As we've all watched the apparent unraveling of the 25-year-old Oracle-Hewlett-Packard partnership, and their subsequent reconciliation that was followed rapidly by an even more dangerous squabble, a lot of questions are swirling around. I'd love to get your help in coming up with some reasonable answers—after all, as I've proven, I'm eminently capable of coming up unreasonable answers all by myself.
I believe that plowing through these questions will help shed some light on what is currently a fairly bizarre situation in which the two companies themselves seem to have much to gain by continuing to work together, but the two CEOs have some unresolved bad blood—very bad blood, in fact—from the days when HP CEO Leo Apotheker was at SAP and competed very directly against Larry Ellison and Oracle.
The exercise will also allow us to get a sense of just how big that Oracle-HP alliance is, and how big by comparison the SAP-HP alliance is, and whether SAP has a big opportunity there or not.
IBM becomes a factor as well, depending on what Oracle and HP do or don't do.
And then of course there's Microsoft, which earlier this year signed a blood oath of fealty with HP for $250 million of shared development and brotherhood that's still in place but has been a little less warm and fuzzy ever since HP decided not to be a huge supporter of Microsoft's Windows mobile strategy.
So here's an open-book, 10-question essay test:
1) It's a dead-set certainty that HP, regardless of who the CEO is today or at any point in the next five years, will drive more deeply into services. If Oracle and SAP can't resolve their current CEO-level issues, and the two companies dissolve their broad and deep relationship, can SAP deliver to HP all of the types of software that Oracle did? Answer: no way.
That means either Microsoft plays a bigger role with databases and some related products, or HP turns to, uh, well, uh, to IBM for databases and middleware and more. Anybody think that might get a little uncomfortable?
2) HP and Oracle's partnership serves more than 100,000 customers, according to HP's website: would Oracle and/or HP really put 100,000 customers and that much revenue at risk? That depends, I guess, on the seriousness of the issue that Ellison has with Apotheker from back in Apotheker's days as a top executive at SAP. It's worth noting that Ellison raised that very same customer angle a few weeks ago when HP sued former CEO Mark Hurd to try to prevent him from joining Oracle as co-president, and here's how that went:
Ellison said HP's board was acting in "utter disregard" for their joint customers. Are the differences with Apotheker so great that they could make it impossible for Oracle and HP to continue to work together and thereby severely inconvenience those 100,000 customers?
3) How chummy can SAP and HP become, even if Oracle and HP patch things up? SAP co-CEO Bill McDermott lauded HP's hiring of his old SAP colleague Apotheker and said it heralded the beginning of "a deeper relationship" between the two companies and that Apotheker's knowledge of SAP (he worked there for 20 years) would be extremely valuable in fostering an even more-strategic working arrangement between the two companies. SAP's website says the companies work together for more than 22,000 customers, and while that's only about one-fifth as many as HP and SAP, it's an indication of how much opportunity SAP could try to seize if Oracle and HP end up having a falling-out.
4) Can you imagine HP calling up IBM and saying that because we need your database and your middleware, it's time for us to work together and share all kinds of deep dark secrets and product plans and customer identities and profiles? I realize that desperate times can call for desperate measures, but that one strains the limits of imagination. With that as a leading alternative, I can see HP going to extreme lengths to keep the Oracle partnership alive.
5) Can Microsoft fill the void that an HP split with Oracle would create? No indeed—Microsoft and SAP could combine to deliver a lot but not everything. And how many really effective three-way alliances are in place in this business? I'm not saying they're impossible—but I am saying if they were such a great idea, we could all easily point to a lot more of them. On top of that, there is the matter of focus: HP values Oracle for helping it penetrate global accounts because Oracle is 100% dedicated to the enterprise, as is IBM. Microsoft, conversely, is deeply into the consumer-technology world and simply does not have the technical depth or market expertise that Oracle and (theoretically, at least) IBM could deliver to HP.
6) So what is it about Apotheker that inflames Ellison and has caused him to intensify his public lashings of not only the HP CEO but also the HP board? It's not just that they used to be competitors—hell's bells, Ellison's got competitors everywhere he turns and he doesn't call them failures and worse. No, in this case, the problem is that Ellison and Oracle are just a few weeks away from starting the damages phase of their ongoing litigation with SAP in a case where SAP has admitted responsibility for the actions of a now-closed subsidiary called TomorrowNow that created bots that copied Oracle's software. SAP clearly says in statement that while it is taking responsibility and is willing to pay damages, it disagrees with Oracle on what those damages should be: "SAP is committed to compensating Oracle for the harm the limited operations of TomorrowNow actually caused. Oracle's unreasonable damages claims are an unproductive distraction as we work to find a fair resolution in this case."
7) So, then, how much is reasonable? That's what the court case is all about, and Oracle will no doubt try to demonstrate that Apotheker knew that TomorrowNow was using bots to steal Oracle's software. If the court finds in Oracle's favor, it will then be not only a matter of how much money Oracle is entitled to ($5 million? $10 million? $100 million?), but also a matter of how much Apotheker did or did not know about what TomorrowNow was doing.
8) And if the court decides Apotheker did indeed know about the theft of Oracle's IP being done by his company, then can you really see Larry Ellison allowing Oracle's special and deep relationship with HP to continue? In an email exchange with the Financial Times over the weekend, Ellison said that Apotheker was a top executive of SAP when it committed "industrial espionage and intellectual property theft" against Oracle—and Oracle believes court documents will show that those acts were carried out with Apotheker's knowledge.
9) Should Ellison, for the sake of those 100,000 Oracle-HP customers, let bygones be bygones and ease up on Apotheker, whether or not he knew of the theft at the time it was occurring? I think that's a nice playground theory but it doesn't work so well in the world of global business where IP is a company's lifeblood. The intent of SAP/TomorrowNow in scraping that code was not altruistic, and it wasn't academic—it was clearly an intention to damage Oracle in the marketplace and for that SAP will have to pay, which it's prepared to do. The court will determine whether Apotheker knew and whether, in the eyes of Ellison, their two current companies can do business together.
10) The HP board ousted Mark Hurd over what is said to have been improprieties with an expense report, and in so doing the board huffed and puffed a bit about zero tolerance and all that. If the court finds that Leo Apotheker had knowledge of TomorrowNow's actions against Oracle while he was a top SAP executive, then what will the HP board do? Will it take the position that it's utterly intolerable to play on the margins with an expense report, but that it's fine and dandy for top executives to be aware of the theft of competitors' intellectual property?
So I've got questions—have you got answers?
Bob Evans is senior VP and director of
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