On the Other Hand

It’s worth taking another look at the Siebel-Oracle merger from a different angle. Too often we make a snap judgment in this kind of situation and it becomes fixed in the mind never to be seriously re-examined. Rather than that, I did a thought experiment the other day starting with the presumption that Larry Ellison has a grand strategy and that the strategy will work. It goes like this.

I think we can dispense with questions of whether or not Larry Ellison is pretty smart and knows what he’s doing. In his long and rather colorful career, he has gone from being a startup to dominating an industry he helped create. Many people may not like some of the methods he used on the way up the hill, but that only puts him in company with Ford, J.P. Morgan, Carnegie, Vanderbilt and a long list of others. People generally don’t like the disruptor very much until he’s dead, then we largely remember him for his philanthropy — ironic if you understand the Greek origin of the word.

The Goal

Oracle wants to be number one in business applications beating out SAP in the process. How does it get there? They can, and have, bought a lot of last generation software companies with large installed customer bases, but even an optimist would not call a company of cobbled together applications dominant. To get to the number one position, Oracle has to find a way to leapfrog whoever is in the top spot now and the way to do that is through innovation.

I have previously criticized Oracle for buying customers (through company acquisitions) rather than innovating new products and winning new customers the old fashioned way, and I think it’s a valid point. In the long run, no company can survive simply by consolidating the competition, and it certainly cannot become number one unless it’s the last survivor. My point is that Oracle may have a different plan.

Although Oracle is in the applications business, it has frequently been the runner up. It has good products in ERP, but SAP is at the head of the class. Similarly, it has serviceable CRM, but Siebel leads that area by a comfortable margin — PeopleSoft had better CRM market share than Oracle and so does SAP.

Leapfrogging Strategy

As I said at the beginning, when you think about leapfrogging the competition you need to have a plan that does more than achieve parity with the competition. Oracle’s strategy has to be the delivery of a full suite of on demand, integrated, front and back office, solutions for the enterprise, but to do that, Oracle needed to bring in expertise and product from outside. There are few companies that have been successful with the on demand model. Obviously, Salesforce.com did it but I’m betting that the markets and the SEC would never allow Salesforce to be absorbed by Oracle.

Siebel’s on demand solution was in many ways a better fit for Oracle’s purposes. Siebel has the in-house expertise in on demand that Oracle needs (thanks in part to Siebel’s earlier acquisition of UpShot), and Siebel also has a lot of experience dealing with very large implementations at the enterprise level. Also, Siebel’s base of vertical applications and massive investment in things like its architecture and tools (and some cool stuff in the pipeline) make it a good fit for Oracle provided Oracle lets the Siebel people do their thing. Finally, culturally, the two companies share memes — the social equivalent of DNA. Tom Siebel is one of several former Oracle executives who have done well starting or running companies using techniques learned at Oracle.

Oracle as Consolidator Doesn’t Wash

Other people might continue to harp on the “Oracle has become another CA” theme, and they might be right. I tried it, and even though I don’t have all the inside information that went into the decision, it just doesn’t feel right. Certainly, if Oracle fails to deliver on the grand unified vision, those criticisms will grow.

If I was Larry Ellison right now though, I would probably welcome the criticism I’m getting because there’s nothing better in this situation than surprising the market and your competition, and no better way to do it than with a little misinformation spread by the people who “just know.” I hope I am right.

It would be very good for the entire tech sector and global business in general if we could forecast a time when the infrastructure of computing is recaptured by the solution provider. Some of the largest potential markets on the planet — Russia, India, South America, and China — could benefit greatly from an IT architecture that significantly reduces infrastructure costs.

While Salesforce.com — as well as NetSuite, RightNow, and some others — has been selling this idea consistently for six years, it will probably take more than a handful of emerging companies to take the market to the next level, and a company with Oracle’s stature would provide some additional leadership. I could be very wrong in this analysis and only the passage of time will clarify the situation, but the necessary drivers seem to be in place. Most of all, Larry Ellison is a complete original and I can’t see him being just “another” CA, or another anything else for that matter.