Fall is in the air and San Francisco beckons so it must be time again for Oracle Open World. Last year I used the Wizard of Oz theme to describe my experiences which I thought worked pretty well. While Larry Ellison isn't the wizard of Menlo Park he could claim to be the wizard of Redwood City or Cupertino. Some however view him differently and might frame him in a darker context so in honor of the release of the Star Wars Saga on Blu Ray my theme this week will be based on these popular movies. Of course how can Oracle be considered anything other than the empire and Mr. Ellison of course Emperor Palpatine? Mark Andreessen seems to fill the role of Darth Vader, once his student but now plotting his demise as one of the members of the dysfunctional Hewlett Packard board. This article will delve into Darth's I mean Mark's comments at the first annual BoxWorks customer conference and analyze the viability of his analysis about the future of cloud computing and how it relates to product lifecycle management.
We should start with Andreessen's remarks so we are working from proper context. Here is a link to the article but the key quote is, "Ten years ago, it was a joke: you'd raise $20 million in venture capital and write a $4 or $5 million check to Oracle, Sun, BEA, and EMC. When it started, Salesforce looked like a toy compared with Siebel. Look ahead five years later, it's obviously better. Not a single one of our startups uses Oracle." So his logic is that because none of his startups can afford Oracle that their days are numbered. The broader point he is trying to make is that cloud computing has become more viable and his perception is that established leaders like Oracle and SAP are not doing enough to embrace this technology and therefore are vulnerable to upstart companies like the ones he funds. His example, Salesforce versus Seibel might be true but you must consider the fact that Salesforce has been in business almost a decade and Seibel was its own company for a good chunk of that time. Also I am not sure it is legitimate to extrapolate one company's success to the entire cloud computing market. Salesforce existed before cloud was even discussed. As for his assertion that his portfolio companies are no longer writing 5 million dollar checks to Oracle, Sun etc. I am pretty sure that is by necessity. Venture capital has dried up considerably and companies are being forced to reduce spending. Moreover even when companies had the capital to make these purchases I think it was a bad move on their part. You need to have products to sell before you start worrying about your manufacturing backbone. I have witnessed many companies spend millions on their infrastructure without ever developing viable products to sell.
I also think Andreessen oversimplifies the issue. Oracle is a very complex company and offers numerous technologies that product development companies might use. CRM is just one aspect. It should also be pointed out that Oracle does offer Seibel on demand which closely mirrors Salesforce. In fact with today's cloud infrastructure you could run most of Oracle's products remotely. So from a technology perspective I am not sure he has any credibility on this argument. What it really comes down to is more of a commentary on the business model. With some exceptions Oracle sells their software and then charges yearly support. Companies like Salesforce charge per user per month. The real argument is that cloud based tools are less expensive to own but this is more of a function of the fact that the cost structure and value proposition is less for these new companies versus an established industry leader like Oracle so they have to charge less. I am sure if they could command the prices that Oracle does for their products they would happily charge this and if not they should. We have used Salesforce since 2000 and as they add more functionality and capability their prices continue to creep up. This is a natural occurrence so I am not sure we can fault Oracle for capitalizing on their product's capability.
The bigger question is whether or not the cloud is ready to take over all elements of product development and business administration. I do think the cloud is a good platform for CRM and IT. The interesting thing is that we do not see the same patterns in other areas. PLM is one space where cloud has yet to really catch on in the same way it has with Salesforce. In fact one could argue that Salesforce is the anomaly since we do not see meteoric growth at the expense of the established players in PLM, ERP or CAD or any of the other tools used for product development. I do see the support infrastructure for cloud continuing to develop. Products like VMWare and companies like Rackspace and Amazon continue to do well but these are more private cloud solutions that allow companies to shift their infrastructure to remote environments or to use external resources to supplement their internal bandwidth. One of the issues is the requirement for unique configuration. Many cloud solutions require some level of sameness that can be problematic in some industries. These companies can take advantage of private clouds but their need for uniqueness eliminates all but the most mature cloud applications. Other issues include bandwidth and security. Some applications require more than meta-data and the files can get quite large and some of them are extremely proprietary. These factors keep the cloud from being the be all end all for most companies and ultimately defeat Andreessen's premise for his comments.
This week I will share my thoughts about the state of Oracle but for now I think that the empire is quite safe and that upstart rebels like Andreessen have quite a bit more to do before we can pronounce the demise of Oracle. In fact if any of Andreessen's companies last more than a few years I suspect they will be knocking on Oracle's door ready for real software to run their now viable companies. I know we all have agendas and as an Oracle partner my perspective might be skewed but I think my perspective is more balanced and reasoned. Consider this the empire striking back on the upstarts from the cloud. At the end of the day it really doesn't matter what platform software runs on. It must deliver functionality and value and that is what will bring down the empire.[clear-line]