Subba’s Serendipitous moments

February 11, 2007

Oracle President — Charles Phillips Jr. envisions Oracle’s future

Filed under: Business,Leadership,Model — Subbaraman Iyer @ 10:22 pm

Recently had a chance to ask questions to Charles Phillips Jr. — President of Oracle when he was in Singapore last week to receive Leaders and Visionaries award in Singapore. I was an invited guest of BBC World who were one of the sponsors.

Question: Over the last 3-4 years, Oracle has spent close to $20 billion making both big and small acquisitions. Recently it has also announced a Linux initiative and apart from making some major horizontal acquisition like Siebel, Peoplesoft, it also has made acquisitions in the vertical segments like banking (iFlex), telecom (Portal), retail (Retek). So, what’s the Oracle’s strategic architecture for the future?

His answer: Oracle intends to dominate the IT space. He believes CIOs spend a lot of money writing applications, customizing them and integrating various aspects of the business. Oracle wants to dominate the entire stack from operations systems to applications and offer that to customers and allow businesses to focus on their domain.

My view: While this does seem to be the intent, the days of an integrated software company succeeding is over. Much as they want to deal with lesser vendors and focus on business issues, not technical issues, I can’t see CIOs giving the keys of the kingdom to one specific vendor. Even today, many of the CIOs are pretty nervous about dealing with the large software vendors. Currently they are all locked in because of maintenance, and despite the software companies using low cost labour for doing their maintenance, the cost savings have not been passed to customers. Despite spending over $20 billion on acqusition and also integrating them effectively in reasonable time, their market shares have not grown significantly over the years. Even the stock price dont seem to reflect the future potential.

Question: Given your past experience at Wall Street (Charles Phillips was a Wall street banker for several years before he came to Oracle), would it be possible for you to comment on the implications and effects of private equity players entering the enterprise software space? In 2006, private equity firms made a significant play on many enterprise software companies and I believe that the trend is likely to accelerate in 2007. So, what does it mean for users and the industry at large?

His answer: He didnt believe that private equity players are significant players in the M&A space. He also believed that for most people in the M&A space, Oracle is the first call because of technology and the kind of market opportunity it provides.

My view: While that may be true, the actions of private equity becoming active in the M&A space actually has broad implications. Innovation is likely to slow down further amongst the bigger companies as the focus would continue to be on maintenance revenues. There is some opportunity for start ups here, though the odds are difficult.

Like other Oracle executives, he did make snide references to the other industry heavy weight — SAP, something which I thought took away some points from what I saw was a very good session.

Looks like there’s a BEAT SAP culture within Oracle!

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