Oracle CEO Larry Ellison hired former Wall Street analyst Charles Phillips almost six years ago, and not long after that appointed him president. Phillips manages Oracle's global field operations, including consulting, sales, marketing, alliances, and customer programs, and has been instrumental in many Oracle acquisitions.
InformationWeek hears regular complaints from readers about the high cost of enterprise software. So a team of editors sat down with Phillips in his Redwood Shores, Calif., office earlier this month, and asked him to explain why software license and maintenance fees cost so much.
Phillips also talked about Oracle's upcoming Fusion Applications, the state of Oracle's acquisition strategy, and the impact that Barack Obama -- sworn in as President Jan. 20 -- will have on the IT industry.
InformationWeek: The tough economy has put more pressure on IT budgets. Most of what Oracle offers is licensed software that customers install on-site. But what about those who say software as a service is more affordable, since customers don't pay the full license and yearly maintenance fees?
Phillips: I'm not sure the licensing model solves everyone problems. We've been in software as a service a decade now, with 1.7 million subscribers. We're the only company that's flexible and offers both on-demand and licensed software. It depends on the application and the model that makes sense for it; there are some apps that are easy to implement for an on-demand model ... [such as] CRM. Other areas are more complicated [such as] supply chain and manufacturing.
Someone has to pay for the software to be updated, and that's the maintenance cost. If you want a [software] partner that makes money, they'll have to charge you something. There's no magic in the cost. Someone has to pay for developers and maintenance. We don't believe that because it's on-demand and multitenant, it's 90% cheaper.
InformationWeek: But are Oracle's on-demand offerings really SaaS? In most cases, customers still pay the license and maintenance fees for Oracle-hosted software. Many SaaS vendors claim true SaaS is multitenant, and having customers share the software lowers everyone's cost.
Phillips: Multitenancy is one way to administer a system to users. We have some multitenant customers. But we have others that say, "I like CRM On Demand, but I want my own server." All those models are growing for us, and the fact that we have all those models is a competitive differentiator for us. There are much stronger [data] privacy laws in Europe than the rest of the world, and that's why we've gained a lot of share against Salesforce.com in that region, because it can't accommodate that [multitenant] model.