Just Trying to Outflank IBM Should Not Be the Strategy
Why Hurd Will Be Key to Shaping the New Oracle
Like a lot of business leaders, Mark Hurd has a history of being willing to play the heavy when joining a company.
Not just anybody can do the dirty work of cutting costs, programs and jobs. Hurd was well-known for doing that as CEO at Hewlett-Packard after he replaced Carly Fiorina in March 2005, and he had done similar duty at NCR previously.
Now Hurd, who was forced to resign from HP Aug. 6 following allegations of sexual harassment and a subsequent financial cover-up, is preparing to take a new position: co-president of Oracle under the direction of his longtime friend, Oracle CEO and co-founder Larry Ellison.
At the start, at least, Hurd will be working alongside co-president Safra Catz, a formidable executive in her own right. This will be a new experience for Hurd, since he's never co-owned any high position in business; he's always been the No. 1 guy.
Analysts contacted by eWEEK agreed that Ellison
is making a statement by immediately hiring Hurd after his Aug. 6 ouster at
HP, the world's largest IT company. That statement would be that Oracle is
completely serious about competing with both HP and IBM
at the highest levels for enterprise IT systems business.
It also would mean that HP wasn't too smart in letting go a chief executive who brought the company back from wandering in the wilderness a mere five years after it was stumbling on its own roadmap following several huge bad decisions -- not the least of which was buying Compaq.
By the way, Oracle said Sept. 10 that Hurd will participate in a keynote session at Oracle's OpenWorld event later this month in San Francisco-despite a pending civil lawsuit brought by HP. Hurd signed a confidentiality agreement with HP as part of his $40 million severance package, and HP officials say they do not believe he can honor that agreement if he takes a position with Oracle.
Hurd will join a group of speakers in the first all-conference session Sept. 20 at 8 a.m. The session includes former Sun exec John Fowler, Oracle's executive vice president of systems; Edward Screven, Oracle's chief corporate architect; and Noriyuki Toyoki, corporate senior vice president of Fujitsu. It is unknown whether Hurd will be able to say anything noteworthy or if he will simply introduce Fowler and the others.
Hurd: Good for short haul, perhaps not for long term
Christine Crandell, senior vice president of marketing at Accept, has another point of view about Hurd's potential profound influence on a company with 105,000 employees. Crandell has a wealth of enterprise software experience, having served as an executive at various times at Oracle, virtualization software maker Egenera, Ariba and SAP America.
Crandell said it's questionable whether Hurd's executive history will serve Oracle well in the long run, since his strength is cost containment.
"When Mark was at HP, I can fully understand why he was the darling of Wall Street," Crandell told eWEEK. "He did what he had to do. He cut areas of the budget in order to give Wall Street what it expected for short-term financial results. He also chose to cut R&D a great deal. But that orientation is not going to be viable going forward."
All important executive decisions certainly must be grounded in fact, Crandell said.
"Looking at what Hurd had done at HP, clearly he made some hard decisions with the best data he could get," Crandell said. "But Oracle's situation is different from HP's.
"Are they going to do M&A as it's always been done, in the quest for accretive earnings, or are they actually going to look at how to mix these innovation pieces together so that they actually come out of this as a new Oracle that brings even more substantial value to the market?"
Oracle is in the process of digesting 27,000-person Sun Microsystems after having acquired it for $7.4 billion in January. Although Sun brought hardware, software and service products Oracle lacked, there are still areas of overlap, and headcount has been lowered substantially-with still more people expected to go.
Hurd, who reportedly will make $11 million per year to start, will likely be the guy to make the additional cuts.
"When it comes to Sun, Hurd's job will not be just about cutting costs; it'll be about, 'What is the new Oracle?'" Crandell said. "What are the pieces of this organization that we have to bring together, and what is the plan to achieve the objective? And that has a lot more importance than just where to cut costs and headcount."
Just Trying to Outflank IBM Should Not Be the Strategy
Simply trying to be bigger than IBM or HP isn't going to be the right way to go, Crandell said.
"There's an awful lot more opportunity here than just trying to squash IBM," she said. "Oracle has an opportunity to create whatever the next-generation model is, in aggregate of where the enterprise tech industry is.
"We're clearly at a point in which the consolidation has been going on for a time. It reminds me so much of back when mainframes were thought to be dead, and up came client-server and open systems that everybody heralded as the new reality. We're at that same point again in history."
Oracle has a unique opportunity that few other companies have: to really stake out the shape of what that new business and technology model is going to look like, Crandell said.
"They have all the pieces. They've done it over their 60-whatever acquisitions they'd made over time. When I look at Mark Hurd and the many assets he brings to the table, the question that looms is: Can he, Larry and Safra make the sum of the parts greater than the whole?"
Will Hurd and Ellison agree on R&D approach?
Whether or not Hurd actually will be delving into Oracle's R&D remains to be seen. Ellison, though a close friend of Hurd's, may have a different view on R&D, so it's going to be interesting to see how this new relationship works, Crandell said.
"We're in something called the 'innovation economy,' in this recessionary period," Crandell said. "The rule of the game is: If you don't have a heavy pipeline of innovation-it doesn't have to be earthshaking innovation, incremental is OK-you're not going to be able to survive, to grow."
Crandell pointed out a pair of market reports, one by PRTM that said 50 percent of all R&D dollars never return a profit-ever. The other is from Gartner, which reported that 49 percent of product launches fail every year.
"The concern, keeping those 50 percent statistics in mind, is that this [cutting costs to the bone] strategy, while it works in the short term to manage the stock price and manage shareholder satisfaction, in the long term-if there isn't a mechanism in place internally to make sure that every dollar you spend in R&D produces a return ... can create quite a lot of problems," Crandell said.
You can cut R&D, Crandell said, but you must make optimal use of that good 50 percent of the R&D budget. The right kind of mechanism for this, she said, is one that makes use of every R&D dollar spent by making sure that the right products are brought to the right markets at exactly the right time in a systemized, transparent process.
So getting the R&D right is a business-critical factor, Crandell said. And she's not sure Hurd is the guy to do that.
"There has to be a real hard look at what innovation is brought to the table, and, 'How do I mix the pieces together so that the sum is greater than the whole?'" Crandell said.