What followed was that Oracle’s developers had to rewrite every ERP and CRM application so that they could all use a common data model. That meant overcoming the resistance of development teams who were convinced of the design superiority of their particular models. It also meant fixing on a data model that would be consistent across an entire range of interactions. For example, what is a customer? Is it someone that just buys stuff from us? Is it someone that buys our stuff through other channels? Is it someone we ship stuff to or who pays us for stuff we ship? Or is it someone who asks questions before buying stuff or after buying stuff, and does that someone expect to get service? A further problem was the inclusion into the data model of what are known as “multis”—languages, places, currencies, contact addresses. And so it goes on. If Ellison’s concept of a unified data model for all of Oracle’s applications was vital to waging war against complexity, achieving it would be a far from simple undertaking.
Almost as important as the datacentric approach that Ellison evangelized was the notion of completeness. “It can’t be simple if it’s not complete” had become Ellison’s latest mantra. Although rivals immediately derided the idea that any one company, even one as big and financially strong as Oracle, could do it all, Ellison did have software history on his side. He was only too happy to point out that he was only copying the successful strategy of Microsoft with Office, its market-dominant suite of personal productivity applications—“There used to be a best-of-breed PC software industry, but there isn’t anymore”—and SAP with its R/3 suite of ERP applications, which had swept nearly all before it, including less comprehensive offerings from Oracle, in the 1990s.
For Ellison, the central argument in favor of the suite approach was that it would give customers all the functionality they needed to transform their efficiency and even become e-businesses without the need to integrate other pieces of software from a multiplicity of vendors. Ellison was convinced that the suite would deliver all the things that best of breed had failed to: fast, fixed-price implementation; rapid information flows across and beyond the enterprise; seamlessly integrated operations between functions and territories thanks to the “single global instance” made possible by the Internet; real-time business intelligence for senior executives accessed through browser-based “dashboards”; a consistent user interface common to every application, reducing training requirements; speedy and graceful incorporation of anything from patches for fixing bugs to full-scale feature upgrades and new releases; lower ownership costs thanks to data consolidation and Internet-based support.
But to arrive at this IT Nirvana, customers, Ellison made it clear, would need to do more than just buy Oracle’s software: they had to sign up for the vision behind it—Ellison’s vision. And being Ellison, the way he expressed the vision was deliberately expressed to stir up the maximum amount of controversy. The messages were, “Just say no to systems integration,” and, “Don’t finish our software for us.” Some nine months after the E-Business Suite was released, Ellison used a speech at Oracle’s AppsWorld convention in New Orleans to explain the perils of customizing Oracle’s applications. To Oracle’s critics and competitors, it sounded very much as if Ellison was arrogantly (and if true, very foolishly) blaming his own customers for the problems many of them were having installing early versions of the E-Business Suite. The influential technology consultancy Forrester Research put out a vicious report accusing Ellison of attacking customers when Oracle shipped a piece of software that was allegedly so buggy that it had needed five thousand patches to stabilize it.4
In fact, Ellison wasn’t criticizing his customers at all. What he was actually doing was outlining a different sort of relationship between a software supplier and clients. In New Orleans he said, “We used to deliver incomplete software, and you would finish it. Now we’re delivering nearly complete software—software that will meet eighty to ninety percent of your needs without any changes. So we’re asking customers not to try to put in the last ten, fifteen, or twenty percent. If you do, you’ll fall into an old trap. If you heavily modify our software, it will be difficult and expensive for you to take a new version of that software a year from now. If you heavily modify our software and you call us with a question, we’ll have a hard time answering the question because you wrote a lot of the system, not us. You are better off, I submit to you, with an eighty percent solution installed and working in six months than fantasizing about a hundred percent solution that you might finish in two years after you write lots of custom code.”
The second part of his plea not to modify the E-Business Suite was based upon another aspect of what he saw as a changed relationship with the customer. The systems integration industry has successfully taught enterprise software customers how to buy software so that costly customization is an inevitable outcome. Typically, prospective users put together a team to draw up a Request for Proposal (RFP) of desired features and functionality. As a rule, partly these RFPs reflect the way the firm has traditionally done business, and partly they are a wish list of features that often quite low-level people suppose will improve the operation of their small bit of the organization. The result is software that is expensively adapted to lock in outdated and ill-considered business practices—a major reason why ERP installations have only rarely given an adequate return on investment.
With the E-Business Suite, Ellison wanted to turn that practice on its head. Instead, Ellison wanted customers to change their processes to take maximum advantage of the Internet-based best practice captured by the software. Ellison said, “Don’t tell us how you’ve been running your business for the last twenty years. Instead, let’s try to figure out how you want to run your business for the next twenty years. It’s a classic business mistake to say, ‘This is how we do business; change your software so we can automate it.’ A new approach is needed. First, you must simplify and modernize all your business processes, then move those newly standardized processes to the Internet. Only then can you expect the system to improve your business. Only then can you expect the system to be delivered on time.”
There was something reckless in all of this. Ellison was challenging customers to share his vision and, in doing so, change the way they operated their businesses. He was daring them not to touch the software he wanted them to buy from Oracle: “We don’t think our customers should try to finish our software. It’s too hard. We’re the world’s biggest employer of engineers from MIT and CalTech, and mathematicians from Harvard and Stanford, and even we have a hell of a hard time finishing our software. Customers shouldn’t try do it for us.” He was challenging the enterprise computing industry’s basic assumptions: “IBM says that what you need to do when you buy that Siebel system is modify it so it fits your business. So you modify it, and you modify SAP and you modify i2 and you modify PeopleSoft. You modify and enhance all this incredibly complex software. When you finish, your company is the only company in the world that is running this unique software configuration. I don’t care if this is the way everyone does it; we’re going to try a completely different approach.”
* * *
1. LE writes: It never ceases to amaze me how the product name can be the difference between success and failure in the technology industry.
2. LE writes: Digital Equipment Corporation (now part of Hewlett-Packard) had designed and built a beautiful ARM-based network computer they code-named “shark.” They were in the process of marketing them in China, among other places, when they suddenly stopped. Bob Palmer, Digital’s CEO, told me that Microsoft had threatened to retaliate against Digital’s PC business if Digital continued to build NCs. So I had an early glimpse of the type of tactics Microsoft would later employ to destroy Netscape. Its attack on the NC was just practice before the main event—the browser war.
3. LE writes: Even today, most customers split their applications software purchases between the software provider and the system integrator. While the software provider sells the software for a set price, the syste
m integrator will provide only a cost “estimate.” If there is a shortcoming in the software, the systems integrator will charge extra to fix it. These extra charges are typically many times higher than the original estimate. The best way to solve this problem is to make the applications software vendor or the systems integrator unconditionally guarantee the price of the software product and the cost of the project to put it in. And while you’re at it, you might try to pin down the cost of running and maintaining the systems once they’re installed. It never ceases to amaze me that companies continue to enter into large software projects without knowing the cost of installation, integration, operation, and maintenance.
4. LE writes: “Patch” is an unfortunate choice of words. A “patch” includes both bug fixes and enhancements to the E-Business Suite. So many of the five thousand patches were not bug fixes at all, they were new features we were putting into the suite in our never-ending quest to be functionally complete.
4
BEGINNINGS
When Larry Ellison says that he honestly thinks Oracle has it within its grasp to become the most important company in the world, he believes it. His eyes shine with sincerity, his smile is almost apologetic. It’s as if he knows that he shouldn’t say such things, but keeping something so exciting and so wonderful to himself would be unbearable. There are, of course, other reasons for saying it. It’s that business of burning his boats again. Just being successful isn’t enough. There has to be something more to play for, a reason to keep challenging oneself and others. When you have more money than you could spend in a thousand years, the stakes have to be big enough to get you into the office each day (or at least most days). Yet when Ellison makes these statements, it confirms the opinion of many people in their belief that he is slightly crazy, someone who has become so addicted to hyperbole that he inhabits an alternative reality.
That Oracle today is one of the world’s most successful companies is beyond argument. From its birth as a public company in 1986, its revenues have gone from a little over $20 million a year to a peak of more than $11 billion by 2001. It has operating margins of at least 35 percent even in a down economy and a cash pile that fluctuates between $6 billion and $8 billion. In the middle of 2000, its market value was more than $200 billion. Even after the “tech crash” it is still worth nearly $70 billion, twice as much as the combined values of Ford and General Motors. Many of Oracle’s 43,000 employees, particularly key developers and those who have been with the company since the mid-1980s, have become multimillionaires thanks to their stock options.
Most people are far less aware of Oracle’s software than they are of Microsoft’s, but it is just as ubiquitous and may have even more impact on their daily lives. Ninety-eight percent of the Fortune 100 companies depend on Oracle software to manage their information. Every time we use a credit card, buy a plane ticket, reserve a hotel bedroom, order from a catalogue, search Yahoo!, get a video from Amazon, settle a phone bill, or withdraw cash from an ATM, the chances are that we are interacting with an Oracle database. From its six shining blue-green towers overlooking San Francisco Bay, Oracle’s operations span more than 145 countries. Oracle’s OpenWorld convention in Tokyo attracts more than a quarter of a million visitors and outstrips even Comdex as the largest computer show in the world. In contrast to Microsoft, few would dispute that Oracle has been a ceaseless innovator, rarely working far from the technological bleeding edge.
Yet . . . it’s equally remarkable how many observers of the technology scene see Oracle as a company that never quite manages to realize its potential, never mind scale the vertiginous peaks of Ellison’s overactive imagination. Among the defects routinely identified are the failure, despite well over a decade of trying, of Oracle’s applications to match the success of its database; a habitual willingness to use customers to debug unstable application software; a cowboy sales force that’s good at driving through deals but couldn’t care less about what happens to customers afterward; hyperaggressive marketing that not only overclaims but insultingly belittles rivals; a consulting organization that complicates and sours relationships with channel partners by competing directly with them; a shallow management bench caused by an inability to hang on to executive talent; and (take your pick) Ellison’s excessively dominant role in the business or Ellison’s semidetachment from the business.
Who should we believe, Ellison or his critics? Does Oracle have the capacity for real greatness, as Ellison contends? Or is there something deep in its DNA and, by extension, Ellison’s, that will deny it the kind of respect, almost love, that people once had for Thomas Watson’s IBM?
A large part of this story is about Ellison and Oracle as they are today. But without an understanding of where Oracle has come from and how it has been forged by both triumphs and disasters in its twenty-five years of existence, the present is without meaning. Oracle’s founding and turbulent early years, leading up to what became known as its “near-death experience” in 1990, have been well documented. But relatively little is known of the struggles and rivalries that have made the modern Oracle: how, in the aftermath of that crash in 1990, the company regrouped, stabilized, and was forced to reinvent itself not once but twice; and in the process, how it increased its revenues more than tenfold in the course of a decade.
• • •
When, in the summer of 1977, the thirty-four-year-old Larry Ellison founded a little firm that he and his two partners, fellow programmers Bob Miner and Ed Oates, rather grandly named Software Development Laboratories, his ambition was pretty much in line with his thus far fairly modest achievements: namely to avoid having to do, as he saw it, unrewarding work for people he didn’t respect. He remembers, “My original goal was to build a company doing about ten million dollars of revenue and employing about fifty people. What motivated me was the desire to control my environment so I wouldn’t have to do things I didn’t want to do or spend time with people I didn’t enjoy working with.”
Ellison had left his hometown of Chicago eleven years earlier, having failed to graduate from either of the universities he had sporadically attended. Looking back, Ellison says, “I went to the University of Illinois for a couple of years, but during finals week my mother passed away, so I just packed up and left without taking exams. I didn’t like exams or the university or the town it was in, for that matter. I recall one exam where I just sat there for an hour, unable to begin because I was so angry that I had to spend the next three hours writing answers to questions I cared nothing about. I never had the discipline to do things I didn’t like. The classes at the University of Chicago were better, but I had such a short attention span that it was simply impossible for me to finish anything. However, I was intrigued by physics because it seemed to answer the most basic questions about our world. Like a lot of young people, I was looking for answers.”1
The one good thing that came out of studying physics was that Ellison ended up working at the Argonne National Laboratory as a contract programmer. As part of a physics course, he had to learn basic programming. “I just read the book. It was similar to doing math proofs. It was logical, and I was good at logic.” He quickly learned how to program the latest IBM mainframe computer. “I started doing contract programming. My short attention span didn’t work against me because I could get programs written very quickly. I ended up making quite a lot of money, and I only had to work a few days a week. It was fun and it was easy. And nobody cared if you were a Ph.D. from MIT or had never finished high school. Either you could do the job or you couldn’t. I loved that.”
For Ellison, discovering he was good at programming was both a validation of his intelligence and liberation from what he regarded as “absurd conventions.” He says, “People—teachers, coaches, bosses—want you to conform to some standard of behavior they deem correct. They measure and reward you on how well you conform—arrive on time, dress appropriately, exhibit a properly deferential attitude—as opposed to how well you do your job. Programming liberated me from a
ll that. I could work in the middle of the night. I could wear blue jeans and a T-shirt. I could ride my motorcycle to work. And I’d make more money if I could solve the problem faster and better than anyone else.”
With the money Ellison was now earning and skills that he knew would be in demand, he bought a secondhand Ford Thunderbird and headed for Berkeley, California. It was the summer of 1966, and “it seemed like the place to be.” Was he looking for a career? Not exactly. “Basically, programming gave me the freedom to screw around through my twenties. All I knew I was capable of was short bursts of energy. So I found jobs working on weekends as an IBM systems programmer. I would help run these huge data centers and fix the operating system on big IBM mainframes. Most people didn’t want to work weekends, so I had no trouble getting these jobs. Monday through Friday, I’d be hiking or rock climbing in Yosemite, kayaking down the Stanislaus or American River, or on a long bike trip down the California coast. I was in my twenties and having fun.”
Soon after moving to Berkeley, he met and married Adda Quinn. But the marriage didn’t last: “She was very bright and very pretty. But although we were the same age, she was mature and I was not.” The breakup triggered all sorts of feelings of self-doubt in Ellison. “My father had told me that I would never amount to anything, and now it seemed he might be right. I knew I could earn a living as a programmer, but where was my life going? I wondered if I could ever be disciplined enough to be anything more than a technology pieceworker.”
Despite the soul-searching, Ellison continued to live pretty much as before, doing less contract work but flitting from one Silicon Valley firm to another. Amdahl, a would-be competitor to IBM in mainframe computers, laid him off in 1973. He then went to work for Ampex. The company that had invented the magnetic tape recorder was working on a way of dramatically increasing the amount of information that could be stored in computer databases. The Ampex terabit memory system was, according to Ellison, a “very cool” project that the CIA had funded and code-named Oracle. At Ampex, Ellison also met his future partners, Bob Miner and Ed Oates.
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