IBM welcomes a new round of competition with Oracle now that the database giant has Sun Microsystems’ assets integrated into its technology base, according to a high-ranking IBM official.
In a sweeping conversation with eWEEK, Steve Mills, IBM senior vice president and group executive in charge of IBM Software Group, spoke on a range of topics including competition with Oracle.
You might say Oracle raised the ante, not only by acquiring Sun after buyout negotiations between IBM and Sun broke down, but by claiming that the addition of Sun’s assets now makes Oracle “like the IBM of the ’60s.” Indeed, at the Oracle + Sun Strategy Update event on Jan. 27, Oracle President Charles Phillips used that phrase several times. And if that nod to imitation was not the sincerest form of flattery for IBM, Phillips basically called on experienced software sales people to come and work for Oracle; Phillips pledged to pay them better and treat them better than their present employers did. Not surprisingly, IBM viewed that challenge as a call out to its sales force.
Of that challenge, Mills said: “Well, I won’t deny that they have the wherewithal to pay people a lot of money if they choose to. Now are you going to pay your whole sales force a lot more money? In which case your cost of goods sold is going to go up. We certainly pay our sales reps competitively. Now, I would take exception to being treated better.”
Yet Mills admits that Oracle is a formidable opponent, particularly on the sales side. “Their selling style is obviously very aggressive and very financially driven,” he said. “They’re not a company that likes to benchmark. They really don’t want to get involved in proof-of-concepts and bakeoffs and benchmarks and so forth. Their view is they’ll just move on to another customer. In fact, Larry [Ellison, Oracle’s CEO and chairman] has said publicly that he has enough customers. That’s kind of an odd view. It’s not one that I buy into. I don’t think any business can ever have enough customers. Unless you’re a craftsman with your own little shop. But as a big, public company it’s sort of hard to accept the idea that you don’t need more customers.”
Not mincing words, Mills added about Oracle:
““They’re out there with very aggressive selling tactics; they do a lot of wrap and roll kinds of deals. The more technology they’ve acquired, the more financial engineering that goes into the Oracle sales proposition. And that is a technique that can at times be a formidable technique. I don’t think it fools the customer. The question is do they sign up for even more Oracle technology recognizing that Oracle is trying to implement a form of price control on them? Or do they think twice about over-committing to Oracle in light of Oracle’s pricing practices? Because the pattern here has been very clear: They buy a company, they take people out and then they raise prices. You talk to any customer that’s been a user of the technology that Oracle has acquired and they’ll tell you that’s what they’ve seen. It’s a consistent pattern of resource reduction and price increase, particularly around subscriptions and maintenance fees and things of that nature. And that has some people very concerned about what Oracle is going to do now that they own Sun.”“
Meanwhile, Mills said that Sun never figured out how to make money from Java, though he expects Oracle to make more of a go at it. “We didn’t create Java but we saw value in it,” he said. “Prior to their purchase of BEA, Oracle was an also-ran in middleware. And the BEA product was on a downward trend. So I don’t see a pattern of Oracle taking away share. Maybe they will try to do something like charge more to license Java, but there are alternative ideas out there, like Harmony.” Harmony is an open-source Java platform from the Apache Software Group.
And speaking of market share, Mills said IBM will approach Oracle as it always has. “Despite what Larry says, we started delivering distributed database in 1993,” Mills said. “We’ve taken share from Oracle every year for 17 years. Because my share started at zero. Oracle was launched in 1978; we didn’t go into his space until 1993. So we’ve gained a lot of share at Oracle’s expense.”
Mills also said be believes Oracle’s biggest challenge is that the database company “bought a hardware company and they have to sell boxes. How do they sustain that enterprise? The Sun installed base has been getting smaller and will get smaller still under Oracle.”
Moreover, Mills said he believes IBM is a more customer-oriented organization than many of its competitors. “This is a customer-focused business, not a vendor-focused business,” Mills said. “If you watched the five hours of rhetoric from Oracle at their event to announce their Sun strategy, how much did they talk about customers? Not very much in five hours.”
Robert LeBlanc, head of IBM’s Software Middleware Group, told eWEEK, “We listen to the market, we listen to the clients, and we continue to focus in on what does the market want. And what is it that clients are trying to solve?”
““Some others focus on competition, and say: ‘I’m going to go kill that company.’ Well, you can focus on competition but at the end of the day, competition doesn’t make a decision on what’s being bought, the client does. So if you understand the client’s wants and needs better than your competitor, that’s a better way to compete than going and badmouthing your competitors.” “