Maybe Oracle CEO Larry Ellison should have eaten his young. Indeed, many of Oracles former managers are growing up, moving on and building software companies of their own. Thats not so bad, until you consider the cruel twist: Some of Ellisons former lieutenants are waging a turf war with Oracle.
Of course, Oracle certainly isnt hurting for money. The companys latest quarterly results, announced in December, easily beat analyst expectations. In addition to leading the database market, Oracles application sales are soaring, and new partner alliances are imminent.
Still, Ellison cant afford to sit back and count his stock options. Many of his former managers have joined companies or launched startups that compete in Oracles core markets. Ellisons list of aggressors includes Asera Technologies president Rohit DeSouza, PeopleSoft CEO Craig Conway, Siebel Systems CEO Tom Siebel and venture capitalist Ray Lane. All four Oracle alumni are chipping away at Ellisons software empire, with a particular emphasis on e-business applications.
Grand Plan Ellisons goal is to provide a one-stop shop for databases and high-end business applications. “It aint going to happen,” says Lane, the former president and COO of Oracle. “Even if Oracle had the best software applications in every area, it [end-to-end dominance] still wouldnt happen.”
Lane, now a general partner at venture-capital firm Kleiner Perkins, made those comments during a recent New York luncheon attended by [email protected] Partner. Lane was in the Big Apple to introduce Asera, a startup software company in Belmont, Calif. Lane sits on Aseras board, and Kleiner Perkins is an early investor.
Aseras software allows customers to view data in disparate applications from IBM, Oracle, PeopleSoft, SAP and other back-end systems. Pulling together these systems can be an arduous task. Consultants from Oracle and SAP, for instance, were unable to unify Cisco Systems back-end software during the late 1990s, according to Lane. Cisco ultimately took the project back in-house. Had Asera existed at the time, Lane suggests that the company could have saved Cisco lots of time and energy. “Oracle couldnt solve the problem,” says Lane. “Asera can.”
Aseras offices resemble an impromptu Oracle reunion, with additional Oracle defectors heading for Asera every month. The most recent executive to defect, Asera president DeSouza, says his charter is “to form new partnerships and leverage existing ones.” His goal is to drive Aseras technology more quickly into the marketplace.
Siebel Invasion Still in startup mode, Asera remains well below Oracles radar screen. The same cant be said for Siebel Systems, which is the reigning champion of e-business applications. Chairman and CEO Tom Siebel launched the company in 1993, after a stint at Gain Technology and a six-year tour of duty at Oracle.
Although Siebel burst onto the scene in the early 1990s, its star has grown even brighter in recent years. The companys revenue for 2000 surpassed $1.79 billion, up a rather incredible 121 percent from 1999. Similarly, net income skyrocketed 116 percent to $123.1 million during the year. Customers riding the Siebel rocket include Procter & Gamble, Verio and Walt Disney.
So, what makes Siebel so darn hot? The company beat Oracle to the applications punch several years ago, and Oracle has been counter-punching ever since. “Oracle can say whatever it wants about its application growth, but were the market leaders and thats not going to change while Tom [Siebels] on watch,” says one Oracle veteran who joined Siebel in 1998.
Large integrators and consulting firms like Accenture (formerly Andersen Consulting) are jumping on the Siebel bandwagon. Siebel says it now has more than 700 alliance partners (up from 450 allies in 1999). More than 6,000 consultants were certified as Siebel experts last year.
A Redmond Bombshell? Siebels next step could be a thunderous one. In a bid to beat Oracle in the small-business market, sources say Siebel is exploring a new alliance with Microsoft. The alliance would involve developing a small-business suite that includes Microsofts Windows 2000 Advanced Server and SQL Server, along with back-office applications from Siebel and Great Plains. (Microsoft acquired Great Plains in December.)
“Wed aim [the suite] directly at the midmarket, and cut Oracle off at the knees before it has a chance to move down from the enterprise,” says one Siebel insider. “We hope to use our relationship with Great Plains as a doorway into Microsofts offices.”
Siebel and Great Plains already sell an e-business software suite for midsize customers. More than 600 Great Plains partners are certified to sell the suite.
“Now, imagine if Microsofts solutions providers were authorized to sell a suite packing our software with Great Plains and Windows 2000,” says the Siebel source. “It would give Larry [Ellison] fits in small business.”
Power to the People Siebel isnt Larrys only worry. Another Oracle defector, Craig Conway, is leading one of the industrys most unlikely turnarounds at PeopleSoft. After riding the client/server wave in the early 1990s, PeopleSoft nearly drowned when it missed the e-business boat.
PeopleSofts problems were both cultural and operational. Founder, chairman and former CEO Dave Duffield built a comfortable, easy-going corporate culture that kept PeopleSofts turnover low. But the company lacked the leadership spark that it needed to compete head-on with Oracle, Siebel and other hot players in the e-business world.
Enter Conway, who put on the CEO crown in 1999 after a stint at OneTouch Systems and an eight-year run at Oracle. Conway immediately overhauled PeopleSofts R&D operation and lit a fire under company employees.
Most PeopleSoft managers speak highly of founder Duffield, but they acknowledge that Conways management style was the perfect medicine for the ailing company. “Craig stepped in an focused our business, honed our operations and instilled a sense of urgency around here,” says Jeffrey Read, VP of worldwide marketing for PeopleSoft Consulting.
“[Craig] challenges us, and he has a natural appetite for knowledge,” adds Michael Gregoire, senior VP for PeopleSoft Global Services, North America. “Hes genuinely interested in how we [PeopleSoft managers] run our businesses. Youll see him interacting with PeopleSofts management team in a hands-on fashion relatively daily.”
Deal Maker In addition to shoring up PeopleSofts traditional businesses, Conway quickly targeted new markets. The biggest move came when PeopleSoft acquired Vantive in October 1999—only five months after Conway had joined the company. The $433 million stock deal gave PeopleSoft a fast entry into the explosive CRM market, which is growing 50 percent annually. Vantive also put PeopleSoft back in the game against Oracle.
The acquisition has paid fast dividends. PeopleSofts sales grew a healthy 17 percent to $1.2 billion during the first three quarters of 2000. Even more impressive, PeopleSoft generated a $101 million profit during the first three quarters of 2000, compared with a $172 million loss for the corresponding three quarters in 1999.
Still, many PeopleSoft partners and investors are holding their breath, as PeopleSoft prepares to announce Q4 2000 results this week. Some skeptics wonder if the IT spending slowdown will hurt PeopleSofts Q4 results.
As we went to press, anecdotal evidence pointed to another strong showing for PeopleSoft. Oracle and Siebel, for instance, both delivered blowout results in their most recent quarters.
PeopleSoft is expected to do the same, thanks to new products like PeopleSoft 8. The software suite, delivered last summer, was rewritten from the ground up for the Internet. It includes CRM, supply-chain management, HR and financial applications.
Early sales appear to be strong. During a financial conference last week in Scottsdale, Ariz., Conway proudly proclaimed that PeopleSoft has received more than 1,000 orders for the new software suite. Early adopters include 3M, Sprint and Washington Mutual Bank. “Market demand for PeopleSoft 8 has been phenomenal,” Conway told conference attendees.
Conways statements were a calculated risk, coming only a week before PeopleSofts pending earnings announcement. Most CEOs decline to discuss business prospects on the eve of earnings week. But Conways words were a not-so-subtle attempt to tell Wall Street that business remains strong.
PeopleSofts partners agree. Just ask integrators like Acuent of Parsippany, N.J. “PeopleSoft is booming,” says Chris Tilden, a senior consultant at Acuent. “Were putting together proposals right now for PeopleSoft 8 installations.”
Tilden expects business to get even stronger when PeopleSoft 8.2 arrives within the next few months. “A lot of companies are waiting around for 8.2, because they dont want to go with a dot-zero release,” he says.
Still, rebounds like PeopleSofts are difficult to maintain. Many companies—from Apple Computer to Novell—have climbed up off the canvas, only to get knocked back down again.
PeopleSoft insists that it wont suffer the same fate, because the company has branched out into new markets. “About two years ago, we transformed from an HR-specific company,” says Read. “We started selling more financial [software] than HR [software] around mid-1997. Thats our legacy, and HR is where we came from, but thats not our growth market today. Craig Conways vision was a pure, full Internet solution, with a complete suite that included CRM. His vision gave us a balanced portfolio of products and services.”
Conways vision could come back to haunt Larry Ellison, but its hard to bet against Oracle. Despite staff defections and mounting competition, Ellison continues to produce record revenue and income for Oracles shareholders. In particular, the company says sales of its e-business suite and CRM applications are showing remarkable growth. Recent adopters include American General Corp., Compaq Computer and JDS Uniphase.
“Everybodys been betting against Larry ever since Ray [Lane] left Oracle last year,” says an Oracle veteran now at Siebel. “I certainly wouldnt bet the house against Oracle, but I would put a few chips on us.”
So, does Ellison still hold the winning hand?