Today, I’m in an April snowstorm in Denver, at the COLLABORATE 13 conference, sponsored by the Oracle Applications Users Group (OAUG). Oracle’s president, Mark Hurd, is about to address the crowd.
He will cover Oracle’s strategy, plans for innovation, and the company’s relationship with its customers. Rae Wong, a principal analyst at Constellation Research, will moderate the session.
The first question to Mark Hurd was, “what does it mean to be an Oracle customer?” Mark answered that Oracle is in the middle of transforming, having acquired one hundred companies since the PeopleSoft acquisition. By the end of May, Oracle will have spent $4.8 billion on acquisitions this fiscal year. Between the acquired intellectual property and organic R&D, Oracle feels that it has the best-of-breed technology. Oracle has set its sights on innovating and leading in the cloud.
“From a customer perspective, do the customers always understand the acquisition strategy?” The answer was “the good news is we’re doing a lot of stuff. The bad news is we’re doing a lot of stuff.” Assuming that people probably don’t know that much about Oracle’s strategy; that it has such a huge portfolio, Oracle realizes that it has some work to do in communicating its strategy to its customer base and the marketplace in general.
The audience was mostly technologists. Oracle made an announcement today that it’s taking its applications and putting them “in memory” in order to increase speed. We want to know what’s happening really fast. In its internal operations, Oracle can now understand what’s going on and what’s been happening some 15-20 times faster than before.
It’s a matter of getting hardware and software integrated together. Larry Ellison made a comment recently that “the greatest innovation coming to software right now is hardware”. But the overall Oracle stance on innovation is: (a) realizing that Oracle customers need to save money in some areas, so they can spend more on innovation. Capturing customer intent via social media – since mobile devices are now in 2 billion people’s hands – is critical. Customers are now more demanding. Now the sale is between you, the customer, and everyone the customer knows, can Tweet to, and talk to on Facebook. So Oracle is putting a lot of energy into the customer experience. Oracle has done a string of acquisitions – ATG, Endecca, FatWire – and putting those capabilities into Fusion, into Siebel, and other applications. This trend towards “big data” can drive companies towards a broader, global, fully integrated “360 degree view of the customer”.
The move to “the cloud” is all about the physical location of the computer, but also (according to Oracle), the intellectual property. Oracle wants to give the customer a choice between traditional on-premise solutions and solutions in the cloud, and to choose between the two depending on the context that makes sense to the customer – by geography, by business unit, by application, by functional area, etc.
Oracle’s average customer spends a third of their budget on development and testing. Customers have built their infrastructure to “peak usage”. Now people can build to average usage, and buy extra capacity in the cloud “by the drink” (i.e. as they need it).
Oracle doesn’t think it’s late to the cloud, it thinks it’s first. Oracle will do just about any combination or hybrid that makes sense for the customer.
Another question was “Oracle is hard to work with.” Mark Hurd made a joke that this was the first time he’d heard this. He did acknowledge the point, though, realizing that Oracle has work to do in this area. When Oracle puts a dedicated account representative on site (typically at its largest 250 customers), customer satisfaction and loyalty is off the charts.
Oracle’s direction is to have more salespeople and to have them be more specialized (with more architects), and more of the integrated relationships, with key account directors. Oracle wants to make it easier to work with the company, not harder.
“Is Oracle a disruptor in the marketplace, or is Oracle being disrupted?”
The reality is that IT has got to simplify – it’s too hard. Bad news – we’re in a very weird industry. What we do is convince customers that they have to buy all this stuff, and somehow put it all together. Companies spend almost $900 billion per year in this industry. Most of it is spent trying to glue parts together. This makes no sense.
“I don’t know what the OS is on my car – when I turn the key, it just works. But we’ve got ourselves at the other end of the spectrum. One bank in this country alone spends $10 billion per year on IT. They spend most of their time gluing infrastructure together. So the real issue that has to get disrupted is this need for integration.
The business processes are too complicated, and business people that don’t understand the IT implications of what they’re asking for have driven them. The disruption that’s going to occur is a step back to a more IT-savvy management team, making these hard decisions about simplifying IT, and getting their money out of things that don’t add value, and into things that do. Oracle will be driving this trend.”
The cloud has driven the trend towards simplification – you just turn it on and it works. And it’s managed for you.
In Constellation’s research, two-thirds of the IT budget is used just to keep the lights on. The shift in power is towards the line-of-business and away from IT.
Mark’s first reaction when hearing “I have a bad IT organization” is “you have a bad management team”. IT works for you – if you look at basic processes like taking an order, those are processes in the business, not in IT. And those processes are too complicated. Sometimes, more than 100 applications are involved in relatively simple things such as dispatching service technicians or taking orders. IT sometimes can’t diagnose when processes are unique or not. The real answer is – they’re not unique. We’ve got to drive towards simplification. Those are hard discussions, at the top of the company, and without those, you can’t simplify IT.
On cost savings and innovation, there was a question about third party maintenance – for software and hardware. Oracle typically doesn’t like people messing with its intellectual property. Its objective with maintenance isn’t just support, it’s a subscription that provides you with perpetual rights to the software. And a lot of the costs in upgrading from one major release to another are to re-implement the customizations made to the current release. So when customers are angry about upgrade costs, they have to realize most of it is self-inflicted. There are other ways to reduce costs than going to third-party maintenance. Oracle is very concerned about its brand, so it won’t let any third-party organizations or partners put Oracle applications in the cloud for quality control and brand integrity reasons.
“What is the role of users groups in shaping the experience of customers of working with Oracle?”
Oracle wants its customers’ input. It has over half a million customers belonging to user groups all over the world. “You’re our most valuable assets we have in the company, and any representation of the customer is important to us. You may not like everything you hear, and we may not like everything we hear. But we need Oracle customers to be thrilled, happy and ‘zealots’ in the marketplace.”
Oracle wants to be easier to work with, and realizes it needs its customers.
Mark Hurd loves being in the tech sector, because of its dynamism. Over time, the IT industry will morph together – blurring the distinctions between hardware, software and services.
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