What the Oracle-Salesforce Lovefest Signifies to the Markets
Larry Ellison's entire business strategy can be capsulized in a single sentence: Companies, like sharks, survive only because they keep moving ahead. Sharks must move aggressively to keep water moving through their gills and food in their stomachs; companies move to keep money moving through their accounts, sometimes swallowing other companies along the way.
"It's like Woody's Allen's great line about relationships: A relationship is like a shark, it either has to move forward or it dies. And that's true about your company," Ellison said at a recent conference.
Ellison, co-founder and CEO of decidedly middle-aged Oracle, has kept that shark thriving for more than a generation, and that, my friends, is no easy accomplishment. Hats should be tipped in his direction for keeping Oracle relevant all these years--no question about it.
However, as everyone knows, there are games one must play in order to maintain this high-level status. Ellison, among many others, has accepted participation in acting out these games for the sake of his company, his reputation and his standing in the world economy. All public figures are actors to some extent; that simply is part of the job description.
Credibility a Question
Sometimes these games defy credibility.
Let's take last Thursday, for example. As a longtime veteran of staged news conferences for analysts and press members, I cannot remember a gooier slobberfest of love and affection between two company CEOs--Ellison and Salesforce founder and CEO Marc Benioff--than the one I heard June 27. There was truth behind the announcements, but the execution of the message was highly questionable in its sincerity.
Ostensibly, the news the other day was that Oracle and Salesforce.com, sworn enemies when it comes to selling cloud services, tools and platforms, signed a 12-year pact for Salesforce to continue to utilize Oracle's databases and Exadata analytics servers. That's fine for those two companies internally but hardly worth a headline on deadline--or at any other time.
Whether Salesforce decides to buy and deploy Exadata and Oracle 12c on its back end is not of interest to most people in the IT world; after all, the two companies have been doing business together for 14 years, ever since Benioff started Salesforce in 1999. Benioff has many times credited Oracle's hardware and software as the basis of his huge Web services business; that's not news in any sense of the word.
Ellison, Benioff: Frenemies
Ellison and his protege, Benioff--both powerful corporate leaders who keep their sharks moving ahead of their packs--may be friendly personally, but they are bitter rivals in many high-volume sectors of the IT services business. And those portions of the business are where most of their companies' future profits are going to be made: in the cloud.
It was significant that the two IT leaders acted out their lovefest press conference not in person at Oracle or at Salesforce, but in neutral waters: on a conference call. There were probably many reasons for this; convenience, travel, time schedules--whatever--are some of them. But the main reason as I see it was this: There's no way these two guys get on a stage in front of the media and analysts and keep straight faces, not with all the happy lines they were throwing at listeners. They also would have had to tolerate a lot of eye-rolling from the audience.
"One of the best decisions we ever made was to go with Oracle database to run our business," Benioff said. "I couldn't be more thrilled to announce that we've committed to another 12 years with Oracle."
"Salesforce is the largest cloud services company in the world," Ellison said. "We're delighted to continue our relationship with them. Our two companies are going to work together to jointly develop out-of-the-box integration between Salesforce's market-leading CM application and Oracle's cloud applications. These pre-configured applications will automatically share data and work together. Back to you, Marc."
Salesforce: No Software
"Thanks, Larry." And on, and on ... for a full hour. Sigh. Remember, one of Salesforce's monikers is the word "Software" crossed out by a red stamp. What does Oracle sell? Um, let's see: software.
The bottom line is this: Oracle needs Salesforce, Microsoft, NetSuite and all the other companies it is suddenly embracing because for the first time in a generation, Oracle is not all that far from a danger zone. It's a huge shark with 118,000 employees and bulging overhead.
Spending $7.4 billion three years ago for Sun Microsystems and all its hardware businesses has been a drag on its profits, and it was late to the cloud. Its income has leveled off, although it is still very profitable. The initial outlay for its products is generally very expensive, and there are a lot of equally expensive services involved.
Young companies coming into the market are eschewing all of that and simply running their businesses on cloud services provided by Salesforce, Amazon--and yes, even Oracle--and any number of other specialized providers. Why pay $1 million for an Exadata when you can swipe a credit card and get similar services from dozens of cloud-based providers such as 1010Data, SAS, Kognitio, JasperSoft, MarkLogic, Red Hat, IBM--we could go on.
Oracle is not alone. IBM, Hewlett-Packard, Dell, Hitachi, Fujitsu and a score of other old line companies are facing the same dilemma. Times and markets have changed, and some companies do not change quickly enough. The lessons of Sun Microsystems, DEC and SGI haven't been learned by everybody.
Truth, But Not News
We're not saying there wasn't an inkling of truth in the Ellison-Benioff hoo-haw the other day. There was plenty of truth, if not news.
And the truth, encapsulated, is this: The Tier 1 IT companies, with Oracle, HP and IBM in the lead, are scrambling big time to keep their gills full of water and their stomachs full. Over the next 12 months, we can expect an upsurge in sharks swallowing companies with forward-thinking cloud products and services.
It is a great time to be an IT entrepreneur, if not a shark.