appointments, Ellison needs to say something funny: “The good news is that our E-Business Suite is brand new. The bad news is that our E-Business Suite is brand new.” Luckily, he says it in a nearly inaudible voice and nobody is listening.
It takes fifteen minutes in a back room for the laying on of hands with the Siebel deserter, and then it’s into the limos for the short ride across town to the Ronald Reagan Center for the Alcoa keynote. Steve McLaughlin, Oracle’s VP for product industries, is waiting in the car to brief Ellison on the status of the Alcoa account, but first he’s got some news about how relations are going with GE Power’s John Rice. Rice may be Oracle’s favorite customer when it comes to promoting the concept of the E-Business Suite, but McLaughlin complains he’s proving a “take-no-prisoners” negotiator over financial issues. “He’s a great guy,” says McLaughlin, “but he seems to think he shouldn’t have to pay. It’s kind of a macho thing with him about paying.”
McLaughlin’s tactic has been to offer Rice a large discount as an incentive for paying up front. Ellison tells him not to worry and not to offer any more discount. He says, “GE already gets a huge discount.” McLaughlin is concerned about not being able to book the revenue for the quarter, but Ellison just keeps saying that GE should buy the software when it needs it—not before.6
Before Ellison makes his speech, some time has been set aside for a meeting with Alcoa’s CEO, Alan Belda, who’s eager to give Ellison a progress report on Alcoa’s E-Business Suite implementation. Alcoa, with revenues of more than $20 billion a year, has operations in 381 plants in thirty-seven countries. Belda is using Oracle software to create something called the Alcoa Business System (ABS), an integrated, enterprise-wide e-business system that has been designed to bind the sprawling company together in such close collaboration that it will operate as if it were a single entity with the same business rules, shared services, a common industrial language, and unencumbered knowledge transfer across divisions and geographies. Belda has committed to spending $800 million over the next five years, all on Oracle. He’s taking the whole suite of manufacturing applications—order management, supply chain, human resources, financials, and manufacturing. At the same time, he’s set a target of taking $1.75 billion of annual cost out of the company and is expecting information technology (IT) spending to fall to 40 percent of its level in 1998.7
The meeting with Belda is low key but verging on the mutually congratulatory. Ellison describes what Alcoa is attempting as “daunting” but promises that if Oracle’s own experiences are anything to go by, the benefits will be “remarkable.” It seems that Alcoa is doing everything the recommended Oracle way. Belda says that for sixty days the majority of his time was spent with Oracle, working out how key processes should be reengineered. “I’m basically betting the whole of my business on you guys,” he says. What convinced him to go with Oracle was the promised speed at which the integrated suite could be deployed. There was a big internal debate, he says, between Oracle and SAP, “but it was kinda rigged.” KPMG’s (the consultants hired by Alcoa) idea of a fast SAP rollout was to do one location a month. “At that rate,” Belda says, “I would have been retired before they were through.”
Belda suggests that Ellison should concentrate his speech on the lessons learned from Oracle’s e-business transformation and what he has seen at other companies going through the same upheaval. Belda says that the biggest challenge he faces is with people—“half want to change, the other half don’t”—and he’s already noticed that he is encountering more resistance in the United States to the idea of mapping processes to the software rather than doing it the other way round. It’s just like with GE, s
ays Ellison. If they got the processes right in Hungary, their Houston plant shouldn’t need any modifications. “But that doesn’t take into account the human factor,” he says, “People are willing to automate their current processes but not change them. They think they’re already doing it the right way. Big companies have to standardize their processes across all their different locations if they want to automate efficiently. That requires a lot of change, and a lot of resistance to that change is inevitable.”
Now the speech has a higher purpose. It doesn’t have to be a sales pitch. Instead it has to get the four hundred Alcoa managers, on whom the success of Oracle’s software ultimately depends, to become true believers. It’s an opportunity for Ellison to do what he does best—inspire, flatter, amuse, and, finally, steamroller skepticism with his own massive certainty.
It’s the end of my first week on the road with Ellison. When you are around him, you cannot escape being evangelized. He can’t help it. The ideas come bubbling out, and he’s so excited about them that he has to share them. I have begun to think that selling software is a secondary objective for Ellison; what’s far more important to him is to recruit believers.
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1. LE writes: Actually, I didn’t invent the idea for a $20,000 version of the E-Business Suite on the fly during my meetings in China. The idea originated some time before, when a team of Derek Williams’s engineers started a project to preconfigure the E-Business Suite for smaller Asian customers. This special edition of our business software is now in the market and sells for less than $20,000, including installation.