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4/1/2010
11:42 AM
Bob Evans
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Global CIO: Oracle's Larry Ellison Mixes Fiction With Facts On SAP

Lashing out at SAP on why Oracle will take the lead in enterprise apps, Ellison said some things that he might believe are true but aren't necessarily so.

(Welcome to Part 4 in our Oracle Week, in which we analyze the good, the bad,and the ugly aspects of Ellison's stated intention to overtake IBM in high-end servers and SAP in applications. For links to those and other pieces, please see our Recommended Reading list at the end of this column.)

In an earlier column this week about Ellison's declaration of war against IBM and SAP, I quoted extensively from remarks sharply critical of SAP that Ellison made during last week's quarterly earnings call. I offered those comments in bulk because, whatever you may think of Larry Ellison—and few people in this business inspire the range and intensity of feelings that Ellison does—he has exerted and continues to exert enormous influence over the shape of the enterprise IT business.

What he says matters because Ellison is a shaper, not a responder; he's a creative destructionist and not a sideline-sitter; and he's engaged in a series of moves that have implications far outside Oracle. For example: How will companies in the systems business react to Ellison's intention to create a series of integrated and highly optimized systems? IBM's done that for a while, but very few others have—will they follow the lead of IBM and Oracle out of hardware and into systems, or will they call Ellison's bluff?

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His string of acquisitions have software companies of every size factoring The Oracle Effect into their strategic plans: what if Oracle buys a competitor? What if Oracle buys three competitors? What if Oracle buys me? What will that do to my pricing plans, my product plans, my profitability plans?

In the storage business—and yes indeed, with Sun, Oracle is now very squarely in the storage business--Ellison has directly singled out NetApp as the company in his crosshairs with a Sun storage box that's now being tricked out with all manner of Oracle software to become a better, faster, and smarter type of storage. Ellison no doubt has some plans for competing with EMC and Hewlett-Packard and other storage leaders, and yes, there's a huge difference between talking about challenging them and actually executing on that intent—but I'd bet dollars to dimes that those companies, whether or not they'll admit it, are now factoring The Oracle Effect into their plans.

In his comments, Ellison was particularly harsh on SAP, saying its core technology is old and brittle, its forthcoming non-premises Business ByDesign is aimed only at companies that can't pay enough for SAP to make a profit, that SAP's not a player in vertical markets, that its strategy is flawed, and that the company has lost its way.

In fact, while Ellison offered some blistering comments about SAP in his unscripted remarks during the earnings call, he very intentionally delivered his most-stinging comment in the formal press release accompanying Oracle's third-quarter financial results. In more than 30 years in this business I've read thousands of company statements about quarterly results leavened with executive remarks, but I've never seen a more pointed, blunt, and insulting comment than the one Ellison made in the Oracle press release:

"Every quarter we grab huge chunks of market share from SAP," said Oracle CEO, Larry Ellison. "SAP's most recent quarter was the best quarter of their year, only down 15%, while Oracle's application sales were up 21%. But SAP is well ahead of us in the number of CEOs for this year, announcing their third and fourth, while we only had one."

Sticks and stones and all that aside, that's awfully tough talk—but the bigger question is this: is it true? And are Ellison's other slashing remarks about SAP also true? Let's take a look:

1) Is -15% SAP's best quarter for the year? Yep—that one's true. For SAP's last four quarters, year-on-year figures for what SAP calls "Software Revenue" were as follows: first quarter, -33%; second quarter, -40%; third quarter, -31%; and fourth quarter, -15%. For the year, SAP's Software Revenue was off -28%.

2) Is Business ByDesign aimed at small companies? Ellison claimed on at least a couple of occasions that SAP's forthcoming SaaS application suite is targeted at companies with 100 employees or less and that therefore can't pay enough to make the business profitable for SAP. That one's false—while SAP includes small businesses among its targets for BBD, it's also very clearly and specifically aimed at mid-sized companies as well. Ellison said, "I'm sorry to go on for so long but their strategy is to try to sell ERP to customers with less than 100 employees—that's their new strategy, Business ByDesign, which has been, I guess three years late."

Larry was blowing a lot of smoke on that one--no doubt.

And then there was Business ByDesign:

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