Oracle's hiring of former Hewlett-Packard CEO Mark Hurd gives it some expertise in integrated hardware and software, but it's unclear whether the company can topple HP and IBM without a services unit.
Larry Ellison, CEO of Oracle, hired Hurd just weeks after HP ousted its CEO over a sexual harassment probe. After defending Hurd to the New York Times last month, Ellison wasted no time putting his money where his mouth was. Now Hurd's job is to extend Oracle's Exadata boxes and "beat IBM in both enterprise servers and storage."
Now Hurd didn't mention HP, which apparently didn't have a non-compete clause for its former CEO, but if Oracle is going to topple IBM it will by extension knock HP around too.
In storage, HP is the leader in total storage systems revenue (EMC is tops on pure play storage), according to IDC. IBM is No. 3 in market share. On servers, HP and IBM are the two market share leaders with 32.5 percent and 29.8 percent, according to IDC. Oracle is No. 4 with nearly half the market share of No. 3 Dell.
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JMP Securities analyst Patrick Walravens handicapped the hiring of Hurd:
While the appointment of Mr. Hurd will undoubtedly be controversial, our view is that Mr. Hurd is a smart choice to streamline the Sun business and implement Mr. Ellison’s vision of “Hardware. Software. Complete.” We like the appointment of Mr. Hurd for a number of reasons. First, Mark Hurd has the right credentials to help Mr. Ellison implement his vision. Earlier in Mark Hurd’s career he ran Teradata (and later, all of NCR). Teradata is not a household name, but is a very successful provider of data warehousing technologies known for the tight integration between its hardware and software platform, a vision consistent with where Mr. Ellison wants to take Oracle’s business.
Add it up and you have a very integrated system view and a world where there are three giant companies selling you an IT stack---IBM, HP and Oracle. Oracle has the applications and the hardware through the acquisition of Sun Microsystems. The problem: Services are what often acts as the conduit to sell these systems. Here's how big IT projects get done. There are systems, business processes and often some fancy consultant to go along for the ride.
Simply put, Oracle doesn't have much of a services answer here. IBM's services unit will implement anything the customer wants and not care, but rest assured a lot of Big Blue hardware goes along with these big IT transformation projects.
Is HP, which views its enterprise services unit (formerly EDS), as a key sales channel for its software and hardware really going to help out Hurd? Meanwhile, I haven't found one EDS employee that spoke highly as Hurd. The common line: EDS saved HP's bacon during the downturn and Hurd gutted talent and pocketed the proceeds.
Now Oracle can find some potential help from the likes of Accenture, Deloitte and other systems integrators, but Ellison and Hurd lack a home services team. Even Dell has services religion with its acquisition of Perot Systems.
It's a bit early to project that Oracle will buy a services company such as Accenture---or Cognizant perhaps---but you see where this is heading. "Hardware. Software. Complete." could realistically become "Hardware. Software. Services. Complete."
There was a good bit of mumbling that Hurd didn't exactly know what to do with EDS. In fact, many analysts expected Hurd to ditch the business process outsourcing side of the equation. Hurd was much more about IT outsourcing. He gets the IT automation and hardware, but the high-touch engagements weren't appreciated as much.
That take on services, which likely mirror's Ellison's approach, doesn't spell out an Accenture acquisition, but you never know. Accenture spends a lot of time implementing SAP applications so Oracle may want to take it out to screw its archrival in apps.
Bottom line: Oracle's adventure in complete systems isn't over. With Hurd sitting on Oracle's board as co-president and Ellison plotting the future, there will be a lot more deals to be had. Oracle could possibly even buy HP, but not before it stops over for a services deal.