In many ways, Oracle is the classic disrupted company. Its hardware business continues to skid while the newer cloud parts of the business are not earning enough to fill in the gaps. Last week Oracle's conflicted enterprise personality was on full display at Oracle Open World.
First of all, there was there CEO Larry Ellison, who skipped the keynote at his own conference, preferring instead to go watch his yachting team win the America's Cup in a Silicon Valley version of fiddling while Rome burned.
Perhaps Ellison who will turn 70 next August sees the end of his run not far off, and as one journalist friend put it, he figures he has enough maintainence contracts in place to get him through until retirement. After that it's somebody else's problem.
But Ellison's company is facing a classic internal struggle. The hardware business has always been the bread and butter, but it's fading. If they abandon it too quickly they can't possibly maintain revenue. What's a company to do?
Apparently, go to the races.
Another sign of a struggling company is that instead of innovating they are responding to innovation in the market, and such is the case with their new in-memory databases, speed demons with a target market of big boys like Yahoo, Google and Salesforce.com. It sounds like a great product on paper, but it's actually a reaction to SAP, which introduced a similar product last year and according to BusinessInsider has been selling them like gangbusters.
Meanwhile, they also introduced a new server with the same in-memory technology, a backup appliance and a backup product in the cloud showing their newer, modern cloudy side.
ParElastic CEO Ken Rugg says these are all the typical moves of a disrupted company. "Oracle's position seems to be to keep moving up the stack with more specialized hardware and more lock in. This is a classic market leader behavior from Innovator's Dilemma. They are missing that the market is fundamentally shifting to companies that want to run their systems on cloud-based, commodity hardware," Rugg told me.
He added that Oracle's move make sense in a way because they can't embrace the cheaper products at the lower end of the market while maintaining the fat profits that shareholders are accustomed to at the upper end. "This [approach] isn't as profitable so it is clear why Oracle's focus is what it is, but it makes them vulnerable to disruption from new delivery models like Database as a Service (DBaaS) and open source," Rugg explained.
Rugg says while Oracle is throwing a bone to the cloud, it's not offering the database service offerings that are really what the market wants because to do that would disrupt their own hardware business and they aren't willing to do that.
"Of course [database backup and recovery as a cloud service] ignores that people don't just want backup and recovery as a service, but database capacity. This is driving growth of Amazon's RDS offering. In the cloud database market, most cloud service providers aren't going to be delivering proprietary, specialized hardware solutions. They provide capacity by scaling out on commodity boxes," Rugg said.
That leaves Oracle in a precarious position, and while it's not impossible for a disrupted company to recover --we saw IBM do it in the 80s and 90s --it's difficult for a mature company like Oracle to find a way out.
It's forced to choose between innovative newer solutions, where competitors have already established cost-effective alternatives and its more lucrative (but shrinking) hardware business. It's a tough situation, and probably requires a CEO who is more concerned about his business than his racing team.
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