If you follow the conference circuit you’d know that Oracle held its user group conference this past week – Oracle Openworld 2014 was held at the Moscone Center between Sunday afternoon and — well, today officially.
First off, I did not attend in person. I watched the keynotes from the comfort of my home office and followed the tweets (as well as chatted with some other influencers and analysts who were there, and had plenty of talks with Oracle people before and during the show). I also have been following Oracle for close to 15 years.
What follows is not an analysis of the show (Dennis Howlett and Doug Henschen did a good job of analyzing that, go read their stuff), but a summary of many of the conversations I had with executives and vendors these past few days about Oracle. As we used to say in Gartner, you write the note when you get the same question three times from clients – and it has been more than three times.
Two parts to this post to answer two questions.
Does Oracle Approach Make Sense?
It is very easy in this world of $1.2 billion acquisitions and $5 billion ARR to get confused as to what a vendor should do. We all want to see massive returns and extraordinary (read, all new and incredibly cool) innovation from all vendors. We all want to have all vendors re-architect their product to address both market needs and innovation requirements.
Unfortunately, no market can support two (or more) large vendors out-innovating each other forever. The traditional technology adoption curve for any market says that we have between 15 and 20 percent of buyers that are early adopters, lead adopters, or early mainstream. These are the ones that look at innovative technologies and product and implement them right away – usually looking for competitive advantage. The other 80 percent or so of the market is mainstream and late adopters – meaning they wait until the wrinkles are ironed out and implement tools and technologies because they work and do something that needs to be done.
Oracle realized long time ago what target market they wanted to serve, and it was not the early 20 percent. Oracle knows their customers favor easy integration, fully functional, and tested-and-proven technology. They gladly trade late and safe adoption, comparatively speaking, for bells and whistles and competitive advantage. They want something that works the same as everybody else – not something that works before anyone else.
And this is what has guided Oracle all these years in their approach to new technologies – they acquire established vendors that are no longer market leaders and innovators, but that have a solid, functioning product that works (for the most part). In the CRM world itself, Oracle did not acquire Siebel, Peoplesoft, Inquira, Vitru, and their “friends” until they saw their evolution and innovation stall and the market become more commoditized. That is the perfect entry point for Oracle, since they are looking to provide the functionality (and add revenue in the process) not to deliver innovation.
Oracle’s approach is very smart in that sense: take an established customer base of nearly half-a-million companies, bring tested-and-proven technology solutions to them, increase revenue from the established base five-to-ten percent by selling these solutions, and reduce the costs of delivering those solutions to maximize profits. Continue to collect maintenance (on-premise solutions) or recurring revenues from hosted solutions (there is no cloud, but that is another discussion for another time – think three-tiers and open, you’ll quickly see why Oracle does not support cloud solutions).
There is a far longer discussion to be had on the size of the customers, risk management, and tailored offers that encompasses Exa-x machines and solution, databases and “platforms”, and applications but this is not the place. For the most part, this is Oracle’s approach to the market – and one of the reasons they are doing what makes sense: they can generate sufficient revenue from this basic strategy to continue operations and growth ad-infinitum.
So, yes – Oracle’s approach makes sense. Which brings us to the next question…
Why Does Oracle Approach Suck?
There are three main reasons this approach sucks.
- Misdirection and Fear Mongering – This is what Oracle does in relation to the cloud: The three tier public cloud? Yeah, we could do that – but instead, let me show you this beautiful “new” security-in-a-chip solution that will do everything you need (although cloud-based security has been proven to be more secure than any other method time and again). If you insist in taking a different approach, one that may make sense for an organization investing in a three-tier public cloud infrastructure, I will have to tell you how scary that world is: you cannot do things without multitenancy else your data is commingled and remote (not true). Still not convinced? Any solution you will implement is ultimately running my products (database, platforms, analytics, hardware, etc.) underneath, just but not as secure as they would be in a private cloud we can implement in your location. Still thinking about going elsewhere? Did you know that without my hardware underneath it all, the solutions are not “engineered to work together”. Of course, none of these issues matter if you are moving to the cloud – but they do spread sufficient FUD to keep you close by.
- Lock In – Now that I convinced you that you must run my hardware, servers, databases and solutions (even mentioning how you can migrate anything you want into my data centers with “the push of a button” as mentioned throughout this past show) you are in. There is no easy way to get out and go anywhere else. Now you are one more of the almost half-million customers that will take what I give you (functional products, albeit not innovative or advanced) and will continue to buy from me. If I convinced you to go the “private cloud” route, even better – moving from a system “engineered to run together” to a three-tier cloud model with open integration is as much of a nightmare as moving from client-server to the internet was in its day. You are locked-in and living in a “Red Stack”. Uber-blogger Jon Reed wrote a great piece on lock-in and adoption at Diginomica that you should read also.
- Anti Innovation – As mentioned in the section above, Oracle customers are not the most audacious innovators there are out there. And this is perfectly fine, as they don’t have to be. However, there is a line that separates offering them the solutions and technologies they want and need and telling them to not innovate. That line is crossed when Oracle tells them how bad things are out there, how many horrible things will happen to them if they deviate from staying with Oracle, and how their careers and organizations will fail. Using misdirection, fear mongering, and adoption lock-in the vendor can then convince their customers to not try new and different, but instead stay with the old and trusted. In some fields this may be acceptable, but in technology this translates into working into the insecurities of IT departments and CIOs to convert them into anti-innovation hubs that will continue to buy from the established vendor. Not a good place to be, even worse off as the pace of innovation and technology evolution continues to accelerate.
Now, before I get tar-and-feathered out of town for being mean to Oracle, a caveat.
I am picking on Oracle because they are the latest to do this – all vendors do something similar to some extent. It is incredibly hard, not to mention almost impossible, to re-architect a behemoth with as many products and solutions as Oracle has. I recognize that.
However, Oracle is the worst offender in using these tactics to ensure an end-to-end lock-in (hardware to applications) since they are the only one offering the “entire stack”. Picking on Oracle does not absolve other vendors that are doing the same or using similar tactics.
Caveat Emptor – be aware of what the vendors tell you, and make your decisions based on thought-out, rational conclusions.
As Franklin Delano Roosevelt once famously said – there is nothing to fear, but fear itself.note: thanks to Alan Berkson for putting up with my un-flushed thoughts earlier and let me use his brain and intelligence to make this more coherent. If there is something wrong or omitted in this post, it is entirely my fault. If something good, it was his help. disclaimer: dang, i posted initially without this – hope you get this. Oracle is a past client. SAP, Salesforce, Microsoft are active clients. Inquira was a client, as was Siebel and Peoplesoft in the day. if i miss someone else, they might’ve been a client or not. as you can see from the tone of this post – it does not matter :-). things don’t change because you are or not a client. and, for the record, i was invited by Oracle to attend Openworld and they would’ve covered expenses by declined – so there is also that to get out of the way.
10 Replies to “Oracle’s Approach Makes Sense (But It Sucks)”
Another classic post, Esteban. No punches pulled.
sorry, didn’t know i was supposed to 🙂
thanks for reading and commenting
however, the optimist in me wants to wait and watch as perhaps we might be at the cusp of new thinking, new business models, more customer centricity being adopted at Oracle.
it is always challenging to cannibalize one’s high margin revenue streams (license/support) and shift to subscription or utility based models without impacting shareholder value. but, Oracle seems to be headed in the right direction.
its always challenging to take a disparate set of applications from various vendors and convert them to pure cloud. but Oracle seems to be headed in the right direction.
Hmmmm…. i wish i could be as optimistic as you, truly. I think that history is against you on this one, and that ORCL management is against you as well. They don’t get the right vision, and their belief that it is biz as usual is the same belief that bellied-up CA, EMC, BMC, IBM, HP, Cisco, and many others.
Things never stand as they are, and evolution is necessary on both sides.
as they say in zen classes, will see…
Esteban, you are spot on. This is not a question of technology superiority…Oracle can easily put several hundred to couple thousand engineers and eventually get to a competitive cloud solution. But Larry’s business philosophy is ‘margins, baby, margins’. And so far at least, the Cloud paradigm puts power in the hands of the buyer. To me, this is the tech industry’s way of breaking the gridlock that the traditional vendors have had on the market…and the only way in was technical superiority at a lower price. Larry does not want to be in a business that has low margins…that’s anathema to him.
Nobody wants to be in a business with low margins. That’s now what stockholders are looking for. And how exactly does the Cloud “paradigm?” put the power into the hands of the buyer? Perhaps if you are buying the least common denominator, but if you do that, what is your competitive edge?
How about SAPs cloud strategy? Locked into HANA?
Lock-in? You claim this multiple times but say nothing about how Oracle locks you in. Are their products based on open standards? So if you stick those standards how exactly are you locked in? Please give an example of how Oracle is locking customers in.
I agree with Todd. How are Oracle’s customers any more locked in than going to the competition. How is pulling data from say an object database is easier than a standard relational database?
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