oracle olc

Executive Summary

One of the world’s biggest technology companies - Oracle Corporation (Oracle) - has

seen many ups and downs in last 33 years.

This report presents the lifecycle of the company. Author has used year on year growth

as a basis to define different phases. Each phase is followed by critical analysis on main

decisions in that particular phase.

In conclusion, the author has included some recommendations for the future strategy of

company.

Introduction

Oracle is an enterprise software company. Started in 1977 as a Database company,

Oracle now offers total system solutions form software, consulting to hardware.

Fig 1.1: Year on year % growth of Oracle corporation from 1984 to 2009 (Appendix 01)

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Though revenue of Oracle has been increasing all years (fig 1.2) but considering the

time value of money and market changes, the author has used year on year growth

(from 1984 to 2009) (fig 1.1), to define the phases of the company.

Fig 1.2: Oracle corporation revenue in £ million from 1984 to 2009 (Appendix 01)

Based on the year on year growth author has divide life cycle of Oracle in following

three phases till date:

2

Start-up Phase (1977 - 1986)

In early 1977, When Larry Ellison was routinely going through the IBM journal of

research and development; he found a research paper that described the working

prototype of a relational database management system (RDBMS). Larry has shown that

to his colleagues Bob Miner and Ed Oates and learned that no company is working on

the commercialisation of this technology (Oracle, 2007).

Soon after realising that they can make world's first RDBMS, Trio left the job and started

a company- System Development Laboratory. The goal of the company was to build the

first commercial relational database. Next was to raise some money for the company,

unfortunately in 1977, raising money for Software Company was almost impossible

because investors were not ready to fund for an intangible product (Morrow D, 1995).

Fig 1.3: Oracle corporation first anniversary (Oracle, 2007)

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Everyone pooled $2000 each for the rent of the office space in Belmont, California;

Larry became the president and CEO and took charge of sales and marketing while Bob

and Ed supervised the software development. It took two years to release first

commercial version out and team has to support themselves during this long two years

by consulting work. By this they could manage to reach $200,000 revenue. Once they

installed their first system at the first client - Wright- Patterson Air Force Base - they

decided to close consulting practice and concentrated on product development.

(Morrow D, 1995).

In 1978 giant IBM has offered the job to all three founders of the company but they

turned down the offer. In 1979 company has released first commercial SQL relational

database management system, Oracle, and company was renamed to Relational

Software Inc. (RSI) (Oracle, 2007). By 1980 same Oracle was running on all available

operating systems, this has given the competitive advantage to the company. Larry has

bagged many government contracts and started moving towards big organisations.

Company quickly became profitable due to its innovative strategy and aggressive

marketing. In 1982 company was renamed second time as Oracle Corporation - to

promote its product - Oracle. By 1982 it was a 24 people company with reported profit

of $2.5 million (Oracle, 2005). In the same year company has started its first non-US

operation in Denmark. Oracle was reinvesting its one fourth revenue in research and

development every year, which was crucial for their success. Recruitment of all its

employees from MIT, Berkeley University and other known technical universities of

USA, shows that company was clear about the talent acquisition for the growth (Oracle,

2007).

By early 1980s Oracle began to see some competition around, however its innovative

reputation and aggressive advertisement, by taking rivals name, helped to push its sales

up. In 1985 company reached the revenue of $23 million. 1986 was historical year for

Oracle; company made its first public offer and reached its first milestone. It was a

successful journey of start-up phase.

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Fig 1.4: Oracle corporation listed on NASDAQ in 1986 (Oracle, 2007)

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Analysis of Start-up Phase

SWOT analysis

From 1977 to 1986 was a fast journey for Oracle. SWOT analysis of company in 1977

shows that Oracle was not an easy start, where founders were struggling for initial fund.

Fig 1.5: SWOT analysis for Start-up Phase of Oracle.

IBM, or any other player in the market, could have destroyed the game by launching its

product before Oracle. Like other start-ups Oracle was started in small office and small

team but determination and innovation was the key of their success.

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Fig 1.6: Ansoff matrix of Oracle in Start-up phase

Oracle Corporation is one of those players in market who has created the need of their

new products and made user to buy them. Oracle was serving a new product (RDBMS)

to a new market as depicted in Ansoff matrix.

Business Drivers and Value proposition

In this phase main business drivers for the Oracle’s business were following:

1. People – Good team of technical and marketing people.

2. Knowledge – Knowledge of a new technology- RDBMS.

3. Market Conditions – Not much competition. IBM was serving only big customers

and Oracle was serving others.

4. Need of the market – There was high need of systematic information retrieval

and usage system.

5. First Movers advantage – Oracle was first company to offer its RDBMS product in

the virgin market.

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Fig 1.7: Value Proposition of Oracle in Start-up phase

Understanding the business drivers and leveraging its capabilities, Oracle’s value

proposition (Fig 1.7 ), has helped the company to become world leader in RDBMS

market.

Organisation Culture and Leadership

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Like all other start-up’s, culture of Oracle was very social - where founders have left

their jobs and working as consultant to support each other and to company in initial

days. All the employees were clear about the vision and confident about their success. In

terms of Goffee R, Jones G. (1996), it was a networked culture.

Fig 1.8: Goffee R, Jones G. (1996) culture grid of Oracle in Start-up phase

Larry was an energetic and inspiring leader and team player. In terms of Jim Collince

(Collins J, 2001) he can be classified as a Level 1 leader in this phase. He is inspired by

Japanese culture – of being humble and aggressive - at the same time. He believes in

following statement of Genghis Khan (Morrow D, 1995).

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Recommendations on some critical decisions

In any start-ups cash is always king. During its early days Oracle has struggled and couldn’t get any funding form outside, seeing such past, stopping an on-going consulting practice after two years was not a good decision in author’s opinion.

Oracle could have hired outside consultants to continue its operations. Especially when Oracle had no clue about its first customer. Oracle has eventually started its consulting in future to reap this market.

Author also thinks that if Oracle would have done a tie up with IBM to supply to its big clients, company could have grown faster. But Author also understands that this option comes with potential threat of acquired by the big giant IBM.

Growth Phase (1987 - 1999)

By 1987 Oracle had become first choice for RDBMS of market. Oracle reached to $100 million revenue and became world’s first database company with more than 4500 users in 55 countries.

Atmosphere of the company was changing fast and people were realising that they have become a part of a big company. One of the founders – Ed Oates says –

Company has decided to provide business application capabilities to the customers by launching Oracle Forms – an application development tool - This was the start of new steam outside Databases.

Oracle entered in the applications business by manufacturing and then retail business suite in 1988. Company has acquired a small company - TCI to add its financial application solution to the portfolio. Market for Applications was different from that of Databases. SAP and other player were old in the market and gaining the share in this market was not easy.

On one hand company was extending its product offerings and on the other hand it was extending the marketing network. In 1987 Oracle launched Value Added Reseller programme (VAR) aimed at building corporate selling alliances with other companies. With the help of partners, Oracle expanded fast and in 1989 it was listed in top 500 major software companies by Standard & Poor’s Corporation. In same year Oracle relocated from Belmont to Redwood Shores – in a large office.

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In fast race of capturing market Oracle stumbled in 1990-1992. Company seeks for $100 million public financing for its expansion plan but its expectation was misplaced and the image badly affected. Share price went down and shareholders filed the suit against Oracle for false declaration of its past income.

In response to criticism of false earning presentation and mismanagement, company went through management shakeup. Two company VPs and one CFO were changed in four months. 10% of domestic work force was laid off and growth rate goal of the company was reduced from 50% to 25%.

In 1991 Oracle crossed $1 billion sales revenue and at the same time also posted a loss of $12.4 million. Larry Ellison explain this to Forbes magazine by saying –

Oracle becomes the first company to announce a comprehensive internet strategy. Company was making a framework for all its application to run on the internet. It was an opportunity as well as a threat because big application players like SAP were agreed to stay away from internet. In 1998 Larry has given the statement that –

This statement attracted many customers and Oracle became the one of the first companies to reap Internet based application market.

Analysis of Growth Phase

SWOT Analysis

After company went public in 1986, Oracle has fastened its growth. Soon after realising that only Database business cannot support the growth of the company, it entered into the Business Application’s business. Innovation was the soul of the company. Larry’s statement about internet businesses was a sign of long term vision. Expansion in many markets was diversifying the risk and adding up to the growth.

SWOT analysis indicates that the company was required to be very careful because of its existing image and high competition in the new market. A quick overlook of this was reflected in the episode of 1990-92.

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Fig 1.9: SWOT analysis for Growth Phase of Oracle.

Management has taken due actions and managed to bring back company’s old days of continues growth. Internet based initiative was proven good in future and company became one of the first provider of internet supported business applications.

Expansion in different geographies was a good strategic move. Ansoff matrix shows that, in this phase company was not only continue innovating new products for the market but also pushing new and current products in the new and current market.

Fig 2.0: Ansoff matrix of Oracle in Growth phase

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Following business drivers were responsible for a steady growth of the business –

1. New technological solutions – Oracle continued to delivered new innovative solutions.

2. Fast market move – In Application Business, Company learnt from the competitors and moved fast.

3. Global presence – Oracle was used in 55 countries in this phase. Global presence has not only helped Oracle to decrease the dependency on US market but also increased the brand image globally.

4. Brand Positioning – At times brand sells itself. Strong market presence in the market helped Oracle to move forward.

Value proposition offered by Oracle in growth period is displayed below –

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Fig 2.1: Value Proposition of Oracle in Growth phase


Expansion of Oracle has reached beyond the limits of the country. In growth phase

Oracle’s culture moved towards communal culture (Goffee R, Jones G. 1996). In author’s

opinion, still Oracle was not completely out of the Networked culture zone because

some of the decisions of 1990-1992 were more of compromised decisions and less of

logical decisions. Accepting sales figures based on future sales and releasing the target

bonus – was one such decision. Goffee R, Jones G. (1996) model of Culture for Oracle in

growth period is shown below –

Fig 2.2: Goffee R, Jones G. (1996) culture grid of Oracle in Growth phase

In growth period leadership was reflected more visible then that in early stage of the

business. Company grown faster the ever and spread in different part of the world, still

reporting structure and overall decision making was concentrated to the US office in the

beginning of the growth period. Episode of 1990-92 was single handily managed by

Larry elision. Soon after this he could learn that giving responsibilities to different

people is the best way.

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Fig 2.3: Greiner, L.E. (1998) Oracle - Evolution-revolution life cycle during Growth phase

Power structure was decentralised and every country was given under a new leader. In

Author’s opinion Larry’s leadership style, in this phase, can be categorised as Level 4

leadership defined by Jim Collins (2001).


Expectation of $100 million public funding for a four year old public company was an

exception and this should have been analysed in advance. Oracle’s position in the

market was a fast growing company and share market was appreciating that. Oracle

could have gone for 3-4 part fundings so that people could have kept the confidence in

the company. Company struggled with this issue for long, had this be a strategic move

company could have benefited better and sooner.

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Fig 2.4: Oracle globalisation strategy

Company has started 17 international offices in 2 years. This fast expansion was too

much for a young company. Oracle went in every company with the global strategy –

one for all – with full control at the central office in US. Due to this many subsidiaries

were not profitable for long time. Author thinks that they should have moved slow in

the internationalisation process and adopted regional level strategy.

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Maturity Phase (2000 – till date)

Finishing 2000 Oracle reached the revenue of $10.2 billion. Oracle has increased its

R&D budget and concentrated on creating a new product line for small and medium

businesses. In 2001 this small business suite was considered “Best of the web” by Forbs

magazine.

By now Oracle was one of the top three Business Application providers of the world. In

order to improve its position Larry has initiated the takeover of PeopleSoft when

PeopleSoft was acquiring J. D. Edwards (another competitor). Even after offer extended

from $5.1 billion to $9.4 billion, PeopleSoft declined it. This issue became a controversy

when Department of Justice involved in this and filed a suit against Oracle saying that

this acquisition will break antitrust law. Suit was rejected in September 2004 and Oracle

acquired PeopleSoft in 2005. Oracle announced 9% staff slicing and some products

went scraped.

Fig 2.4: An example of Oracle’s aggressive marketing

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A book was published in 2003 – “The Difference between God and Larry Ellison: *God

Doesn't Think He's Larry Ellison”.

This book has presented a new Larry Ellison in front of the world - An aggressive and

arrogant leader. The author of this report was an employee of Oracle Corporation in this

duration and has seen this form of Larry closely.

After PeopleSoft acquisition Larry appreciated the idea of acquiring companies and

capturing the market by inorganic growth. In wish of being world leader oracle has also

tried placing bid for taking over SAP but it was unsuccessful (Oracle Apps Blog, 2007).

In this decade Oracle was keep on acquiring companies. Company has acquired all its

close competitors except SAP. Oracle Fusion product came out with the promise of

including best of bests from all acquired products but couldn’t get high acceptance from

the customers. After all these acquisition (Appendix 02) existing customers of acquired

company were not happy because switching cost was too high and changing to the new

system brings risk.

In this duration of fast acquisitions, Jhon Wookey, Sr. vice Precedent of company form

last 12 years has left Oracle and joined rival SAP. He was heading the Application’s

innovation. Oracle denied to comment on this but press has mentioned that SAP

benefitted by this move (Cnet News (2004).

In 2010 Oracle acquired Sun Microsystem and entered in Hardware business. In an

interview Larry said (Reuters, 2010)–

System Development Laboratory started in 1977 has become a system company in 2010.

Now size is more important than innovation, things are moving for managing the

business instead of creating new products, revenue growth is getting slow, Author

thinks that Oracle has hit the maturity.

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Analysis of Maturity Phase

SWOT Analysis

In 2000 Oracle was a well-established company with big customer base. Company has

started operation in new segments and that is a risk. Over relying on the acquisition

strategy can be a risk preposition for the company. Why other big players like Microsoft

or SAP are not following this path is another question Oracle should answer. SWOT of

Oracle in this phase is presented below –

Fig 2.5: SWOT analysis for Maturity Phase of Oracle.

By acquiring many different businesses Oracle is getting into many new markets but

getting away from its DNA – innovation. There is less offering of new products and more

concentration on the management of acquired products. Ansoff matrix of the company

in this phase is shown below.

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Fig 2.6: Ansoff matrix of Oracle in Maturity phase


Following business drivers were active in maturity phase of Oracle–

1. New customer base– Oracle extended its market and revenue by acquired companies.

2. New products – Company has some new products in the portfolio.

3. A system company – Company has promised customers to provide a turnkey solution.

4. Internet based solution – Oracle is one of the most experienced companies in this Internet based applications business.

Value proposition offered by Oracle in maturity phase is displayed below –

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Fig 2.7: Value Proposition of Oracle in Maturity phase


Close to 50 acquisitions in 10 years, Culture in Oracle is not easy to define. Every new

company brought its own culture in the company. Slowly informal and open innovative

culture changed to formal process driven culture. People sitting on distance across the

globe were connected through mind not through heart. In terms of Goffee, Jones(1996),

Oracle’s can be defined as Mercenary Culture.

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Fig 2.8: Goffee R, Jones G. (1996) culture grid of Oracle in Maturity phase

Collision of many cultures in small duration has reduced the social-glue factor and made

the atmosphere more process driven. Lack of coordination and red tape system is on its

height in the company.

Fig 2.9: Greiner, L.E. (1998) Oracle - Evolution-revolution life cycle in Maturity phase

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In this duration Larry came up as a Coercive leader as defined by Goleman, D. (2000).

Also his leadership style has been changing with the success of the company. May be in

future he will need a new point of view to run Oracle as company reached its maturity.


Approximately 50 acquisitions in 10 years is a very fast and aggressive move. It has

helped company to reach inorganic growth but in this process company has increased

the risk of destroying its DNA – innovation. Now Oracle writes wrapper over other

existing products instead of creating new products. Innovative flexible culture has

changed to process driven red tape system and this can hinder the progress in the

future. Fast moving inorganic growth has also disappointed some of its existing

customers.

In Authors opinion this should have been a pre-defined systematic process instead of a

random pick. Also innovation should be promoted in the organisation as it was in start-

up phase so that company can live with the same glory in the future also.

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Conclusion

Three decades of Oracle was overall good for the growth of the company. Company is

now in maturity stage and next challenge is to avoid decline phase. Now when company

is away from its DNA i.e. innovation and people are in comfortable zone there is a need

of change.

Fig 3.0: Oracle’s current position in change house (Janssen C. F.,1996)

In authors opinion people are in contentment room of change house (Janssen C. F.,

1996) and they are required to be challenged about their contribution in the growth of

the company because most of the growth in last decade is attributed to inorganic

growth.

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Fig 3.0: Organisation innovation cycle (Michael L, Tushman C. 1990 )

Considering the size of the company, it should look for more incremental innovations

than a discontinuous innovation (Fig 3.0). Author believes that Oracle should stop its

acquisition drive for some time and concentrate on making a culture of innovation in

the organisation, as it was during start-up.

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Appendix 01

Income (in £million) details of Oracle Corporation (1984-2009)

Ref : Thomson Reuters Knowledge(www.knowledge.reuters.com)

Fiscal Period:

Total Revenue

Gross Profit

Operating Income

Net Income Before Taxes

Net Income After Taxes

Net Income

2009 16,181.070 12,844.920

5,790.580 5,451.680 3,892.170 3,892.170

2008 15,609.040 12,142.760

5,458.640 5,451.680 3,842.060 3,842.060

2007 12,523.420 9,606.900 4,157.310 4,165.660 2,974.280 2,974.280

2006 10,007.040 7,755.810 3,295.780 3,347.280 2,352.840 2,352.840

2005 8,210.920 6,366.090 2,798.910 2,819.090 2,008.370 2,008.370

2004 7,067.560 5,455.160 2,688.960 2,745.330 1,865.710 1,865.710

2003 6,593.650 4,963.850 2,393.900 2,383.460 1,605.440 1,605.440

2003 6,593.650 4,963.850 2,393.900 2,383.460 1,605.440 1,605.440

2002 6,731.440 5,057.110 2,485.060 2,371.630 1,547.680 1,547.680

2001 7,557.250 5,611.480 2,628.480 2,763.580 1,782.270 1,782.270

2000 7,119.750 5,001.430 2,143.370 7,044.600 4,382.080 4,382.080

1999 6,142.880 4,010.540 1,303.340 1,379.330 897.540 897.540

1998 4,971.420 3,389.210 865.840 924.030 566.250 566.250

1997 3,955.730 2,876.760 878.910 893.210 571.650 571.650

1996 2,938.990 2,176.280 629.710 639.890 419.820 419.820

1995 2,064.650 1,522.540 452.140 458.590 307.250 307.250

1994 1,392.600 1,045.200 292.250 294.690 197.440 197.440

1993 1,045.780 804.550 151.000 151.730 98.630 68.380

1992 820.120 624.180 79.100 66.900 42.800 42.800

1991 715.350 529.940 12.460 (9.220) (8.630) (8.630)

1990 675.610 563.970 132.080 120.150 81.710 81.710

1989 397.110 326.830 76.500 74.610 50.610 46.990

1988 196.320 160.660 44.460 45.220 29.840 29.840

1987 91.350 78.370 19.770 19.410 10.870 10.870

1986 38.540 38.540 7.540 7.290 4.100 4.100

1985 16.120 16.120 1.910 1.800 1.080 1.080

1984 8.850 8.850 1.810 1.600 0.970 0.970

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Appendix 02

List of companies acquired by Oracle Ref (www.wikipedia.com)

Acquisition date

Company BusinessValuationmillions

USD

2010

April 16, 2010 Phase ForwardApplications for life sciences companies and healthcare providers

$685

February 10, 2010

AmberPointService-Oriented Architecture (SOA) management

N/A

February 10, 2010

Convergin Telecom Service Broker $85

January 27, 2010

Sun MicrosystemsComputer servers, workstations, storage, software, and services

$7,400

January 4, 2010 Silver Creek

Product Data Quality Solutions for connecting Enterprise Systems, Customers, Suppliers and Partners.

N/A

2009

October 12, 2009

SOPHOIIntellectual property management for Media & EntertainmentIndustry

N/A

October 5, 2009 HyperRoll Financials, software and IT services N/A

September 29, 2009

HyperRoll Financials, software and IT services N/A

June 17, 2009 Conformia Product Lifecycle Management N/A

May 13, 2009 Virtual Iron SoftwareServer Virtualization Management Software

N/A

March 23, 2009 Relsys International Drug Safety and Risk Management N/A

2008

October 9, 2008 Advanced Visual Technology Retail Space Planning N/A

October 9, 2008 Primavera Project Portfolio Management N/A

June 23, 2008 Skywire Software Document Management N/A

May 13, 2008 AdminServer Insurance Policy Administration N/A

January 16, 2008

BEA Systems Enterprise Software $8,500

2007

September 5, 2007

Bridgestream Enterprise Role Management software N/A

July 18, 2007 Bharosa, Inc Online Identity Theft and Fraud Detection N/A

May 15, 2007 Agile Software Corporation Product Lifecycle Management $495

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April 24, 2007 Lodestar Corporation Utilities Application Software N/A

March 1, 2007 Hyperion Corporation Enterprise Performance Management $3,300

March 2007 Tangosol Inc Datagrid Software N/A

2006

November 2006 Stellent Inc. Universal Content Management $440

November 3, 2006

SPL WorldGroupUtility Billing and Customer Service Systems

N/A

October 2006 Sunopsis ETL, Data Integration N/A

October 2006 MetaSolv OSS service activation $219

June 2006 Demantra Demand-Driven Planning Solution $41

April 2006 Portal SoftwareBilling and Revenue Management solutions for the communications and media industry

N/A

February 2006 HotSip Communications infrastructure solutions N/A

February 2006 Sleepycat SoftwareOpen-source database software for embedded applications

N/A

January 2006 360Commerce Retail Industry Solutions N/A

January 2006 Siebel Systems Customer relationship management $5,850

2005

December 2005 TemposoftWorkforce Management Applications sam organization

N/A

November 2005 OctetString Virtual Directory Solutions N/A

November 2005 Thor TechnologiesEnterprise-wide User Provisioning Solutions.

N/A

October 2005 InnobaseDiscrete Transactional Open Source Database Technology

N/A

September 2005 G-Log Transportation Management Solutions N/A

August 2005 i-flex Banking Industry Solutions $900

July 2005 Context Media Enterprise Content Integration N/A

July 2005 ProfitLogic Retail Industry Solutions N/A

June 2005 TimesTen Real-time Enterprise Solutions N/A

June 2005 TripleHop Context-sensitive Enterprise Search N/A

April 2005 Retek Retail Industry Solutions $630

March 2005 Oblix Identity Management Solutions N/A

January 2005 PeopleSoft Enterprise Software $10,300

2004

June 2004 Collaxa Business process management N/A

May 2004 Phaos Identity management N/A

2003

June 2003 Reliaty Enterprise data protection N/A

2002

June 2002 Steltor Enterprise calendaring system N/A

January 2002 NetForce Adverse event reporting system N/A

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January 2002 TopLink Object-relation mapping technology N/A

1999

June 1999 Thinking Machines Corporation Darwin, datamining technology N/A

1994

October 1994Rdb Division of Digital Equipment Corporation

Relational database N/A

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