The veteran leader of IBM's software business talks about growth, reorganization, enterprise software diversity, and the place of competitors, including Oracle and SAP.
InformationWeek:You mean it's a suite?
Steve Mills:No. It's more than the vendor's suite as well. Nobody runs SAP stand-alone, and nobody runs any of those Oracle applications stand-alone. They run them in concert with other applications, which are often not delivered by the vendor that produced the core application. The rhetoric one often hears is that customers are somehow making singular decisions. [Oracle CEO] Larry Ellison loves the story that if you just bought Oracle applications, you wouldn't have to buy anything else. That's something that Larry says that's just so untrue as to not even make any sense.
InformationWeek: Back in 1998, saying "we're not an applications company" put vendors like PeopleSoft, JD Edwards, Siebel and many others at ease, but is there a different position today in the wake of so much consolidation?
Steve Mills: No. And the reason is because the software requirements surrounding these applications remain quite significant. I'm not talking about midsize and small businesses that can focus on very few packages. But in the enterprise, for every dollar invested in ERP, there will be five dollars of investment made around that ERP package to get it fully implemented, integrated, scaled and running effectively. Those five dollars go into hardware, services and software. That deployment needs a database. It needs systems management. It needs development tools. It needs integration software. It needs messaging infrastructure. Application-to-application communications have to be enabled through the middleware infrastructure below the application layer.
All of that is not native to any one application. Furthermore, there are so many different connection points, we're the only ones that have a portfolio that can deal with all that. That's the value of this very-large integration portfolio and the many decades of experience that we have around managing data, managing transactions, managing message flows and so on.
InformationWeek: Do businesses view all that as plumbing? Is there a customer perception -- particularly with ERP -- that applications are the mission-critical piece?
Steve Mills: The things that we deliver are foundational in nature. You have to have a good foundation, or you can't scale. We're the ones that provide horizontal integration, deep levels of transactional integrity, sophisticated optimization around data. Our perspective of the customer's problem spans not just the individual processes but the aggregate of all processes. We're the company that has the widest and deepest view of what the company is trying to accomplish with all the IT assets that they have. We know their legacy environments. We know all their hardware platforms. We know Unix, we know Windows, we know Linux and we know the mainframe world. We know storage and telecommunications. There isn't anything they do with IT that we don't know. And we have a perspective on how to optimize all of those things....
InformationWeek: Do you see any threat from Oracle's new single-stack strategy with the acquisition of Sun? Or to ask it another way, what's really driving customer technology selections these days? Is it hardware, middleware software or applications?
Steve Mills: It's money. That's the No. 1 motivator. And money is not a single-dimensional factor because there's short-term money, long-term money and money described in broader value terms versus the cost of a product. The surrounding costs are far in excess of products. Every month, customers convert from Oracle to DB2. Why do they do that? Well, Oracle is expensive. Oracle tries to use pricing power to capture a customer and then get the customer to keep on paying. Oracle raises its prices constantly. Oracle does not provide a strong support infrastructure. There are many customers who have decided to move away from Oracle across a variety of products because of those characteristics.
Oracle is not a very strong technology company, but they are a very high-testosterone company. They love to beat their chest and talk about how they always win and never lose. They're very declarative in that sense because their perspective is that lies that go unchallenged become the truth. If you scream loud enough, it's hard for anybody to get a word in edgewise.