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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (3777)9/18/2014 9:21:00 PM
From: richardred  Read Replies (1) | Respond to of 6449
What timing, the day SAP makes a big acquisition.

Larry Ellison Steps Down: Succession Done Well

Sep 19 2014

Founders always have a very hard time giving up their roles as CEO.

Look at pioneering technology founders like Bill Gates of Microsoft, Andy Grove of Intel, Larry Page and Sergey Brin of Google and Mark Zuckerberg of Facebook. Each held (or still hold) onto their companies as long as they possibly can.

Why? Because successful founders define their identity around their company and often single handedly create the culture, product strategy, and marketing vision that drives success. I have personal experience in this area, so I completely understand the dynamic.

This week one of the most iconic and successful CEOs in our time, Larry Ellison, announced his decision to step down from his direct operational role running Oracle. For those of us who have been in the technology industry for years, the story of Oracle is amazing.

This company started as a small scrappy pioneer in the relational database industry back in 1977 (before relational databases were really popular). The company popularized the use of SQL for mainstream programmers and as the database industry exploded with growth, won the "database wars" against Sybase, IBM, Ingres, and Informix in the 1980s. Under Ellison's leadership, Oracle built an entire ecosystem of Oracle tools, professional developers, and applications over the years. From the very early days, Oracle essentially invented the "multi-platform" database and developed strong relationships with every major hardware manufacturer in computing (eventually acquiring Sun, one of its best partners). Ellison learned quickly that in addition to having a good product, the company needed to "own a market" by running on every platform imaginable.

As the database industry become bigger and Oracle's growth slowed, he aggressively moved the company into business application software, eventually buying a slew of applications companies to make Oracle one of the world's leaders in business software. As I followed Oracle over the years (as both a competitor, software executive, and analyst) I always marveled at Ellison's ability to spot a trend and then jump into a market when it became big, popular, and ready for global growth. Today Oracle is dominant in almost every major business software category and the company never slows down in its relentless efforts to own a market segment and penetrate large corporate accounts.

Over these 30+ years Ellison has always been a smart, aggressive, and somewhat controversial leader. Analysts believed Oracle was behind on the cloud, until Ellison made a series of announcements (Oracle 8i, 9i, 10i) which convinced the world that Oracle's products were no made for the web. While Oracle is not always first to market as technology changes, the company is an amazingly fast follower and Ellison has an amazing ability to rapidly push the company into new markets right as these markets become large. In my particular marketplace, Oracle went from a relatively small player in Human Capital software to suddenly becoming the #1 market share player through the acquisition of PeopleSoft and Taleo over the last ten years.

Ellison's decision to acquire Sun, Siebel, BEA Systems, and many other companies demonstrates his ability to deeply understand technology markets and pounce when the time is right, even when Oracle itself may not be able to innovate fast enough. In many ways Ellison's strategy has always been "if we can't develop software to be #1 in the market, we will buy the #1 in the market." This has worked again and again.

I remember meeting Ellison in the 1980s when I worked for IBM and saw his charisma up close. At that particular time IBM was rapidly growing its business in distributed unix computing systems and badly wanted Oracle to port its product to IBM's version of Unix, called AIX. Ellison painted such a compelling picture of Oracle 7 (it didn't really exist yet) to the IBM executives that IBM decided to invest heavily in Oracle and later developed a strong business partnership to help Oracle port its software to the IBM platform.

The interesting thing about this relationship is that for many years IBM and Oracle competed aggressively in the database industry, so while one part of IBM was partnering with Ellison, another part considered him a tremendous rival. IBM scientists were some of the original inventors of the SQL language and IBM executives always felt that they deserved the right to that market. Oracle did a much better job of building the right products, porting to multiple platforms, and aggressively marketing and selling the database - leaving IBM as a small player in the relational database industry.

I had the opportunity to work for one of Oracle's bitter rivals in the early 1990s (Sybase) and we always worried that Oracle would eventually "figure out" what we were doing. When they finally did, Oracle quickly and aggressively started to outsell us (pushing a story that "Sybase couldn't scale") and eventually forced Sybase to shift its product strategy away from enterprise database toward mobile and middleware products. While I never knew how much Ellison was involved, I'm sure he was beating the drum behind the scene and knew that Sybase represented an existential threat, firing up his competitive energy. Despite our best efforts to beat Oracle in the database market with new and better technology, Sybase lost that battle and eventually the war. Now SAP (who owns Sybase) can fight the battle by investing in Hana and Sybase to compete with Sun and Oracle.

Ellison's tremendously strong technology background and deep understanding of enterprise software makes him hard to beat -- and most of his competitors have either gone out of business or simply become part of Oracle after an acquisition.

This announcement is significant for several reasons. First, of course, it means that Larry Ellison will be less involved in the day-to-day operations of Oracle. But more significantly, it shows that Oracle is now mature enough and smart enough to build a long term succession plan for Ellison himself. Mark Hurd and Safra Catz, both of whom have worked for Oracle for many years now, are running the company -- and Ellison is going to play the role of chief technology officer. This puts Larry where he fits best: watching the product strategy, observing market trends, and pushing Oracle to aggressively move when the time is right.

In many ways this is the end of an era. If Ellison truly decides to step away from the company, a new breed of software leader(s) will have to emerge, and Oracle has plenty of people to take his place. To me, as someone who has grown up across the bay from Oracle and still works closely with Oracle in the human capital market, I expect the company will continue to thrive. While Oracle has plenty of challenges (as does every technology company), he has taken the time to groom new operational leaders to take his place. He has been an exceptional leader and we have all watched him grow and evolve as Oracle continued to grow.

For business people, the lessons show that sometimes strong multi-functional founders can thrive for many years. So while many companies try to replace founders at some time, in Oracle's case Ellison has been instrumental in the company's success for decades. For HR and other people, the story shows that even the strongest CEOs need a succession plan, and it often takes years to develop and groom successors that can succeed. In this case Ellison has been friends with Mark Hurd for many years and it would not be suprising to hear that this transition has been in the works for a long time.

I personally have always found Oracle to be an impressive, trend-setting company, despite its sometimes overly aggressive sales and marketing approach. The company's products are eminent around the world in almost every market, and we hope that Oracle's success continues through this transition. There are a lot of lessons to learn and stories to be told, and now that Ellison is in the chairman role it will be interesting to see how the new top executives evolve Oracle as the market for enterprise software gets hotter than ever in the cloud. SAP, Workday, Salesforce, and dozens of other fast-growing vendors now have young, aggressive leaders - Oracle is now ready to do the same.