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February 1, 2002

Poseidon Adventures

Larry Ellison, master of his ship, charts Oracle through turbulent times

David Stodder

As we closed in on Treasure Island in San Francisco Bay, we lost the city. Driving into a thick, rainy mist, the diesel buses throttled past some very serious security guards and into the former military base. Squinting through the fog, the Bay Bridge was just a string of pearls against the darkness. At one end of the parking lot, searchlight pods gyrated, sending long white beams dancing and disappearing into the low fog. Oracle OpenWorld. Barenaked Ladies. Sumptuous food, drinks, henna tattoos, and fortunes told.

Festivities at the big "Appreciation Night" party during Oracle's annual conference and trade show hardly displayed any strains of a tough 2001. Not immune to the global economic slowdown, Oracle would later announce that in its fiscal second quarter, profits dropped 12 percent, while new software licenses fell 27 percent. "We are assuming we hit the bottom," Jeff Henley, chief financial officer, would say.

But at Oracle OpenWorld (OOW), the band — yes, Barenaked Ladies — played on. Not surprisingly in this time of turmoil, attendance was down; everyone had stories to tell about their travel ordeals. Animal passions and madcap revelry were less evident, but then again, none of us are getting any younger. Yawning and sated, many were seen headed for the buses well before it all ended. Glory days, have they passed us by?

At sessions on 9i database, application server, and portal products, attendees seemed as intense as ever. Sessions on Real Application Clusters (RAC), the company's biggest technology announcement of 2001, drew some hungry crowds. The trade show floor was a little less crowded than last year, but it still featured an impressive array of software, hardware, storage, networking, and service providers. Intel, talking "macroprocessing," had a major presence at the show; Oracle announced that it was in the process of porting its 9i database server to the IA-64 microprocessor platform. Just down the lane were Sun Microsystems ("no hard feelings"), Hewlett-Packard, and (sigh) Compaq Computer Corp. EMC Corp., the struggling king of storage, sent its executive chairman, Michael Ruettgers, to give an upbeat keynote. To borrow Oracle's new marketing slogan, the big platform vendors' interest in getting their message in front of Oracle's installed base remains "unbreakable."

BIGGER PIECE OF THE PIE

In other words, the Oracle third-party market is not thinning out, despite a strengthening pull from the other primary database lodestones, IBM's DB2 and Microsoft's SQL Server. And despite a declaration from the oracle himself, CEO Larry Ellison: "Companies living off of the Oracle installed base — making money pitching tents in our backyard — are living on borrowed time." Responding during a press conference to questions about how Oracle would regain its customary profit levels, Ellison specifically put BEA Systems Inc. and Business Objects SA in his sights. "They're the ones in trouble, not us."

Oracle is moving aggressively into potentially high-growth industries, such as intelligence and bioinformatics. Misunderstood about his seeming to back national identification cards, Ellison does favor national standards for existing IDs that are at least as effective as those used by the credit card industry. Fixing the government's "stovepipe" problem — evidently, it can't integrate data from its myriad ID, immigration, and criminal investigation information resources — could require a large investment in new database and data management software. "It's very simple. We want all of your data," Ellison declared.

As we enter the Age of Genomics, pharmaceutical laboratories, government regulatory agencies, and companies in a growing pool of related industries interested in bioinformatics are going to need scalable, high-performance database systems. During OOW, Oracle made its interest in these emerging markets known to all. Especially in the midsize market, some of the new opportunities could be hosting arrangements, involving both the 9i software and the 11i e-business applications suite: "The ASP [application service provider] thing is not dead, not for us," Ellison asserted.

However, Oracle is clearly not waiting around for a spike in new licenses. The company is expanding its reach; to drive profitability, it must gain a larger share of current customers' wallets. All last year, Oracle told us that BEA's days were numbered once 9i Application Server (9iAS) gained traction, particularly with Oracle's installed base. The Business Objects mention was a clue that Oracle is finally ready to pump up the volume about its bundled business intelligence (BI) and analytics features — about which Ellison in particular has thus far been noticeably quiet.

The battle has been joined: Business Objects is already countering the BI bundling notion with its own rhetoric about the importance of keeping the BI layer independent of database and enterprise applications. "It's a heterogeneous world," explains Dave Kellogg, Business Objects' senior vice president of marketing. "Do you really want your database or ERP vendor to own your BI and data warehouse platforms, when you have multiple vendors' systems that you need to work with?"

JACK OF ALL PORTALS

One of Oracle's most interesting bundles is 9iAS Portal, which the company describes as a "complete solution for building, deploying, and maintaining self-service, integrated enterprise portals." Perhaps no sector of the software industry is more contested than enterprise information portals (EIPs), which provide a single, Web-based point of interaction with a variety of underlying content resources. EIPs will also play a major role as the user interaction and presentation layer for role-based workflow, e-business processes, and event-driven BI.

Oracle's top competitors have been busy sorting out where the portal fits into their own strategies, but heading into 2002, BEA, IBM, SAP AG, and Microsoft seem to have their signals straight. Based on presentations at OOW, Oracle's competitive edge seems to be application development and management. Its portlet technology enables developers to create components that "represent" underlying data resources and can access those sources directly when necessary. Bundled with 9iAS, Oracle's portal solution stacks up well against BEA and IBM, which are taking a similar course by supplying the portal on top of an application server; however, Oracle appears to be further along with portal application development tools. SAP Portals, SAP's wholly owned subsidiary, could prove a more elusive competitor as it puts together a combination of realtime BI, data warehousing, knowledge management, and portal technology.

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MASTER OF HIS DOMAIN

At the press conference, Ellison brushed off critics who are concerned that top strategic managers have been leaving Oracle, and that he hasn't designated a "Number Two" — that is, a successor. "I'll let you know who it is right before I leave," Ellison said. "If that was good enough for Jack Welch [General Electric's recently retired chairman and CEO], it'll be good enough for me." The perceived Number Two can get "blinded by the limelight," Ellison said, obliquely referring to Ray Lane, former president and COO during some of Oracle's strongest years. "I don't think that was a healthy thing for Oracle, and I'll never let it happen again." Ellison applauded the fact that so many former Oracle executives are now in top positions at other companies. "We have always had an awful lot of management talent. We have the strongest team we've ever had right now."

There's nothing to be gained by accusing Ellison of hubris. He has to admit it, which he did as he told, probably for the hundredth time, the story of the tragic 1998 Sydney to Hobart yacht race that took him and his crew through a hurricane. In the face of waves as high as eight-story buildings that sent his craft airborne several times into the teeth of 100 mph winds, he turned over the wheel to the professionals on his crew. Now leading a personal $85 million effort to win the America's Cup race, Ellison demurred about whether his all-star crew would let him take the helm. But then he admitted: "If you're owner of the New York Yankees, you don't get to play first base. But as owner of this boat, I do."

David Stodder [dstodder@cmp.com] is editorial director of Intelligent Enterprise.