One of the most influential people in the software industry these days, Phillips is a hard man to pin down, due to the demands of a hectic travel schedule meeting with customers, startups, and potential acquisition candidates. Editor-at-large Mary Hayes Weier got him to sit still long enough to answer an e-mail enquiry on several facets of Oracle's acquisition strategy, the company's upcoming Fusion technology, its Web 2.0 push, and its competition with archrival SAP.
InformationWeek: As a result of Oracle's acquisition strategy, you've helped turn the company into a Wall Street darling and greatly improved its market cap. But is it good for customers?
Phillips: Customers now recognize that Oracle acquiring a product is a very good thing for them. The product will be quickly enhanced and tested more thoroughly, supported globally, and integrated into the Oracle stack. Our strategy is consistent with the decisions customers are already making: They want fewer software suppliers and more accountability, more standardization and pre-integration, and less complexity. We are removing the complexity from their environments by taking responsibility for integration, certification, and testing across all these products. We can do it once instead of each customer doing this on their own.
Our renewals on support agreements reached an all-time high last quarter. We have to earn the renewals each month, and customers generally don't spend money with vendors that aren't providing value. Our customer satisfaction ratings are also at an all-time high. We've shipped more updates to the products we've acquired than anyone anticipated. Call any of our user groups and they'll register their satisfaction on the product improvements. We've improved the quality, broadened the language support, integrated the products where appropriate, expanded support to more countries with more localizations, and updated the underlying tech stack with modern middleware. We've done what we said we would do, and customers are rewarding us for providing value.
InformationWeek: Oracle can't possibly replace the majority of SAP ERP deployments since companies have gone through so much time and expense putting them in place. So what exactly is Oracle's endgame in business software?
Phillips: We've been trying to educate the press and analysts that ERP is but one component of the enterprise applications market. It's the one people know the best, but things are changing and that's an opportunity for us. We're going well beyond ERP to CRM where we are the leader, and the extremely large opportunity for industry applications.
The industry applications are line-of-business applications such as communications billing, utility billing, core banking, and retail merchandising. These applications are a higher value-add than a general ledger and drive the core business of our customers. We're selling them into SAP accounts because SAP only has administrative applications and lacks the expertise in these industries. The person who builds a good general ledger isn't the person you want building a billing engine for telcos. We've found that these industry applications are so strategic that customers will often give us the back-office administrative applications if we're providing the line-of-business applications.
In other cases, we simply surround SAP's general ledger with best-of-breed functionality in areas where SAP is weak. A very common scenario is the SAP GL surrounded by Siebel CRM, PeopleSoft HR, G-Log for transportation management, Hyperion for consolidation of those GLs, and Demantra for demand planning -- all sitting on Oracle Fusion middleware and the Oracle Grid. Many SAP customers also use Agile and Siebel CRM On Demand.
So we make sure we integrate well with SAP using standard technologies such as BPEL and our Application Integration Architecture, which supports a common object model across all applications. In this scenario, the customer simply decides they are a two-vendor applications shop: SAP for GL and Oracle for everything else. They can continue to run the GL but get world-class functionality, standard integration via our middleware suite, which most of them are already using, and support for all these other applications from the largest enterprise software company.
So the answer is that the applications market is changing. Customers spend more on custom line-of-business applications than they spend on ERP. We're aggressively pursuing the rest of the market that SAP seems to be ignoring, and we're betting that more customers will buy these processes off the shelf as their legacy applications age. Meanwhile, we'll let SAP add more complexity to their general ledger.