Executive shakeup

By Jim Louderback  |  Posted 2004-01-29 Print this article Print

The recent management shake-up at Oracle, where Safra Catz and Chuck Phillips were promoted to president, and Jeff Henley to chairman, was a topic of conversation around the show. Heres Larrys response to why he did it. "It was all designed for one simple focus: to have our senior executives spend more time with customers. Thats priority one, two, three, four and five. Jeffs been our financial officer for a while, and weve had conversations about the best ways for him to spend his time. And thats with customers. The more time Jeff spends with customers, the better input and the better management decisions we make. They [Katz, Phillips and Henley] are going to be spending much more of their time with customers, so we have better information from our customers on what were going to emphasize and what were doing next."
Ellison went on to discuss why he gave up the chairman role, but stopped himself as he began to discuss what, exactly, his role is to be.
"Ive been chairman of Oracle for half the time Ive been there. [Ellison reels off a list of other Oracle chairmen from the past.] Im not an expert in accounting, Jeff is. Im not up on all the new rules. Jeff is. He knows Oracle from the inside. And I cant think of anyone better equipped. But that was Priority 1a. Spending more time with the customers was Priority One." "And we certainly want to keep Jeff around too." (laughter). There was a lot of talk about pricing, particularly since the cost of 10g hasnt been announced yet. Ellison was critical of industry-standard pricing models based on processors or users. "I think all pricing models have flaws. Theres always an edge condition. The best model is an employee pricing model thats annual. Lets count employees, and then give a company all the Oracle you can eat for—pick a number—say $100 an employee per year. "Its very difficult for our customers to even count processors, or users of systems. Ask a large company how many processors they have! They just dont know. Its a much more convenient pricing model to count the number of employees you have each year. I think thats a much more reasonable approach to pricing, and thats a direction wed like to go. Right now you buy the product, and then pay a 20 percent subscription service each year. My favorite situation would be to have no new license sales and all subscription services." Ellison used his bully-pulpit as an opportunity to chastise the financial analysts for failing to see what he considers a fundamental piece of Oracles business. "Whats not well-understood about Oracle is that if nothing changes, if we sell $3 billion worth of new software—same as last year—our profits go up $600 million. You would say Oracle didnt grow. But because the subscription service goes up 20 percent [of that $3 billion number] we add $600 million in profit. We cant avoid it. We can figure out some way to spend it, I suppose. But the most profitable part of our business is our subscriptions, not new software sales. "That subscription is a very interesting line. They think its part of our service business. Its not. Its part of our software business. And there is zero cost. Zero service. If software sales do increase, its more! "We think our margins can expand very substantially. I dont think we want to control the expansion [what some people call investing]. I think we have more sales capacity. Well have more efficiency, and more use of telesales. Theres plenty of existing capacity to grow our sales. So you should see a top line growth of sales. Youll see substantial margin expansion." Larry went on to suggest that a 50 percent margin is feasible, although Oracle has yet to hit 40 percent. After he left the room, newly minted Chairman Henley took the stage and tried to clarify Ellisons discussion of margin—focusing on 40 percent first. Henley was then joined by new presidents Katz and Phillips, who clarified the pricing discussion—saying that a completely subscription-based pricing model is a long way off.

With more than 20 years experience in consulting, technology, computers and media, Jim Louderback has pioneered many significant new innovations.

While building computer systems for Fortune 100 companies in the '80s, Jim developed innovative client-server computing models, implementing some of the first successful LAN-based client-server systems. He also created a highly successful iterative development methodology uniquely suited to this new systems architecture.

As Lab Director at PC Week, Jim developed and refined the product review as an essential news story. He expanded the lab to California, and created significant competitive advantage for the leading IT weekly.

When he became editor-in-chief of Windows Sources in 1995, he inherited a magazine teetering on the brink of failure. In six short months, he turned the publication into a money-maker, by refocusing it entirely on the new Windows 95. Newsstand sales tripled, and his magazine won industry awards for excellence of design and content.

In 1997, Jim launched TechTV's content, creating and nurturing a highly successful mix of help, product information, news and entertainment. He appeared in numerous segments on the network, and hosted the enormously popular Fresh Gear show for three years.

In 1999, he developed the 'Best of CES' awards program in partnership with CEA, the parent company of the CES trade show. This innovative program, where new products were judged directly on the trade show floor, was a resounding success, and continues today.

In 2000, Jim began developing, a daily, live, 8 hour TechTV news program called TechLive. Called 'the CNBC of Technology,' TechLive delivered a daily day-long dose of market news, product information, technology reporting and CEO interviews. After its highly successful launch in April of 2001, Jim managed the entire organization, along with setting editorial direction for the balance of TechTV.

In the summer or 2002, Jim joined Ziff Davis Media to be Editor-In-Chief and Vice President of Media Properties, including ExtremeTech.com, Microsoft Watch, and the websites for PC Magazine, eWeek and ZDM's gaming publications.


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