Strategic CIO // Digital Business
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1/29/2014
11:59 AM
Rob Preston
Rob Preston
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Oracle's Hurd: A 'Once-In-A-Career Opportunity'

President Mark Hurd explains Oracle's strategy on cloud, marketing, innovation, and those pesky startup rivals.

Mark Hurd showed up 10 minutes early for our scheduled 9:00 to 9:30 a.m. interview, which we conducted earlier this month in a shut-down bar off the lobby of Manhattan's Palace Hotel. Hurd, one of Oracle's two co-presidents, was in town partly to address the invitation-only Chief Marketing Officer Leadership Forum later that morning. I was pleased to get 40 minutes to talk with Hurd about Oracle, as well as industry and customer trends, as something of a primer for the on-stage keynote Q&A the two of us will be doing at the InformationWeek Conference in Las Vegas on April 1.

The previous time I had sat down with Hurd was also in New York, in October 2011. It was a year after CEO Larry Ellison had brought in the no-nonsense former HP CEO to lead Oracle's sales and marketing efforts while the other co-president, Safra Catz, continued to oversee financial matters, including mergers and acquisitions.

Hurd at that time talked about the smartphone revolution, which he characterized as putting the power of the old VAX minicomputer into the hands of billions of mobile customers and employees, all of them wanting to "bang on" petabytes and eventually exabytes and zettabytes of data and expecting a modern, "consumer" experience. This was all happening while the corporate world tried to make do with applications that were 20 to 25 years old. It's hard work for companies to uproot and realign their legacy applications for modern processes, business models, and customer expectations, Hurd noted at the time, especially when IT budgets are flat.

Even Oracle's ERP applications are 'headed to the cloud,' says co-president Mark Hurd.
Even Oracle's ERP applications are "headed to the cloud," says co-president Mark Hurd.

In 2014, is that still the No. 1 challenge keeping Oracle's customers up at night? What's different today?

"All the things you said -- or said that I said -- are still true," Hurd replied. "But you've had a sharpening of it in the sense that the tools have continued to mature and demographics have continued to evolve. There's a stat: Roughly speaking in the next eight or nine years 40% of Americans can retire. When those people retire and are replaced by the next generation, those people become our customers, and their familiarity with IT is very different from the generation that's retiring. The people retiring now are from the PC generation. The people entering the workforce are from the Facebook generation. The way they communicate, the way they talk, the way they reference is very different from what I did. You can go down the same track on the employee side. Now you just get on social media and say, 'Hey, can anyone tell me anything about this?' and you get a thousand inputs. The transparency we're seeing in the marketplace is unlike anything we've seen before."

So how do those trends translate to the way that Oracle needs to approach its customers?

"There are two really big things going on at the same time," Hurd said. "They may seem in opposition to each other, but I really don't think so.

"I don't know many CEOs telling their people in IT: 'Your budget is limitless.' Most people have a fixed set of money, and they have to get a lot done with roughly what they've got. So our customers, generally speaking, are looking for ways to save money. And that means simplification -- getting rid of complexity -- consolidation where appropriate… That's one of the reasons you see this secular move to cloud and to engineered systems. The No. 1 driver of that is simplicity.

"On the other side of this is this massive drive for innovation, particularly around the customer: How do I get better at connecting to the customer? You're going to see this ripple through, industry by industry. Retailers, as a segment, are obsessed with how to connect better to customers. What I like about retailers as an industry is that they have very thin margins -- their whole business is about getting the right product into the right place at the right time. Their differentiation is that inventory location and their relationship with you. So they tend to innovate. The company that can connect with me, that can engage with me, that can transact with me the way I want, where I want, when I want, and offer me the right services is going to get my business and I think the next generation of buyers. And that technical capability will change markets.

"At Oracle, our job is to help customers do both of those things at the same time: innovate and save money."

Outside of retail, I asked Hurd, which industries does he see driving true "digital business" innovation and competitive advantage?

"Right now in the banking segment, all it takes is for one company to nail it for everybody to follow," he said. "Same thing in telecommunications service providers. Once one company nails it and gets in front, they start to gain share and it has a ripple effect throughout the entire segment."

I asked Hurd about the changing role of the CIO and the emergence of the "chief digital officer" to drive digital innovation, often outside the IT organization. I also asked him about the movement of IT budget dollars outside of IT organizations and into marketing and other departments. Is the CIO role being marginalized?

"You catch me one hour before I'm going to keynote a marketing conference," Hurd replied. "First of all, I think being a CIO is a very hard job. By definition, you can never please everybody. There will always be functional organizations who say, 'Yeah, he doesn't give me what I want.' But I think it depends upon the function, the company, and the industry… CEOs traditionally are hired and fired based on their ability to perform. And generally revenue drives that. And they feel like their marketing department has an opportunity to change the brand, so you'll see more IT projects in marketing than you've seen before.

"But I think in the end you're looking for companies to have a cohesive IT strategy. In the end things like security… are still too important."

Now that Oracle is in the thick of marketing automation with its $810 million acquisition of Eloqua and $1.5 billion acquisition of Responsys, do you see CMOs making their own IT spending decisions independent of the IT organization?

"The app is typically owned by the functional leader, [who's responsible for] the influence of the decision if not the total decision. The ability to ensure that the solution meets corporate standards, such as security, has to fall to IT."

I asked Hurd how Oracle's cloud strategy has evolved over the past two years. In that time, most of the company's 20 or so acquisitions have been cloud-based, including RightNow (CRM software), Taleo (talent management software), Eloqua (marketing automation), Responsys (campaign management), Nimbula (infrastructure), and Corente (application delivery). Meantime, Oracle has also introduced Oracle Fusion applications, designed for cloud delivery as well as on-premises deployment.

"In SaaS, we're really the only company in the market today with a suite of applications," Hurd said, referring to HR, financial, sales automation, marketing, etc., and noting Oracle's 35% growth in SaaS bookings last quarter. "We feel very good about the depth and breadth of our portfolio. We made the change in our company a year and a half ago, where we lined up our sales force against secular competitors, by function, by product.

"We're in the early days. We're going to get nothing but better and better and better. Our sales force is going to get nothing but better and better and better."

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Mark Montgomery
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Mark Montgomery,
User Rank: Strategist
2/1/2014 | 2:21:50 PM
Re: What would you ask the Oracle president?
Hi Rob,

Mark and I have some mutual acquaintences, apparently including you virtually anyway, but we've never met. I appreciate his candid view on the industry--more credible than most with less spin.

My question for him/Oracle and other market leaders in the enterprise -- in addition to the one already asked about where the growth is coming from in the industry, is whether he believes as I do that the service model was taken too far.

As you may have noticed in my comments on LI, I sent Lou/IBM a letter on the brilliant strategy at IBM at the time in mid 1990s, and he responded with interest. However, the rise of the integrationist model and related conflicts became so massive that based on my research the economics of the model wasn't sustainable, it just took a few years to manifest in the numbers. Something had to change and it had to be big. 

Is he concerned with the sales growth numbers in enterprise IT leaders? What message is it sending to him?

I'm very curious to see if his view is similar to what we are hearing direct from customers and chief influencers.

Thanks, Mark Montgomery @kyield
cbabcock
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cbabcock,
User Rank: Strategist
1/30/2014 | 5:38:33 PM
Six or seven years may be too long to catch the next generation
Hurd says,"It'll take them six or seven years to rewrite their code," a statement based on Oracle's own experience. It's aimed at SAP but might be applied to any legacy business application vendor trying to move a complex system into SaaS. I'm not sure Oracle did it fast enough or in such a way that crossed the generational chasm. I think more and more business applications are going to be coming from the young vendors that capture the interests and ways of doing things of the next generation. 
ChrisMurphy
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ChrisMurphy,
User Rank: Author
1/30/2014 | 4:17:30 PM
Re: What would you ask the Oracle president?
Will companies be more or less likely to switch between enterprise software vendors in the coming cloud era? Are customers more locked in, because of the challenge of moving data? 
danielcawrey
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danielcawrey,
User Rank: Ninja
1/30/2014 | 11:02:01 AM
Re: What would you ask the Oracle president?
Oracle does face some generational challenges. Yet I would have to argue that their strength is something that is necessary. Data amounts are exploding, and I think Oracle will have a role in helping to store and categorized some of these sets.

Do I think their solutions are overly expensive? Yes. But I think that companies are clearly willing to pay the price to get results from their databases. 
D. Henschen
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D. Henschen,
User Rank: Author
1/29/2014 | 2:52:52 PM
Why are the "small startups" outpacing Oracle in the cloud?
Customers do have a choice. They may consider Oracle's financial, engineering, and support strengths, as Hurd says, but they're also considering the cost and complexity of doing business with Oracle. Hurd doesn't seem to see the ease of doing business with Oracle as a particular problem. Why then, I would ask, are cloud-based companies like Salesforce.com, NetSuite, and Workday growing faster than Oracle in the cloud? They may be smaller than Oracle, but I'd hardly call them "small startups."
RobPreston
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RobPreston,
User Rank: Author
1/29/2014 | 12:09:53 PM
What would you ask the Oracle president?
As I mention above, I'll be sitting down with Mark Hard on April 1 during the anchor session at our InformationWeek Conference (the conference starts on March 31--informationweek.com/conference). It will be an on-stage, unscripted Q&A. What would you like me to ask Hurd? Please keep the questions high level and relevant to Hurd's role at Oracle. Come April, we'll report back on his answers.
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