I'm a bit worried about Oracle at the moment. I'm at EMC World this week and while EMC isn't positioning itself against Oracle, I thought it might be interesting to contrast the two companies' market approaches.
Both companies are successful in their core space, both companies regularly handle acquisitions and both companies have CEOs that are a bit larger than life and both have recently hired top-flight talent from other successful companies - Pat Gelsinger from Intel went to EMC and Mark Hurd from HP went to Oracle.
Let's contrast and compare this week.
Focus on Profit Versus Focus on Customer Satisfaction
Oracle is a profitability engine. It follows the traditional MBA best practice of focusing like a laser on revenue and particularly bottom-line performance. The company aggressively mines customers for revenue and much of its execution creativity can be found in its complex licensing methods and sales commission structure, which drives a level of aggressiveness in sales that is likely unmatched in the technology industry. Currently, Oracle is exploring and creating some rather impressive up charges tied to hardware as it expands this creativity into this new frontier. While I have some concerns regarding how fast it seems to be going through CFOs at the moment, from the standpoint of what the company reports, it is incredibly successful financially.
EMC is customer-focused and this is a sharp contrast to Oracle. Much of its creativity operationally is on customer satisfaction metrics and technology. Jim Bampos, who owns this effort, reports into the office of the CEO and every executive is tightly held to both customer satisfaction and customer loyalty metrics. Much of the company's advanced work is currently focused on SAS and Greenplum implementations of customer reporting and analysis and currently EMC has one of the most advanced customer tracking systems in the world. While not yet complete, when this implementation is done, it is expected to be the most advanced customer analysis system in the industry, capable of aggressively anticipating and correcting problems before they become evident to customers. While clearly revenue and profit are important to EMC, they are subordinate to customer loyalty. EMC is one of the few companies that recognizes that the cost of customer acquisition, one of the highest costs any company incurs, can be greatly reduced through this focus.
This strategic focus points the way to executive selection. Mark Hurd, who had been fired from HP for allegedly sharing insider information, was known for aggressive cost cutting. His focus on bottom-line performance was likely unmatched during his tenure at HP. While employee loyalty and satisfaction clearly suffered, HP held revenues reasonably well and bottom-line performance for the company was considered to be very strong. His selection by Oracle partially showcases Oracle's sharp focus on financial performance.
EMC picked up Pat Gelsinger who was considered to be third or fourth in line to run Intel. Pat is a visionary and highly regarded. When AMD recently fired its CEO, Pat was one of the first people it called to take over its open CEO roll. This is because Pat is recognized to be very process-oriented and was considered to be the heart of Intel. Well-regarded by Intel's employees and focused on performance excellence, Pat has never been tarnished by scandal and he was very well-regarded by Intel's OEM customers.
Oracle focused like a laser on financial results and ignored the problems Hurd represented; EMC went after one of the best-regarded operational thought leaders in the technology industry.
Acquisitions: Competitive Versus Strategic
Oracle's Sun and PeopleSoft acquisitions showcase the company's strategy. PeopleSoft represented the elimination of a major competitor. Oracle basically acquired PeopleSoft to shut it down and to limit competition so it could reduce competitive costs and to more easily raise prices. The Sun acquisition was to provide stronger account control and competitive vendor lock-out. This approach allows a vendor to set prices based on need, and the high switching cost tends to force customers into a tax-like relationship where they are at an increasing disadvantage when it comes to prices. This can be a very powerful revenue engine and can make the company mostly immune to competitive pressures and adverse world or country economic impact.
EMC's RSA and VMware acquisitions are forward-looking. Held, as many of the company's acquisitions are, as separate entities, they are designed to provide technology capabilities that the firm felt it would need at some future point. Each company is free to work with EMC competitors like Oracle or HP as needed and this assures the customer the greatest flexibility. This lack of lock-in forces EMC to focus on customer satisfaction because customers can switch and thus need to be constantly embraced and assured.
Both approaches, done well, lead to predictable financials; however, EMC's, while potentially less profitable tactically, is less risky strategically because it is far less likely to cause a broad customer revolt. IBM experienced, with a similar model to Oracle's, such a revolt in the late 80s and nearly went under. One of the indicators of a similar problem with Oracle is its inability to retain CFOs.
Wrapping Up: Choices
The top executives at both companies define the firms. Both are larger than life. However, while Ellison is often known for his aggressive take-no-prisoner positions, extreme wealth and a clear belief that many rules simply don't apply to him, Tucci has a vastly friendlier image, is less combative, more cooperative (with the EMC/Cisco/VMware alliance being a proof of point) and has virtually none of the drama similar to what surrounds Ellison and Oracle. Tucci is focused on assuring EMC's long-term survival and success, while Ellison is more focused on becoming the most powerful company in the world led by the wealthiest man and not necessarily in that order. Personally, I admire Tucci. Ellison regularly scares the hell out of me.
In talking with a lot of EMC and Oracle customers, my sense is that I'm hardly alone in my feelings.