Last week at EMC World I was once again taken by how many resources EMC is putting into instrumenting customers to assure the relationship. Also, last week I became aware of some internal correspondences that came from discovery out of Oracle, which indicated it knew it was pushing non-competitive Sun hardware to its customers while bad-mouthing HP's more competitive offerings. One memorable exchange talks about how Oracle sales reps don't want to sell the Sun hardware because it blows (actually if you want to search for the term it is "baaaallliloooooooows") and it is clear that Keith Block, EVP Oracle North America, isn't a fan of what the company is selling.
In a way, I think this massive difference between the two companies is due to some very different views of how IBM initially became dominant in the computer space. Both firms rightly saw the tight connection between IBM and its customers back then, which resulted in massive profits and revenues. Oracle sees that connection as a whip and chain, while EMC sees it as a deep partnership where the parties prefer to be together. This isn't a subtle difference and it is like contrasting a relationship between master and slave with one of a loving couple. Both are couples, but only one of the two is mutually beneficial.
I think one of the things IT executives should be looking more closely at is whether the vendor you are considering will be a cooperative partner or a slave master. In the first case both of you are looking for a harmonious relationship; in the second the vendor is mining you for money and keeping you chained with financial disincentives. In short, I think we should be looking for vendor relationships that we will enjoy and not those that we can't subsequently escape from.
Let's explore that.
Back when I first grew to understand IBM, it was still close to when Thomas Watson Jr. ran the company. He had been an ex-diplomat and formed a key and lasting understanding that for IBM to survive for centuries it would need to have a deep and lasting relationship with its customers. Efforts were made to tie each executive and every employee into this process, which covered not only how each would behave, but the consistent image each conveyed.
IBM's business was not one of selling products but in crafting comprehensive leases, which provided services that tied IBM to its customers in what was a unique, for the time, symbiotic relationship. The phrase "no one ever lost their job buying from IBM" was telling because, not only was it true about the jobs, but it reflected subtly that IBM didn't sell products, it sold peace of mind. In effect, it sold a desirable destination.
I was reminded of this a few months ago when Sam Palmisano, IBM's last CEO, spoke at the IBM centennial celebration. You see, after Thomas Watson Jr. retired, IBM's following executives got increasingly focused on tactical revenue and profit growth and forgot Watson's vision. They started selling hardware, cutting back services and charging for everything that used to be part of the lease - even fixes to newly installed unreliable products came with customer charges.
I recall talking to a VP of marketing at the time and pointing out that IBM seemed to be off track and breaching the trust it had so hard won. He said something to the effect that I didn't understand, that IBM sold air and that customers had no choice but to pay what IBM charged. IBM had gone from a company that sold relationships to one that mined customers, and these relationships shifted from partnerships to slave-like ownership. And in the late 1980s the slaves revolted and IBM almost went under.
Gerstner and Palmisano put IBM back on track and the rest is history, but the pain both inside and outside IBM during that time the firm was off track is legendary for those of us who were there. These changes were massively painful and IBM almost didn't make it.
I think the difference between EMC and Oracle is that EMC is trying to build a more technology-driven version of the Good Old IBM and Oracle the chains of the Bad Old IBM. Both are pulling from the IBM model, but Oracle is picking from IBM's dark ages.
The two companies don't overlap that much; at their cores Oracle is still a database software company and EMC a storage hardware company. But while Oracle appears to be investing heavily in crafting chains that will lock customers into hardware it knows to be inferior, EMC is investing heavily in instrumenting customers and applying its big data analytics tools to improving its customer relationships.
In the end, the results from the outside will look similar: very little customer churn and strong financial performance as a result. But under the covers you'll see that the Oracle customers are furiously looking for a way to escape, while the EMC customers prefer to be where they are. What Oracle is creating is a cage where once you go in you can't get out, and EMC is creating a place where you actually want to be.