Management Strategies

12:33 PM
By Laurie Sullivan, InformationWeek
By Laurie Sullivan, InformationWeek
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The Changing Face Of Oracle

CEO Larry Ellison talks about the company's new presidents, new products, its hostile bid for PeopleSoft, and international markets.

Oracle is one of the world's major software companies, and its database and applications help power the IT operations of many large businesses. Larry Ellison, the company's outspoken CEO, has strong views on the state of the business-technology industry and his company's position in it. Earlier this week he sat down with InformationWeek associate editor Laurie Sullivan and other reporters to discuss the changing face of Oracle, the hostile takeover bid for PeopleSoft Inc., grid computing, new products, and international markets.

Ellison explains the company's new management structure:

"The company is divided into multiple parts. Charles Phillips runs marketing, sales, and field service operations. Safra Catz runs the internal operations. I've seen them called Mr. Outside and Ms. Inside. Charles runs the front office and Safra runs the back office. It works quite well."

But he denies that the management changes are in response to reports that PeopleSoft passed Oracle in size:

"They claim to be No. 2. But let's take a look at the quarters. They are shrinking at a very rapid rate. I think the companies' new license revenue are very close to equal in size. We have many more ERP customers then they have. They specialize in HR. I don't think they are bigger than we are. And if they are, it is really, really close, quarter by quarter. All I know [is] our business grew by 27% last quarter and theirs shrunk enormously. If you look at how big J.D. Edwards and PeopleSoft were as two separate companies and put them together, they got dramatically smaller."

Ellison dodged a question on what happens if Oracle's bid for PeopleSoft fails:

"The decision is not mine. It is up to the board. If the Justice Department decides to block us in court, we will decide whether to take the Justice Department to court. I don't have the authority to make that decision. I can't make that decision. It must come from the Oracle board of directors."

Grid computing has a place in the enterprise, but Ellison says it may cause Oracle to move to a per-employee licensing approach:

"We are very precise on what we mean by grid computing. Grid computing on the Internet [is] hopelessly impracticable for security reasons. I don't think Bank of America is going to take all its depositors' data and ship it to different desktop computers on the Internet at night. Using the Internet as a grid has nothing to do with enterprise computing. Our definition of enterprise grid computing means it has to be secure. We would have a dedicated grid of computers inside the firewall. You can have whatever kind of processor you want. Having said that, you are likely to have a lot more processors than before. I think you will see us migrating toward an employee licensing model rather than a processing licensing model."

Why will businesses have more processors?

"The way we license our software is the high-water mark of the number of processors that are running Oracle. That is the conventional way. You can go from $50,000 for a processor, where we are now, to $2,500. Rather than have 10 processors, customers will have 40 processors because they are so cheap. I think people will be using more processors. Hardware will no longer be the barrier to using more processors. The software license cost will be the barrier and we will have to find a different metric. You will eventually see us with an alternate pricing model."

Ellison was asked how technology could help to improve the healthcare system.

"We could take everyone's medical records and have the patient decide whether to opt in to the central medical database of records. If you want to opt out, God bless you, opt out. For patients who would like their doctors to have quick access to their medical records, they would opt in. They could keep all your record in a central database and actually answer questions like: Are these two drugs designed to treat this kind of cancer? Which works better? Which works better for men? Which one works better for women over the age of 40?

"If we had complete medical records, we would actually know what surgeries have the best outcome. Which drugs are most affective for certain diseases? We don't know any of that now. You would dramatically improve the quality of healthcare with a central heath database."

Where is Oracle putting most of its R&D money?

"We have 10,000 engineers. We are a pretty large software engineering organization. It is evenly split between application and technology in terms of engineers. We have a new important product called Collaboration Suite. It has instant messaging, office conferencing, file sharing, and e-mail. You have single-query search capabilities to find information on documents, e-mail messages, spreadsheets, and Web conferences. We are spending money on further developing the Collaboration Suite. That is a growing product for us. We only have one competitor. That is Microsoft. The world is ready for a second."

What's happening in Asia?

"I think the Asian market is very special. The China market is very different from the Japanese market and the market in India. They all have different economies and dynamics. The China economy is growing extremely rapidly. We have strong agreements with the Chinese government and telecommunications. Also, multinationals companies--American and European--have opened factories in China. We are seeing our business in China explode. India is a little different profile. Not so much manufacturing, but we are seeing a lot of consulting companies in India that are now delivering their services all over the world. It is very important for us to have a relationship with these companies and recognize the training and the network complications to work with the technology sector. All these factors have to be dealt with separately."

This article originally appeared in InformationWeek, Jan. 30, 2004.

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