I remember reading a online article from about a year ago on Bloomberg titled “Oracle's Ellison Uses `Art of War' in Software Battle with SAP” by Rochelle Garner, which professed that “Ellison, 62, is a master of applying Sun Tzu's precepts to the modern-day warfare of business competition, say those who know him. One basic tenet notes a smaller force can beat a larger one by causing its rival to respond before thinking.” In addition, the article also stated that Ellison has also employed another key strategic tenet of Sun Tzu, which is, ``all warfare is based on deception.”
This observation certainly bears truth if you look at the spectacular growth Oracle has experienced in the last 15 odd years. However, if you closely examine the current strategies of Oracle, it appears that some key tenants of Sun Tzu's treatise has been broken, which may have negative impact on Oracle's ability to maintain its stature and growth.
Given the spectacular growth of Oracle in the last fifteen years to the database and application giant it has become, it obviously requires tremendous amount of hard work, innovation and certainly a firm understanding of the precepts of Sun-Tzu's famous canon "The Art of War". Having been so successful in the past by predominantly growing organically, yet pursuing the recent strategic shift by Oracle to embark on a mega acquisition and growth strategy seemed both peculiarly atypical and thought provoking. Spending in excess of USD $24 billion on acquiring or increasing ownership in a whopping 40+ companies in the last three years, however, sounds like something that an ultra-aggressive leader like Ellison would do.
What Do I Want to Be When I Grow Up?
The reason for Oracle to go on an acquisition binge is quite clear and understandable. For starters, Oracle clearly realizes that it has to move beyond its core database business and be serious about its applications business. The reason why the core database business needs to expand is because database technology is increasingly becoming commoditized. With industry stalwarts like IBM DB2, MS SQL on one hand and OpenSource entrants like MySQL and PostgreSQL on the other, Oracle's dominance is continually challenged and Oracle's control of the enterprise database market that it enjoyed in the last 10 or so years is being continually marginalized. And this trend is likely to continue as organizations have become smarter about their IT expenditures and competing database software vendors have become more mature, the database software continues to become commoditized and is fast loosing its cache to warrant a premium price as well as profit margin from customers.
As per a JoinVision study named "Open Source in the Fast Lane", it states “IT specialists indicated they deploy MySQL 30% more frequently than Oracle, SQL Server or DB2.”
The graphic below from the same study paints a disturbing picture if one is traditional database vendor.
From a 2006 column written by Jack Loftus in SearchOpenSource, “"In 2005, the industry witnessed great momentum around open source databases, from product enhancement, improved customer support and increased adoption to new vendors jumping on the bandwagon," Yuhanna said. "Open source databases continue to make inroads into enterprises, offering low-cost database management system alternatives to support all types of business applications." “Proprietary vendors would have to hide their heads in the sand not to see the marketplace impact of greatly improved product quality and support offered by commercial open source database vendors….that the fact that proprietary vendors have issued deeper discounts, scaled down versions and more advanced features at no extra cost have bolstered the case that OSS is having an effect.”
In addition, as requirements for quick information retrieval becomes higher, and the availability of cached information in RAM becomes greater (think Google, BI) there is more and more dependence for fast caching and retrieving data from RAM rather than constantly hitting a database for that information. Given Moore's Law, this trend has continued since the inception of microchips and is likely to continue in the foreseeable future. As knowledge workers become more sophisticated and require not just saved information, like Purchase Order or Employee Record, to be retrieved quickly but also expects derived business intelligence data and calculations to be done on fly, the use of cached data takes a more central role and database become a solid state repository. Hence database will continued to be used to save and synchronize the cached data as business events occur, rather than a active participant in creating the derived data.
Although, Oracle has had a portfolio of applications and has been partly successful in making inroads at customers who were already using Oracle's database to sell them these applications like Oracle Financials, HR, Supply Chain etc, it still lacked the market share domination, revenue share and growth in core application software that companies like SAP and PeopleSoft had enjoyed in addition to successes of new entrants like Hyperion, Siebel and Retek to name a few.
