Interview: Oracle's President, COO on Bringing the Internet to Business

Working under the shadow of Larry Ellison is probably not the easiest job in the world, but it's a role that Oracle Corp. President and Chief Operating Officer Ray Lane seems to take on with ease.

"Typically, we don't need to have a conversation to agree on something," Lane says of his outspoken chairman and CEO. "We see the world the same way, so it works out really well."

Joining Oracle in 1992 as president of Oracle USA, Lane is today part of the triumvirate that sets policy directions and strategies for the US$7 billion software company. While in Sydney, Lane took time to answer questions from Asian journalists. Excerpts from the session follow:

Question: Why are the Internet and Web enablement so important to Oracle?

Lane: Our products are made to drive information management on the Internet, so I think we will make a world of a difference. The only contender in today's client/server platforms for developing applications is Windows. In the future, it will be Java, or other types of languages that can write directly to a database, and that will offer applications running on servers that work the way the Internet does.

When you use Internet software today, there's nothing running on your client except a browser. You're accessing servers and a network of applications that are sitting on the server. This model should work for business. It doesn't today, but it's already working for consumers. We want to focus on bringing the Internet to business.

Question: Why will this necessarily be bad for Microsoft Corp.?

Lane: Well, then why would you need Windows on the desktop? You could be running an Internet browser without the Windows operating system using some kind of embedded operating system on a fast microprocessor.

This would also cause Microsoft to change its business model. If what the market requires is an Internet service, where you need lots of data, lots of users, and lots of transactions, NT is not strong enough in this kind of an environment.

In a client/server world, NT is probably the lowest cost and most efficient, with Windows 95 on the desktop. Which is why today, it's the conventional wisdom to install (this kind of system). Unfortunately, this is the last client-server platform, and no one's working on developing new ones.

So NT must figure out a way to morph itself into an Internet operating system. That means they're going to have to put a lot of scalability into it, and SQL Server will have to have a lot of scalability, too. Otherwise, it's destined to be just a client/server system, and there's no market for client/server software anymore.

Question: Is Oracle at what Intel Corp. Chairman Andy Grove would call a strategic inflection point?

Lane: I think it is an inflection point for us. We can continue to make a lot of money in the client/server world, but at some point, Microsoft will dominate this model because they've been integrating their Back Office software -- SQL Server, messaging, and middleware -- into the operating system.

As it usually happens, if you leave one business model in place long enough, then whoever has the most efficient distribution economics will dominate it, and that's Microsoft.

Microsoft has never been the most innovative, and they don't have the best software, but what they have is an incredible distribution machine. So by distributing enough copies of SQL Server and Exchange, they will make them cheap enough and they become commoditized. At that point, you've got to find a technology that can (do the same job) at a lower cost. If you can' t, one company will dominate. Other companies can play -- they can be number 2 and number 3, but Microsoft will dominate it.

Now, we've found a lower cost platform in the Internet. Microsoft running on the Internet becomes the high-cost alternative, not the low-cost option, because distributing NT servers everywhere on the Internet is pretty expensive.

When Oracle runs its HR (human resources) system, we run one system worldwide from a server in California. There's no reason to have any other servers. We also run our financial system on one server in California. There's no reason to have any more. It's the same way that when you go to the New York Times home page, you're going to a server in New York. It runs the same way.

In the future, if you want to buy general ledger accounting services, then you could buy these by the transaction, or pay for them through a percentage of your income, as opposed to having to buy licensed software, NT servers, Windows 95 on all the PCs, and database administrators to administer the whole network. That's where it's going.

Question: How soon do you see that happening?

Lane: It's happening now. It's already started. Amazon.com could not exist as a client/server company. Tell me how it would work. It wouldn't. You can't run the servers on NT because it's not scalable enough, so you start distributing everywhere. You distribute NT servers everywhere, and PCs to everybody who wants to order books. So you've got to distribute all that software to NT servers, it just doesn't work.

Question: What are your targets within your organization?

Lane: A personal target for both Larry and myself is to ensure better execution in our business. I think we've always been very innovative, but I don't think we've always been the best company in terms of execution. So when we dream of products that will perform a certain function, we like to think that we can get those products developed and sold into the marketplace pretty fast, and we don't. We don't get that done nearly as fast as we'd like. As I've said, it's a marketing (issue). We don't market very well. We're good at selling, and we're good at developing, but we're not good at marketing.

I wish we had the marketing capabilities of some of these startup companies, which is just awesome. All of a sudden, you have companies that have no customers and no products, and people are talking about them like they were GM (General Motors) or General Electric. I don't know how they do it.

I guess we get into our groove and we start thinking about the business running a certain way. We don't think that some of these new products need some energy behind them, to be promoted as a new business.

That's the difference between a company that has matured: it's more difficult for us to think about new products and the way they have to be sold, and this happened to us.

Our applications business has been very successful, but today a big part of why we haven't sold as many applications in the last year is that we don't have the management in this company reporting at a high enough level. We've basically allowed our applications to be sold, buried in every country around the world, even in the U.S., five levels down. And in every country around the world, the applications are led and integrated with the database business. These are two very different businesses.

If you go into SAP AG, you'll find that everybody's come from the applications business. At Oracle, top management does not come from the applications business, and you find the applications expert many levels down.

We've changed this in the U.S., and put all the applications business under one person, who reports directly to me. We've changed it so that the database business and the applications business are separate. I think we have to think about how we're going to do this around the world when we have the applications business chopped up in a hundred countries.

Question: Will Oracle eventually be looking at two separate companies?

Lane: No, we won't do that. The businesses are too connected. We call on the same customers. But I think it does need a separate sales organization.

We've done a lot to simplify our business. In the last couple of years, we had too many products to focus on. We created what we called virtual companies. Databases, application servers, designer tools, developer tools, financial applications, manufacturing applications, they all had their own marketing, they all had specialists and a sales force that was compensated just on those products. What we've done is to greatly simplify our business. We have two businesses -- database and applications. That's it. And the sales force is organized into those two, and we need to focus on those two.

Question: You and Larry Ellison seem to be very different, yet work well together. How come?

Lane: People are still writing articles about that. We are very different but we tend to think the same way. We tend to be slaves to logic and slaves to reason. So while we may not come at a problem the same way, we tend to see the same answer, and that glues us together.

We're good professional friends. We stay away from being personal friends, and keep it on a business level.

Typically, we don't need to have a conversation to agree on something. We see the world the same way, so it works out really well.

Question: What are the implications of the Asian crisis for Oracle? Lane: The U.S. is growing much faster now, therefore we're trying to hire and train resources as fast as we can to go after the business, because the economy is very good. Here (in Asia), we've got to be careful. We've got a strong commitment to Asia, and we have a lot of people here, and a lot of business. We have to be careful about how we manage that business and (how we use) resources to manage it.

We see great opportunity in the future, and we have to stick by our customers. Our businesses are just too big to do anything else. You can't just come in and go out. Many software companies do, but we're just too big to even think about that. One way (to deal with the crisis) is to be flexible in the way we fund projects or we do things with our customers, and recognize that we're operating under a different financial model now. We've been used to seeing 50 percent or 60 percent growth rates in Asia, and now we're not.

We can manage our resources by region, so that areas that are not as affected by the crisis can help out.

In terms of lowering costs, our database business is all about lowering costs. Companies that are in a crisis should not be distributing NT servers everywhere. It's counter-intuitive to be distributing NT servers everywhere and trying to run a business that way because you're going to have a lot of people who you're going to have to support. So we have an opportunity to present Oracle 8i as a low-cost way of deploying software. Or our applications in the same way. We can offer financial services with partners who can post our applications. There are real opportunities, but we'll have to come at them in a different way.

Question: Is Web enablement something your customers are already looking for, or is it something you'll have to push onto the agenda?

Lane: Customers want to do things on the Internet, but they don't know what the software can do today. When they think of doing some kind of electronic commerce, they think of Web application servers that will host a Web page which allows the display and ordering of products. But they don' t think about linking a database to the Internet and having that kind of scalability and (using the system) to analyze transactions and do Internet commerce. That's what we have to do.

Category: Systems Software & T