Global CIO: Larry Ellison Will Need A Time Machine To Catch Us, Says IBM
Ellison's vowed to remake Oracle in the fashion of circa-1960 IBM: a true systems company. But IBM says it's impossible for Ellison to overcome that 50-year head start.
"We want to be TJ Watson Jr.'s IBM," Ellison said at the time during a public appearance in the Bay Area. "Not Lou Gerstner's IBM, not Palmisano's IBM—we wanna be T.J. Watson Jr.'s IBM. And that's when IBM really was the dominant software company—uh, 'dominates' is a bad word (audience laughter)—they're not allowed to use that word—well, but they were the dominant software company in the world and they translated that position in software to become the dominant systems company in the world. We are not going into the hardware business. We have no interest (shrugs) in the hardware business. We have a deep interest in the systems business. . . .
"T.J. Watson Jr.'s IBM was the greatest company in the history of the enterprise on Earth because they had that combination of hardware and software running most of the enterprises on the planet. That company was the dominant company in computing when I came into this industry: it was pre-Intel, there was no Intel, there was no PC, there certainly was no Mac or any of this stuff. It was IBM, IBM, IBM. And I was told that IBM was not a company against which you competed; IBM was the environment in which you competed. We've already beaten IBM in software—on modern systems. And now, if everyone will let us, we'd like to see if we can beat IBM in hardware, or systems." (For the full story on this, please see Global CIO: Larry Ellison's Top 10 Reasons For Buying Sun.)
Now flash forward to just one month ago when Ellison used Oracle's latest earnings call to frame out his vision of just how close he feels his company has come to pulling into a tie with IBM in high-end systems:
"We expect overall that our new generation of Sun machines—Exadata, Exalogic, and Sparc Superclusters—will enable us to win significant share in the high-end server market and put us into the #2 position behind IBM very, very soon," Ellison said. "Then we'll fight it out with IBM for the #1 spot." (For deeper analysis on how Ellison plans to do win that fight, please see Global CIO: Larry Ellison's 10-Point Plan For World Domination.)
But Ellison's powerful ambition, counters IBM, is out of line with reality. During IBM's earnings call last week, CFO Mark Loughridge was asked about his company's stance in this increasingly popular market for high-performance integrated systems, and while Loughridge did not mention Oracle and Ellison by name, he clearly was referring to them and their high-intensity efforts to close the gap with IBM:
"Yes, I do think that integrated play is a very strong play," Loughridge said via the earnings-call transcript on seekingalpha.com. "And if you look at the industry, nobody has that hardware, software, services complement the way we do. Now you may see a lot of businesses putting together strategies along that perspective or describing that future state in that perspective, but if you just look at who's doing it right now, it's really IBM with that hardware, software, services complement.
"And you don't build that overnight. We've been working on this for decades (emphasis added). Secondly, I think it's really the strength of those cross-business-unit growth initiatives, and I would return to make the point that in Business Analytics, that cuts across our businesses: growth at 19%; growth markets, 13%; our Smarter Planet content, we did $3 billion, up double-digit; cloud, again, with thousands of engagements, doubling to 2015," Loughridge said.
"So one, nobody has that complement of hardware, software and services the way we do. Number two, it takes a long time to build that. We've been at this for decades" (emphasis added).
Loughridge's comments are of a piece with those shared by IBM senior vice-president of Systems and Technology Rod Adkins in a telephone conversation last week when I asked for his impressions of Oracle's ambitions to displace IBM as the world's top maker of high-end systems.
"As for Oracle/Sun, we'll also continue to hear more of the same from them: in the last year, they've embraced aggressively our point of view about the importance of integration and of delivering highly integrated and highly optimized systems. And that's a good thing," Adkins said.
"However, the challenge Oracle has is time: you don't go out and acquire a company and then immediately declare victory, and declare that you've got everything all squared away—it takes years of work to get those software and hardware teams working together. And believe me, we know that from our own experience here at IBM (emphases added).
"So Oracle will continue to tell that story but the reality is that they have a one-trick pony called Exadata—that's all they have," Adkins said. (For the full story on Adkins' perspectives and the financial performance of Systems and Technology in the latest quarter, please see Global CIO: IBM Zings Oracle And HP Over Lack Of Vision.)
Remember, this isn't just a talk-off; rather, the intense competition between IBM and Oracle at the high end of the market is driven by their shared belief that business customers are becoming increasingly certain that highly engineered,integrated, and optimized systems are the way of the future.
And CIOs would be wise to leverage that uncompromising competition to ensure that the real winners are ultimately those CIOs themselves and the businesses that stand to gain from the accelerated innovation that always comes out of such head-to-head battles.
Does Larry Ellison need a time machine to catch IBM? Maybe.
But trust me on one thing: IBM's going to behave as if he doesn't.
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