Commentary
1/6/2011
09:39 PM
Bob Evans
Bob Evans
Commentary

Silicon Valley Crackup: Oracle & HP Killing 25-Year Alliance?

After nearly three decades of close collaboration, the HP-Oracle alliance is disintegrating in the wake of severe friction between top-level executives at each company.



Until recently, a page on HP's website describing its alliance with Oracle said, "Strategic partners for over twenty five years, HP and Oracle have more than 100,000 joint customers."

"Our accomplishments together are numerous," it went on, pointing out that the partnership is based on "executive alignment that starts at the top and runs deep."

But the link to that page detailing happier days is now as dead as a doornail—and that also seems to be the still-unofficial but nevertheless accurate description for the one-time sprawling and mutually beneficial partnership that HP and Oracle enjoyed for close to three decades.

While neither company would confirm that a formal breakup has occurred, top-level executive changes at the formerly close partners have sparked such tension and harsh words between the two companies that each has begun preparing for a near-term future as head-to-head competitors instead of close collaborators.

Oracle declined to comment on the matter, and late yesterday HP released this statement from vice president Mike Crowsen, who oversees the Oracle Alliance: "Oracle is an important partner, and HP will continue to work with them to deliver the solutions that our clients need."

But high-level contacts with intimate knowledge of the partnership said it has largely unraveled and that each company believes it is in the other's crosshairs since former HP CEO Mark Hurd went to Oracle and was replaced at HP by longtime SAP executive and Oracle nemesis Leo' Apotheker.

What I find most striking about this situation is the considerable exposure each company seems fully willing to undertake in dissolving a 25-year alliance that both companies have recently said is engaged with 140,000 customers. Not 140, not 1,400, not 14,000—but 140,000!

Here's a partial overview of what the HP-Oracle alliance was—is?—involved in:

*The companies billed HP as the leading provider of hardware and infrastructure for Oracle apps;

*Offered joint development, testing, and refinement;

*Developed joint solutions for platforms, software, and middleware

*Collaborated on "benchmarking leadership";

*Offered HP consulting for Oracle applications and Fusion middleware; and

*Operated 13 HP/Oracle demo and solution centers worldwide.

(Much more information on the range of the collaborative efforts can be found here.)

And in a section of the HP website detailing the frazzled partnership called "Customer Stories", HP offers this rather intimate portrayal of the depth of the companies' shared commitment:

"For over 25 years, HP and Oracle have been providing customers with complementary expertise to help them address their pressing business challenges. With over 140,000 combined customers and 13 worldwide technology and competency centers to demonstrate solutions, we continue to enhance our joint offerings and bring tangible benefits to customers. Whether it's reducing the total cost of ownership, simplifying IT management, reducing the cost of change or implementing solutions that help provide a competitive advantage, our commitment to customers continues to grow."

(And here's the inoperative link I mentioned at the beginning of this column.)

Hurd's move to Oracle in early September certainly chafed some folks at HP pretty severely—in fact, HP sued Hurd to prevent him from taking the position as Oracle president—but within a couple of weeks, just before the start of Oracle Open World, the companies resolved their disagreements over Hurd's joining Oracle and professed renewed commitment:

"HP and Oracle Corp. today reaffirmed their long-standing strategic partnership and the resolution of litigation regarding Mark V. Hurd's employment at Oracle," HP said in a statement. "While the terms of the settlement are confidential, Mr. Hurd will adhere to his obligations to protect HP's confidential information while fulfilling his responsibilities at Oracle. The agreement also reaffirms HP and Oracle's commitment to delivering the best products and solutions to their more than 140,000 shared customers."

The HP statement then quoted interim CEO Cathie Lesjak as saying the companies "are committed to working together to provide exceptional products and services," and quoted Oracle CEO Larry Ellison as saying they will "continue to build and expand a partnership that has already lasted for over 25 years."

But that rapprochement was apparently shattered just 10 days later when, right after Open World, HP named Apotheker as CEO, an appointment that caused Ellison to begin a relentless war of words against Apotheker individually and then against HP as a viable supplier of high-end hardware.

Ellison lashed out at Apotheker, initially calling him a "failure" at SAP (Apotheker was forced out about 8 months after being named sole CEO) and then escalating that verbal onslaught by charging that Apotheker engaged in "industrial espionage and intellectual property theft" of Oracle software during his time as SAP CEO.

But not long after the end of that trial, in which SAP was ordered to pay Oracle $1.3 billion, Ellison shifted his target from Apotheker to HP itself and, specifically, his perception of its severe shortcomings in high-end systems.

In a column called Global CIO: Larry Ellison Vows To 'Go After' HP; Is Alliance Dead?, I shared this public comment from Ellison about HP made during Oracle's introduction of its new Sparc Supercluster system:

"We're one big cheetah, and IBM's a stallion . . . and HP's a Turtledome," said Ellison with a huge laugh. And then he made his and Oracle's intentions toward HP unmistakably clear:

"Make no misunderstanding—there should be no misunderstanding—we think the HP machines are vulnerable, we think they're slow, we think they're expensive, we think they're vulnerable in the marketplace, and we're gonna go after them," Ellison said (emphasis added).

At some point, no matter how deep the commitment from front-line folks like HP VP Crowsen and his team and their counterparts over at Oracle, the corrosive effect of that kind of talk from the CEO of one of the partners about the other will reach a point where the damage is irreparable.

And HP and Oracle have reached the point where, whatever the formal or legal status of their alliance might be, they have made the transition from one of deep collaboration to one of bitter competition.

P.S.—For anyone interested in checking some of the specific comments made by Ellison and others during the five months that the HP-Oracle Alliance has come apart, here's a chronology, followed by our "Recommended Reading" list for more extensive analyses of the HP-Oracle situation:

1) After HP forces out CEO Mark Hurd: "The HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago," [Ellison] famously told the New York Times.

2) After HP sued Hurd to prevent him from joining Oracle: "Oracle has long viewed HP as an important partner," said Oracle CEO Larry Ellison. "By filing this vindictive lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees. The HP Board is making it virtually impossible for Oracle and HP to continue to cooperate and work together in the IT marketplace." (Sept. 7, 2010)

3) Reconciliation on the eve of Oracle Open World, Sept. 20: "HP and Oracle Corp. today reaffirmed their long-standing strategic partnership and the resolution of litigation regarding Mark V. Hurd's employment at Oracle," HP said in a statement. "While the terms of the settlement are confidential, Mr. Hurd will adhere to his obligations to protect HP's confidential information while fulfilling his responsibilities at Oracle. The agreement also reaffirms HP and Oracle's commitment to delivering the best products and solutions to their more than 140,000 shared customers."

The HP statement then quoted interim CEO Cathie Lesjak as saying the companies "are committed to working together to provide exceptional products and services," and quoted Ellison as saying they will "continue to build and expand a partnership that has already lasted for over 25 years."

4) Reconciliation wrecked when HP replaces Hurd with former SAP CEO Leo' Apotheker: Of all the executives in all the industries from all the companies, HP picks the one guy with whom Ellison would find it just about impossible to work: Leo Apotheker, who not only worked for Oracle's arch-enemy but was ultimately fired as CEO over declines in market share, profits, employee morale, and customer trust.

Of course, it's not the job of HP's board to placate Larry Ellison and Oracle with its choice of CEO. But it's also impossible to imagine that the HP board, particularly with its simultaneous addition of venture capitalist and one-time Ellison lieutenant Ray Lane, would not have understood the repercussions with Ellison that their hiring of Apotheker would have.

And those repercussions—at least the initial ones—were juicy. Here it is from the Wall Street Journal: "I'm speechless," [Ellison] wrote in an email to the Wall Street Journal. "HP had several good internal candidates…but instead they pick a guy who was recently fired because he did such a bad job of running SAP."

An H-P spokeswoman said Ellison's comments don't "deserve the dignity of a response" [end of excerpt].

5) Meanwhile, SAP's reaction was quite different: Since the enemy of my enemy is my friend, Oracle rival SAP believed HP's appointment of Apotheker was a stroke of genius. Here's a comment I received from SAP co-CEO Bill McDermott: "This is great news for HP and for SAP. SAP and HP are outstanding partners, HP is a great SAP customer, and this move only sets the stage for an even deeper relationship between our two companies. Leo understands our business model and how to fully advantage this partnership to help our joint customers be best-run businesses. I personally congratulate Leo on this tremendous appointment."

6) Ellison says with Apotheker as CEO, SAP engaged in "industrial espionage and intellectual property theft": In early October, with the damages portion of the trial between Oracle and SAP only one month away, Ellison stepped up his pointed attacks on Apotheker's leadership and integrity. As I wrote at the time,"Larry Ellison is cranking up the heat on Oracle's now-tenuous strategic partnership with HP by trashing newly named Hewlett-Packard CEO Leo Apotheker as not only a dismal failure as CEO of SAP but also as the leader of SAP during the time it committed 'industrial espionage and intellectual property theft' of Oracle software."

7) Ellison taunts HP's board over Apotheker's potential testimony: "I don't think Ray Lane wants to risk Leo Apotheker testifying under oath as to why he allowed the theft of Oracle's property to continue for 8 months after he was made sole CEO of SAP. I hope I'm wrong, but my guess is that new HP's Chairman, Mr. Lane, will keep HP's new CEO, Mr. Apotheker, far, far away from the Courthouse until this trial is over."

RECOMMENDED READING:

Global CIO: Is Larry Ellison Going Soft On HP And IBM?

Global CIO: Oracle Seeks New Whipping Boy As SAP Thrives

Global CIO: Is Larry Ellison Hurting Oracle By Hammering Competitors?

Global CIO: HP Claims Server Supremacy And Tells IBM: Migrate THIS!

Global CIO: Larry Ellison Vows To 'Go After' HP; Is Alliance Dead?

Global CIO: Will The Oracle-HP Alliance Survive The Oracle-SAP Trial?

Global CIO: In Larry Ellison's Legal Battle With SAP, HP Is Collateral Damage

Global CIO: Are HP And SAP Perfect Match Or Train Wreck?

Global CIO: Larry Ellison's Heightened Attacks On HP Doom Alliance

Global CIO: Larry Ellison Puts HP In Crosshairs Via Slap At New CEO

Global CIO: Resurrecting Mark Hurd: Larry Ellison's War With IBM

GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at [email protected].

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