Oracle's Unsubtle Strategy

There is nothing subtle about Oracle Corporation founder and CEO Larry Ellison. From the phallic towers of the Oracle campus he built in Redwood Shores to his world's largest private yacht Rising Star to his competition for the America's Cup, Ellison's is in-your-face clear in word and deed. It should come as no surprise, then, that the company that made him, albeit briefly, the world's richest man, is unsubtle in its strategy of aggressive, head-to-head competition.

Oracle, born in 1977, grew up as the relational database company. Ellison grew it with relentlessly focus on being number one in this market, which he arguably created, crushing all competitors except IBM and Microsoft. The strategy was brutal, no-holds-barred competition, from features-and-functions to sales tactics. In fact, Oracle was a textbook software product driven company, pursuing license revenue, skewing resources to sales and engineering, and creating a priestly cult of devoted user acolytes known as Oracle DBAs (DataBase Administrators).

In the early 90s, Oracle began adding a second pillar to its foundation, entering the business applications market. After all, archrival Bill Gates, the more enduring holder of the richest man crown, had two strategic product lines, Windows and Office, but poor Larry had only the Oracle RDBMS. It turns out that Ellison found business applications boring, tedious stuff, and paid little attention to the development effort. This changed in 1998, when Oracle's then president Ray Lane, persuaded him that something had to be done. Oracle's business application product line was an uninspiring, loose collection of weak applications the sales force could not sell. Ellison decided to take the helm of business applications development himself.

In two years, a re-architected suite of business applications was released -- prematurely. With over 5,000 known bugs, it was an embarrassing disaster. Ellison had used the "compile-ship-debug" approach that he had used 20 years earlier. There followed a couple of years of frantic debugging while customers fumed. Talk about boring! There had to be a way to fix this that was more fun.

And there was. Oracle, which had largely gotten to be database king by growing organically and eschewing major acquisitions, changed its strategy. It boldly made an aggressive offer to acquire business applications rival PeopleSoft. In the aftermath of the dot-com bust, the price was right and plotting strategy and tactics for this blockbuster deal got Ellison's competitive juices flowing again. When the Justice Department lost its antitrust action to block the deal, the way was paved for an acquisition spree that is nowhere near over. Ellison has been clear: Oracle intends to consolidate the business applications market. He has the money. He has the will. He has discovered he likes doing it.

Ellison now has business applications leader SAP in his sights. He has turned the enterprise business applications market into a two horse race. Oracle has had several strong quarters in a row. It is executing the complex integration of its acquisitions superbly. Forget the business applications stumbles of the past. Expect the same aggressive head-to-head, in-your-face competitive tactics going forward that worked in the database market, with a new twist: Ellison has discovered that you can buy big chunks of the puzzle pieces instead of building them.

Copyright © 2006 Philip Bookman

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