WHERE IS ORACLE HEADED?
Questions persist about both Oracle's acquisitions and its follow-through.

Daniel Lubin, director of IT at medical device company Abiomed, chose SAP over Oracle because of what he saw as SAP's better functionality and understanding of business processes. "Oracle's R&D spend is fragmented compared to SAP's," Lubin says. "That's not to say they don't have great products, but we still don't understand where Oracle is headed."

Last fall, Dow Corning replaced Siebel with SAP's CRM software. Many of the reasons were functional--better reporting, better integration with other SAP systems it has--but those weren't the only ones, says Chip Reeves, Dow Corning's director of marketing and sales processes. Dow Corning's relationship with Siebel changed after the Oracle acquisition. "I don't know what happened to my direct seller; I never saw him again," says Reeves. "I did receive standard letters from Oracle that had 'don't worry, everything is all right' kind of messages. But I don't recall having a personal interaction with anyone after the acquisition."

At the same time, Oracle has its share of true believers. "They're doing great things for us, bringing together in the applications world all the best under one roof," says David Rudzinsky, CIO of Hologic, a $700 million-a-year medical device maker that uses PeopleSoft, Siebel, and other Oracle products.

Rudzinsky wasn't always so high on Oracle. "We grew up in the IT industry hating the fact that a few guys controlled our future direction," he says. "Oracle was one of the large companies you feared doing business with." But Phillips helped change things. "They're working closer with user groups and showing up at the meetings," says Rudzinsky, adding that Phillips seems genuinely interested in how things are going for him.

There's another change under way at Oracle: It's shifting to a business process, vertical-industry orientation, one less focused on what Phillips calls "general ledger" ERP and more on specific industries. For that reason, Phillips says he's not so concerned with trying to convince companies long standardized on and invested in SAP to move over to Oracle. "ERP is but one component of the enterprise application market," he says.

Oracle wants to be the leader in such areas as communications billing, utility billing, and core banking. "We're going to expand the number of vertical industries where we have industry-specific applications and we're going to do that via acquisition," Ellison said in a recent conference call with analysts. Not only is that a market opportunity in itself, but it leads to other, bigger opportunities. "We have found that these industry applications are so strategic, that customers will often give us the back-office, administrative applications if we are providing the line-of-business applications," Phillips says.

So far, Ellison's gamble on Phillips is paying off handsomely. Somewhere in the financial analyst he saw a talent for strong customer skills and a keen appreciation for technology's potential. Without those, Oracle's acquisition strategy wouldn't have been as successful. The degree to which Ellison's bet pays off in the long run will depend on how well Phillips keeps the momentum going.

-- with Charles Babcock

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Q&A: Oracle's President Charles Phillips