|For Oracle, Money’s Not the Problem. It’s Coping With the Cloud.|
By QUENTIN HARDY
New York Times
JULY 29, 2016
Thomas Kurian, Oracle’s president of product development, has the task of integrating NetSuite into Oracle’s efforts to expand its cloud-computing offerings. Credit Aaron Wojack for The New York Times
REDWOOD SHORES, Calif. — It was not all that difficult for the Silicon Valley software giant Oracle to pay $9.3 billion for a company called NetSuite. But then writing big checks has rarely been a problem for Oracle, which over the last 11 years has acquired dozens of companies in its quest to find more and more customers.
The hard part is now in the hands of Thomas Kurian, a soft-spoken 49-year-old who has to figure out how the new purchase will work with what Oracle already has.
While Lawrence J. Ellison, Oracle’s brash executive chairman, is still an outsize personality at the company he co-founded, Mr. Kurian has been the key figure in Oracle’s attempted reinvention, overseeing sweeping changes in its engineering. That includes the creation of a network of 21 data centers around the world, a project that has cost perhaps $15 billion. NetSuite is Oracle’s first major acquisition intended to tie right into this new global system.
“Money isn’t the problem for us,” said Mr. Kurian, who is Oracle’s president of product development. He added that “between 2004 and 2014 we spent some $40 billion to $45 billion on acquisitions.”
Oracle became a giant by selling directly to businesses software packages that do things like manage the books and keep track of customers. Now most industry experts think the company needs to show that it is finally in a position to rein in competitors that have been stealing customers away with fresher technology delivered over the internet, a concept called cloud computing.
And the trade-offs Oracle must now make — accepting lower profit margins because customers are less interested in the older, pricier technology — reflect the hard decisions many older tech companies must make to avoid getting left behind.
“There’s no doubt Oracle moved late,” said Al Hilwa, an analyst at IDC. “They had doubts about the business, and the profit margins, but the way companies are spending forced them to change.”
Oracle’s new data centers are intended to power a cloud-computing network to compete with the established services provided by the likes of Google, Amazon, Microsoft and IBM. And the NetSuite acquisition could help Oracle pull even with smaller, cloud-focused companies like Salesforce and Workday, which provide their own technology to manage business operations like sales and human resources.
Mr. Kurian would seem an unlikely person to play such a key role in one of Silicon Valley’s iconic companies. Born and raised in a middle-class family in Bangalore, India, Mr. Kurian ended his first day in the United States in his freshman dorm room at Princeton University, which he shared with his identical twin, George, who is now chief executive at NetApp, another Silicon Valley company.
“The day we left India was the first day we saw a computer,” said George Kurian, who after graduation worked at Oracle while Thomas Kurian was a consultant at McKinsey. The two also went to Stanford Business School together.
Mark V. Hurd and Safra A. Catz, both chief executives at Oracle, manage the company’s sales and finance. Mr. Ellison, who is 71 and shows no inclination to retire, counts on Mr. Kurian to run the core of any big tech company: thousands of engineers.
The NetSuite deal is something of a coming-out party for Oracle’s global cloud, possibly signaling the start of a new round of acquisitions, along with hefty spending to keep building out this network. But spending upward of $2 billion a year on building a cloud network, Mr. Kurian said, is table stakes for the biggest tech companies.
In NetSuite, Oracle saw a cloud company whose sales of e-commerce and manufacturing software to smaller businesses were stalling as it tried to move into international markets. Oracle figured it could distribute that software efficiently over its cloud. It also hopes to reach smaller companies that can’t afford Oracle’s traditional high-cost, high-maintenance product.
Mr. Ellison played no role in the acquisition of NetSuite, according to Oracle, since he owns about 40 percent of that company. Mr. Ellison, who is already worth $45 billion, according to Bloomberg, will reap another $3.7 billion on the NetSuite deal. He still attends regular corporate strategy sessions, along with Mr. Hurd, Ms. Catz and Mr. Kurian, grilling each on their respective portfolios.
Oracle has hundreds of different types of software for businesses, but more than anything it is known for powerful databases. Many global airlines, banks and manufacturers wouldn’t function without them.
Customers treat the big, Oracle-strength software like sacred objects that should never be altered, while they’re happy to experiment, for example, with a new offering from Amazon. That’s one reason Oracle has a hard time moving toward new technology, said Steve Miranda, Oracle’s vice president of applications development.
“New companies have what is called ‘a minimum viable product’ they can sell,” said Mr. Miranda, a 24-year veteran at Oracle. At his company, Mr. Miranda said, that minimum is in reality a fairly high-end product.
Mr. Kurian, who has been at Oracle for 20 years, is known to move quickly in meetings, seeking slides ahead of a presentation and immediately zeroing in on the one slide where he spots a problem. If there are no problems, the meeting is canceled. Soft-spoken or not, he will let rip a profanity-laced tirade if he sees too many problems.
“I won’t comment on the language, but we are very honest with each other, very hard on ourselves and very direct,” said Mr. Miranda. “If you’re striving to be the best of the best, it comes with the territory.”
As fast as Mr. Kurian moves Oracle down the technology field, the competition keeps moving the goal posts. Soon after the NetSuite deal Thursday, Amazon announced that its cloud business had second-quarter revenue of $2.9 billion. Just the amount Amazon’s cloud segment grew from the previous quarter, $320 million, was $90 million more than all NetSuite’s revenue for the second quarter.
Much of that revenue comes from selling bare-bones computing that Oracle doesn’t care about. But increasingly Amazon is offering its own databases, and customers are signing on. It targets Oracle directly at its promotional events, and offers something called “serverless computing,” which charges for applications per line of code rather than monthly fees or upfront licenses — another potential threat to Oracle’s profit margins.
Oracle has built a large operation in Seattle, paying big for cloud talent from Amazon and Microsoft. (Google also has operations there, making Seattle something of the nation’s cloud town.) But local hands there say Oracle isn’t yet a noticeable presence.
“Right now, I go to all-day meetings, and their name doesn’t come up,” said Matt McIlwain, a managing director of the Madrona Venture Group, a Seattle venture firm.
The next big competition in cloud computing also involves artificial intelligence, fed by loads of data. Soon, Mr. Kurian said, Oracle will offer applications that draw from what it knows about the people whose actions are recorded in Oracle databases. The company has anonymized data from 1,500 companies, including three billion consumers and 400 million business profiles, representing $3 trillion in consumer purchases.
“Most of the world’s data is already inside Oracle databases,” said Mr. Kurian.
That’s the kind of hold on people’s information that perhaps only Facebook can match. But Mark Zuckerberg doesn’t sell business software. At least, not yet.