Turf wars
Maybe Oracle CEO Larry Ellison should have eaten his young. Indeed, many of Oracle's former managers are growing up, moving on and building software companies of their own. That's not so bad, until you consider the cruel twist: Some of Ellison's former lieutenants are waging a turf war with Oracle.
Of course, Oracle certainly isn't hurting for money. The company's latest quarterly results, announced in December, easily beat analyst expectations. In addition to leading the database market, Oracle's application sales are soaring, and new partner alliances are imminent.
Still, Ellison can't afford to sit back and count his stock options. Many of his former managers have joined companies or launched startups that compete in Oracle's core markets. Ellison's list of aggressors includes Asera Technologies president Rohit DeSouza, PeopleSoft CEO Craig Conway, Siebel Systems CEO Tom Siebel and venture capitalist Ray Lane. All four Oracle alumni are chipping away at Ellison's software empire, with a particular emphasis on e-business applications.
Ellison's goal is to provide a one-stop shop for databases and high-end business applications. "It ain't going to happen," says Lane, the former president and COO of Oracle. "Even if Oracle had the best software applications in every area, it [end-to-end dominance] still wouldn't happen."
Lane, now a general partner at venture-capital firm Kleiner Perkins, made those comments during a recent New York luncheon attended by Sm@rt Partner. Lane was in the Big Apple to introduce Asera, a startup software company in Belmont, Calif. Lane sits on Asera's board, and Kleiner Perkins is an early investor.
Asera's software allows customers to view data in disparate applications from IBM, Oracle, PeopleSoft, SAP and other back-end systems. Pulling together these systems can be an arduous task. Consultants from Oracle and SAP, for instance, were unable to unify Cisco Systems' back-end software during the late 1990s, according to Lane. Cisco ultimately took the project back in-house. Had Asera existed at the time, Lane suggests that the company could have saved Cisco lots of time and energy. "Oracle couldn't solve the problem," says Lane. "Asera can."
Asera's offices resemble an impromptu Oracle reunion, with additional Oracle defectors heading for Asera every month. The most recent executive to defect, Asera president DeSouza, says his charter is "to form new partnerships and leverage existing ones." His goal is to drive Asera's technology more quickly into the marketplace.
Still in startup mode, Asera remains well below Oracle's radar screen. The same can't be said for Siebel Systems, which is the reigning champion of e-business applications. Chairman and CEO Tom Siebel launched the company in 1993, after a stint at Gain Technology and a six-year tour of duty at Oracle.
Although Siebel burst onto the scene in the early 1990s, its star has grown even brighter in recent years. The company's revenue for 2000 surpassed $1.79 billion, up a rather incredible 121 percent from 1999. Similarly, net income skyrocketed 116 percent to $123.1 million during the year. Customers riding the Siebel rocket include Procter & Gamble, Verio and Walt Disney.
So, what makes Siebel so darn hot? The company beat Oracle to the applications punch several years ago, and Oracle has been counter-punching ever since. "Oracle can say whatever it wants about its application growth, but we're the market leaders and that's not going to change while Tom [Siebel's] on watch," says one Oracle veteran who joined Siebel in 1998.
Large integrators and consulting firms like Accenture (formerly Andersen Consulting) are jumping on the Siebel bandwagon. Siebel says it now has more than 700 alliance partners (up from 450 allies in 1999). More than 6,000 consultants were certified as Siebel experts last year.
A Redmond Bombshell?
Siebel's next step could be a thunderous one. In a bid to beat Oracle in the small-business market, sources say Siebel is exploring a new alliance with Microsoft. The alliance would involve developing a small-business suite that includes Microsoft's Windows 2000 Advanced Server and SQL Server, along with back-office applications from Siebel and Great Plains. (Microsoft acquired Great Plains in December.)
"We'd aim [the suite] directly at the midmarket, and cut Oracle off at the knees before it has a chance to move down from the enterprise," says one Siebel insider. "We hope to use our relationship with Great Plains as a doorway into Microsoft's offices."
Siebel and Great Plains already sell an e-business software suite for midsize customers. More than 600 Great Plains partners are certified to sell the suite.
"Now, imagine if Microsoft's solutions providers were authorized to sell a suite packing our software with Great Plains and Windows 2000," says the Siebel source. "It would give Larry [Ellison] fits in small business."
Siebel isn't Larry's only worry. Another Oracle defector, Craig Conway, is leading one of the industry's most unlikely turnarounds at PeopleSoft. After riding the client/server wave in the early 1990s, PeopleSoft nearly drowned when it missed the e-business boat.
PeopleSoft's problems were both cultural and operational. Founder, chairman and former CEO Dave Duffield built a comfortable, easy-going corporate culture that kept PeopleSoft's turnover low. But the company lacked the leadership spark that it needed to compete head-on with Oracle, Siebel and other hot players in the e-business world.
Enter Conway, who put on the CEO crown in 1999 after a stint at OneTouch Systems and an eight-year run at Oracle. Conway immediately overhauled PeopleSoft's R&D operation and lit a fire under company employees.
Most PeopleSoft managers speak highly of founder Duffield, but they acknowledge that Conway's management style was the perfect medicine for the ailing company. "Craig stepped in an focused our business, honed our operations and instilled a sense of urgency around here," says Jeffrey Read, VP of worldwide marketing for PeopleSoft Consulting.
"[Craig] challenges us, and he has a natural appetite for knowledge," adds Michael Gregoire, senior VP for PeopleSoft Global Services, North America. "He's genuinely interested in how we [PeopleSoft managers] run our businesses. You'll see him interacting with PeopleSoft's management team in a hands-on fashion relatively daily."
In addition to shoring up PeopleSoft's traditional businesses, Conway quickly targeted new markets. The biggest move came when PeopleSoft acquired Vantive in October 1999—only five months after Conway had joined the company. The $433 million stock deal gave PeopleSoft a fast entry into the explosive CRM market, which is growing 50 percent annually. Vantive also put PeopleSoft back in the game against Oracle.
The acquisition has paid fast dividends. PeopleSoft's sales grew a healthy 17 percent to $1.2 billion during the first three quarters of 2000. Even more impressive, PeopleSoft generated a $101 million profit during the first three quarters of 2000, compared with a $172 million loss for the corresponding three quarters in 1999.
Still, many PeopleSoft partners and investors are holding their breath, as PeopleSoft prepares to announce Q4 2000 results this week. Some skeptics wonder if the IT spending slowdown will hurt PeopleSoft's Q4 results.
As we went to press, anecdotal evidence pointed to another strong showing for PeopleSoft. Oracle and Siebel, for instance, both delivered blowout results in their most recent quarters.
PeopleSoft is expected to do the same, thanks to new products like PeopleSoft 8. The software suite, delivered last summer, was rewritten from the ground up for the Internet. It includes CRM, supply-chain management, HR and financial applications.
Early sales appear to be strong. During a financial conference last week in Scottsdale, Ariz., Conway proudly proclaimed that PeopleSoft has received more than 1,000 orders for the new software suite. Early adopters include 3M, Sprint and Washington Mutual Bank. "Market demand for PeopleSoft 8 has been phenomenal," Conway told conference attendees.
Conway's statements were a calculated risk, coming only a week before PeopleSoft's pending earnings announcement. Most CEOs decline to discuss business prospects on the eve of earnings week. But Conway's words were a not-so-subtle attempt to tell Wall Street that business remains strong.
PeopleSoft's partners agree. Just ask integrators like Acuent of Parsippany, N.J. "PeopleSoft is booming," says Chris Tilden, a senior consultant at Acuent. "We're putting together proposals right now for PeopleSoft 8 installations."
Tilden expects business to get even stronger when PeopleSoft 8.2 arrives within the next few months. "A lot of companies are waiting around for 8.2, because they don't want to go with a dot-zero release," he says.
Still, rebounds like PeopleSoft's are difficult to maintain. Many companies—from Apple Computer to Novell—have climbed up off the canvas, only to get knocked back down again.
PeopleSoft insists that it won't suffer the same fate, because the company has branched out into new markets. "About two years ago, we transformed from an HR-specific company," says Read. "We started selling more financial [software] than HR [software] around mid-1997. That's our legacy, and HR is where we came from, but that's not our growth market today. Craig Conway's vision was a pure, full Internet solution, with a complete suite that included CRM. His vision gave us a balanced portfolio of products and services."
Conway's vision could come back to haunt Larry Ellison, but it's hard to bet against Oracle. Despite staff defections and mounting competition, Ellison continues to produce record revenue and income for Oracle's shareholders. In particular, the company says sales of its e-business suite and CRM applications are showing remarkable growth. Recent adopters include American General Corp., Compaq Computer and JDS Uniphase.
"Everybody's been betting against Larry ever since Ray [Lane] left Oracle last year," says an Oracle veteran now at Siebel. "I certainly wouldn't bet the house against Oracle, but I would put a few chips on us."
So, does Ellison still hold the winning hand?
Gary Bloom, president and CEO, Veritas: Left Oracle in November to join Veritas, one of the industry's fastest-growing software-centric storage companies.
Craig Conway, president and CEO, PeopleSoft: Joined PeopleSoft in 1999 and revived the ailing company. Previous positions include a stint at OneTouch Systems and eight years at Oracle.
Ray Lane, general partner, Kleiner Perkins: Formerly president and COO of Oracle. Left last fall to become a venture capitalist; early investments include Asera, a startup that competes with Oracle on some fronts.
Tom Siebel, chairman and CEO, Siebel Systems: Founded the dominant supplier of e-business apps in 1993. Served as an executive under Larry Ellison at Oracle from 1984 through 1990.
Oracle's Mini Me ...
Peek inside Asera Technologies' doors, and you'll find a very, very tiny clone of Oracle. The Silicon Valley startup is a merry band of Oracle veterans.
Company president Rohit DeSouza formerly was group VP for B2B exchanges at Oracle. Asera's other Oracle alumni include:
- VP and CTO Anil Nori, formerly an Oracle8 architect
- Executive VP Kenneth Ng, formerly an Oracle senior director
- VP of product marketing Mark Atherton, formerly a senior director at Oracle
- VP Gamiel Gran, formerly head of Oracle's North American channel sales
- VP of engineering Chin Hong, formerly an Oracle8 development director
- VP of channel sales Mark Oakley, formerly VP of B2B exchanges at Oracle
Asera's software can gather and display data from all types of enterprise applications, including apps from Oracle, SAP and Siebel Systems. Early customers include British Petroleum, which used Asera's tools to launch a customer portal that ties together 16 business units.
Asera's flagship partners include Accenture (formerly Andersen Consulting), Cap Gemini Ernst & Young and Computer Sciences Corp. CSC, for one, plans to use Asera's tools as it designs new B2B marketplaces for its customers.
Looks like this little Oracle clone is growing up fast.