“The New Frontier: Simplify IT”

A Centerpiece Conversation with Mark Hurd, President, Oracle; hosted by Mark Anderson

MH: In financial quiet period. Not talking about financials.

MA: Power of integration: How do you see integration at Oracle?

MH: Start from top. IT is $1.8 trillion of worldwide GDP. First time that consumer has been bigger than companies. Within enterprise, services is now bigger than products.

We’ve been effective as an industry of making this really hard for companies: selling piece parts. We sell you a server, an operating system, a database, applications. Companies put those together on their budget, it’s their cost.

If you take Oracle’s R&D (Ballpark $5 billion) and added another big 3-letter company, you’re going to get $10 billion +. That’s smaller than the biggest banks’ IT budget. IT budgets are not going to grow 10% over the next 10 years. Yet CEOs have big global ideas.

MA: It reminds me of when vertical integration is in style. Is that coming back again?

MH: In the industry, if I were a customer, I’d be rebelling against complexity. If you think about companies, if they’re willing to standardize the process of development, cloud becomes a very attractive process.

Why? It’s simple. Everything integrated together: server, storage, software. Everything is integrated by Oracle.

Larry was way ahead on this one, he just didn’t call it cloud. When he invented Netsuite (standard accounting to small and medium businesses over the internet) it was many years ago.

MA: As large-scale trend, it was all about open systems. But now it’s moving to an integrated offering.

MH: In defiance of 80s models, in context of creating better leverage, they created more complexity. Cloud and engineered system are the same thing: it’s all about how you push cost and complexity back into the industry.

MA: New energy coming back to enterprise market?

MH: Problem in enterprise market relates to computing. (Pulls out phone) This is more powerful than a 360 mainframe. Data on the planet has grown 7-8x since 2005. By 2020 it will grow 20x. The problem in companies is that apps are 25 years old. Legacy applications make it harder to get data.

Technical part of cloud will become v. interesting in context of integration levels and service you can achieve.

Bigger issue w. cloud will be business issues

We define cloud as set of capabilities we can deliver from remote location that lets us serve up IP. Having same new technology available wherever you go, on both sides of firewall.

At HP, ran 7,000 apps in 2005. Their IT budget was higher than R&D. Application sprawl. IT guys will consolidate data servers, but that’s not the whole issue. 1.8 million parts a year were distributed by nearly 100 applications. You had to tell business guys to stop. We don’t need 99 incremental apps. We need to consolidate, which will simplify IT.

The answer is leadership aligned to business strategy. Oracle can deliver on the huge promise of integration.

MA: Customer is increasingly driving the train.

MH: This is a simpler, integrated experience. If you leave it to average humans, by definition you’ll have fragility.

Private cloud? Typically defined as being behind firewall. With banks, you can’t have your data outside your firewall. Requirement of security.

Attacks are going to keep coming, bad guys will get more sophisticated. Asked CTO to hack his iPhone and time it: Had his mail in under 4 minutes.

In IT and corporate IT, want to get more capabilities into phones. The more data pushed out from the edge, the less secure it becomes. There are a ton of incredibly mobile users, they want their data on mobile, how are you going to give it to him? The private firewall won’t do it.

We’ve had major attack in Texas on Oracle, 5 years ago. First reaction: attack by the Chinese. Found out it’s not actually from China, but Texas, from a company called Tomorrow Now. Came in to grab and use all Oracle code. Wound up in a big court case.

Seeing these attacks on companies. When your core IP is at risk, it’s a big issue. Most attacks are not external, they’re internal. If you want to protect data, you have to have your internal processes aligned.

MA: You put your crown jewels right in the middle and restrict access. Employees become weak link. Countervailing trend between BYOD and security. How do you secure it?

MH: Create partitions in a device and secure partitions all the way back to origin of data. No one can guarantee total security, but Oracle can make you more secure. Make sure all apps are as easy and secure to use as possible. The more you get out there, the more a company increases their profile risk.

MA: You’re offering equipment on premise and offering software as service, which work seamlessly, and letting companies decide what they want to put where.

MH: With the Oracle cloud, you can go from Oracle to Amazon cloud and then fly out. Beware of the clouds you can’t fly out of — it’s a proprietary cloud. There are some countries that won’t let you take data out of the country. We want to take that off the table too. Get rid of cloud v. private cloud etc and focus on how to best optimize systems for the customer.

There will be an economically driven forcing factor that forces enterprises to redo their applications suite. (Security, performance, etc will drive this.)

You have to change the game from customers doing work, etc, to industries doing the work.

US’s core app suite: 25% are packaged apps, 50% started out as packaged apps, but were customized by buyer to the extent that the originator can’t recognize it. How fast will this go? Governed by speed of CEOs looking to reinvent these things. Without app suites, the ability to do business becomes very challenging.

In 5-10 years

Can imagine world in which many many apps are served up through cloud, integreted into preprovisioned systems. You’ll see more vertical integration, rebellion against services modification plan, much more edu about going standard and getting cost out of IT.

Huge opportunity in reinvesting that money.

MA: Differential evolutionary pressures on in-house vs. whatever’s out there. In 10 years, there may be different worlds outside vs. inside.

MH: The issue for us is getting that world moving that way. Our IP stack is second to none. The bigger issue is the speed at which corporate world starts embracing change. The people that change well the fastest will win. Lots of opportunity for new systems, integrated systems.

MA: Have you reached platform level?

MH: We have 4 strategies

Points two and four get complexity out and give it to me.

MA: Competitive landscape: is general consolidation happening?

MH: If industry grows the way I describe, by definition, there will be more consolidation. You’ll see more growth in emerging markets, but with those successful companies, it’s better to invest $$ in business than into bank if you thought things made sense. Other companies like Oracle will look to consolidate.

Industry has already consolidated a lot and list of companies to go buy is smaller than ever before. There may be more minimal M&A because dollar amounts of companies have decreased.

MH: Evaluate each M&A situation independently and make each decision as it makes sense. We buy leaders in their industry, but we buy them into white space pieces of the architecture where they add to Oracle’s capabilities. Then they have to integrate them into their technologies.

All of our industry groups are integrating their apps on shared logic. All built with same tools on same middleware, which increases productivity and they all work together.

Integration of Sun, Java have helped. Strategically, Oracle’s confidence level is very high. They feel good about the ability to go execute.

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