Category Archives: Oracle

A Few of My Favorite Quotes

For a change of pace, I thought I’d do a quick post with some of my favorite quotes.

  • “In preparing for battle, I have always found that plans are useless but planning is indispensable.” — Dwight Eisenhower
  • “Management is doing things right; leadership is doing the right things.” — Peter Drucker
  • “The single best question for testing an organization’s character is:  what happens when people make mistakes?” — Bob Sutton
  • “The only place success comes before work is the dictionary.” — Vince Lombardi
  • “Maybe I’m a complete idiot, but I have no idea what anyone is talking about.  This [cloud computing thing] is complete gibberish.”  — Larry Ellison
  • “Common sense is not so common.” — Voltaire
  • “It ain’t what you don’t know that gets you into trouble; it’s what you know for sure that just ain’t so.” — Mark Twain
  • “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”  — Bill Gates
  • “Be careful what you pretend to be because you are what you pretend to be.” — Kurt Vonnegut
  • “All companies go out of business for the same reason.  They run out of money.” — Don Valentine
  • “Man sacrifices his health in order to make money. Then he sacrifices money to recuperate his health. Then he is so anxious about the future that he doesn’t enjoy the present:  the result being that he does not live in the present or the future; he lives as if he is never going to die, and then dies having never really lived.”  — The Dalai Lama
  • “They never missed an opportunity to miss an opportunity.” — Abba Eban
  • “If I had asked my customers what they wanted, they would have said a faster horse.”  — Henry Ford
  • “Opportunity is missed by most people because it is dressed in overalls and looks like work.” — Thomas Edison
  • “The nine scariest words in the English language are:  we’re here from corporate and we’re here to help.”  — Adapted from Ronald Reagan

Note:  if you enjoy tracing quote attributions (and their correctness), then check out this site where I found the rather unlikely dual attribution to Yogi Berra and Niels Bohr.

Will Oracle or IBM Start a Bidding War with HP over Autonomy?

I’ve heard a fair bit of discussion about whether IBM or Oracle is likely to step in and start a bidding war for Autonomy which HP last week announced that it will buy for $42.21 per share, or $10.2B, as discussed last week in Kellblog when the rumors first surfaced.

My opinion — and this is an educated guess / speculation only — is that the answer is no.  Here’s why:

  • I’m told by those who’ve analyzed the deal that it is a very target-friendly deal on contractual terms as well as price.  HP wants this deal to happen.
  • I’m also told that HP is moving through the acquisition process with great speed.  HP wants this deal to happen.
  • I’m also told that HP is messaging that the deal is not just about buying into unstructured data but also about getting Autonomy’s CIO-level relationships that are supposedly superior to HP’s.  While I’m not sure that Autonomy has great CIO relationships (think:  “let Jimmy here tell you how much you’re going to pay next year”), that’s not the point.  The point is if that HP believes it, the deal becomes about protecting the core as much as about expanding into software which again would suggest that HP wants this deal to happen.
  • Because HP wants the deal to happen, I suspect the deal was not shopped and the first Oracle or IBM heard about it was the announcement.  If that’s true, then they didn’t get a chance to bid (and/or not bid) before the deal was announced.  But if that’s true, HP had to offer a market-clearing price such that Autonomy could accept the deal without shopping it.  That’s how you get a 70% premium to the market.
  • Oracle can move quickly.  The biggest reason that I think Oracle will not start a bidding war is that they haven’t already.
  • I’m told that Oracle investor relations is making comments along the lines of  [not verbatim] “if we were worried about Autonomy as a competitor, we couldn’t think of a better place for it to land than HP.”  And my guess is they believe that.   I suspect Oracle is more bummed about Clearwell slipping away (a leading pure-play e-discovery solution) than it is about a mini-me of document-oriented solutions (i.e., Autonomy) with a mere $250M/quarter spanning numerous categories including enterprise search, web content management, e-discovery, and digital archiving with over 40 products in a product line built through inorganic growth.
  • If either Oracle or IBM cared about a document-oriented, unstructured data platform, they could acquire other companies (e.g., MarkLogic!?)  for a lot less than $10B.  If they care about enterprise search, they could buy one of many small vendors in that space or put (more) wood behind Lucene and Solr.  They already have offerings in web content management and e-discovery.  The key point is that if you de-construct Autonomy, Oracle and IBM either already have or could easily buy each of the pieces.  Buying them all-in-one at discount?  Maybe.  At $10B for the starting bid?  Methinks not.

I’ve been wrong before and I’ll be wrong again, but I just have a lot of trouble seeing a bidding war on this deal.  It reminds me of the Sun / MySQL deal where a hardware company paid a hefty multiple for a deal they decided is absolutely strategic to their future.   You usually don’t get bidding wars on those because the purchaser precludes them by offering a market-clearing price.  And $10B for Autonomy strikes me as a market-clearing price.

Dear CIO: Stop Writing Big Checks for Commodity (Database) Software

Dear CIO,

What’s wrong this picture?

  • At 50%+, Oracle’s operating margins have never been higher
  • The differentiation of Oracle’s database technology, however, has never been lower and the number of both core and specialized alternatives has never been greater.

So what’s going on? You, kind Sir or Madam, are being milked. What’s worse is that you, in an example of collective behavioral dysfunction, have inadvertently played a role in setting up the milking. What happened?

  • Like all smart CIOs you followed a bit of herd mentality when it came to core technology. Pity the poor fools who, back in the day, bet big on Ingres or Sybase. You played it safe and went with Oracle, IBM, or if your requirements weren’t too heavy, Microsoft.
  • The problem is, of course, that everyone executed the same strategy you did. Hence, the market created a system of increasing returns where the strong vendors got stronger and the weak ones died. The result: the RDBMS market is an (order of magnitude) $10B/year market, structured as an oligopoly with 3 players. Most other software markets worked out the same way.
  • You were focused on standardization. You realized that through a combination of decentralized IT decision making and growth-by-acquisition your organization had become a kitchen sink of enterprise software. You had everything. In order to reduce the administrative, training, and license acquisition costs, you fought tooth and nail with your divisions to standardize the environment. You said, “Heck, it’s all the same stuff in the end, folks, so let’s make Oracle our DBMS standard, Business Objects our BI standard, Documentum our ECM standard, and SAP our ERP standard.”
  • And you won. Mostly. There’s still some Cognos in finance. And marketing didn’t totally give up on Interwoven. But, for the most part, you won. You reduced the entropy of your IT environment and drove cost savings for your organization.

The problem is you’ve won the battle but lost the war. Why? Because if, as you say, the “stuff really is all the same” you shouldn’t standardize on the most expensive product. You should standardize on the cheapest.

  • Do you really need to be paying those big fees to Oracle for enterprise licenses? Wouldn’t MySQL do?
  • Are you really using all the functionality of that $1M/year Documentum ECM system? Wouldn’t SharePoint or Alfresco do?
  • For BI, do you need all the bells and whistles of BusinessObjects? Wouldn’t Pentaho or Qlikview do a fine job, at a fraction of the cost?

But these alternatives are obvious. Heck, even “the establishment” (i.e, Gartner) says it’s safe to tread in the open source water. So the question is, what’s holding you back?

  • Switching costs. It’s hard to move off Oracle or Documentum and you don’t want to pay the nut to do so.
  • Organizational inertia. Your whippersnapper DBAs who were in their 30s in the 1980s are now in their 50s. They’re thinking that change devalues their knowledge and experience; some just want to cruise into retirement. But that’s their personal agenda, not your enterprise one.
  • Accounting: you made it free for your divisions to keep using Documentum, Oracle, or BusinessObjects because you bought an enterprise license. While this appeared to “save” you money on a per-license basis, and it helped support your standardization initiative, it squashed innovation in your divisions, reinforced the organization inertia, and has a lot of people using the wrong tool for the job, resulting in projects that either take more or more expensive hardware than necessary (Oracle is good at this), that take too long to develop, or that simply fail.

So, what do I recommend doing about all this? I suggest that you adopt these policies, which –- for full disclosure, are at least partially in the self-interest of this blog’s author:

  • Stop writing big checks for commodity software. Every time a big check comes along, ask yourself: is this software differentiated or commoditized? Be willing to pay a premium for differentiated software, and price shop commodity software. Call a group of your smartest staff together periodically to help you make the commodity versus differentiated call.

  • When you see a big check coming for commodity software, make a migration plan. My hunch is that most of the time, you can create a nice 3-year ROI in the transition from premium to cheaper software. (This reminds me of the time I visited an investment bank’s CIO asking about their Documentum strategy. The answer: “our Documentum strategy is to get off Documentum,” because we’re paying too much and using too little.)

  • Stop doing enterprise agreements that create poor economic incentives within your organization. Don’t pay $XM at the enterprise level, spread that as a “tax” across your divisions, and then make use of certain software “free.” It distorts project reality, creates false incentives, squashes innovation, and generates lots of hidden costs. If you want to negotiate a master agreement and discount rate, that’s fine. Shoot for centralized discounts without central planning.
  • Don’t worry that the prior policies will create mayhem. While I understand that you don’t want arbitrary taste differences increasing the entropy of your enterprise software portfolio, recognize that with the first policy you’ve solved that problem already. If you deem a category (e.g., core RDBMS, enterprise search) commoditized, then you are going to force people to pick on cost. You’ll get standardization on the commodity categories –- just on the least expensive alternatives. The only entropy you’ll need to manage will be on the differentiated software which, having dispatched the commodity majority, you’ll have time to explore, study, and exploit.

Why I am taking the time to write this note to you? Back in the 1980s I was a foot soldier in the relational database revolution, and today I’m the CEO of one specialized DBMS company and on the board of another.

  • Mark Logic makes an XML server which can save great amounts of time and money in creating applications against unstructured information, replacing the combination of an RDBMS, an enterprise search engine, and an application server. Not only can Mark Logic manage 100s of TB of XML, the system eliminates the object / relational/ hierarchical impedance mismatch between Java, SQL, and XML that hampers developer productivity. Mark Logic was recently named the fourth fastest-growing IT company in Silicon Valley.
  • Aster Data makes a specialized data warehouse DBMS that runs on low-cost commodity hardware with a shared nothing architecture and leverages in-database MapReduce technology for parallelism and high scalability.

And during the past 25 years or so I’ve watched the market evolve. While I fully understand the policies and market forces that have led
us to where we are, I feel like we’ve come full circle. Vendor power is now concentrated in the big three. Vendor margins top 50%. Big vendors don’t innovate; they consolidate. Inertia has set in customer organizations. And there’s a major platform shift in progress; last time it was mainframe to minicomputer, this time it’s cloud.

Things feel a lot to me the way they did in 1985, just past dawn of the relational revolution. So in one way I’m writing to point out the oft-overlooked obvious: stop paying premium prices for commodity items. And in another way I’m saying, take the money you save in so doing and invest it in innovation technologies that:

  • Drive competitive advantage (which will matter again as we come out of the Great Recession)
  • Enable the Internet-scale applications you’ll need to face the coming information deluge
  • Reform the application development stack in ways that make sense for the coming generation of information applications, not that made sense for the last generation of data-centric ones.

Thank you for reading my note. If you have any questions or comments, please give me a ping at dave-dot-kellogg-at-marklogic-com or comment on this post.

Sincerely,

Dave Kellogg

Why Mark Logic Isn't Bigger Than Oracle. Or Is It?

I had a great meeting with a Silicon Valley technology executive this afternoon. He was a very clever chap with all the right credentials: an engineering master’s, a top MBA, experience at Google. The works.

He asked us the standard set of questions that tech executives do.

  • Is this a database or search engine? (Yes. As in both.)
  • Does it have transaction consistency? (Yes.)
  • Does it provide real-time search? (Yes.)
  • Does it have a query language? (Yes. XQuery.)
  • Does it scale? (Yes, to 100+ TB today)
  • Does it cluster on cheap hardware? (Yes.)
  • Do you require schema adherence? (No.)
  • Can you handle semi-structured content? (Yes.)
  • Is it native XML? (Yes.)
  • What database does it run on? (Itself. i.e., it is a DBMS.)
  • Do you use Lucene? (No. It has our own built-in search engine.)
  • Is it a database bolted to a search engine? (No. It’s both but as an integral hybrid.)

We went to cover common customer use-cases, talking about the generic reasons why customers buy Mark Logic:

  • Messy XML. (Various structures, unknown structures, changing structure.)
  • Big content. (Tens to hundreds of terabytes and nothing else will perform.)
  • DBMS/search-engine integration fatigue. (Tired of paying the costs of development, maintenance, and synchronization.)
  • Semi-structured data. (Such as the wide, sparse table problem.)
  • “Special” search requirements, where “special” could mean any combination of: structured, parametric, real-time, language-specific, or geo-coded search.

Then, suddenly, he caught us off-guard with his next question:

If you actually do all this, then why aren’t you bigger than Oracle?

In the meeting, we stumbled: “uh, gosh, well, that’s a question we don’t hear often.” Now, had I brought my A-game to the meeting, here’s what I would have said:

On an age-adjusted basis, we are.

For my source, check out this New York Times post, How Long Does It Take to Build a Technology Empire? The post measures various high-tech companies on their historical revenue ramps, specifically addressing the question how long did it take to get to $50M in revenues?

The answer for Oracle is 10 years. In Oracle’s year six, according to the graphic — which is interactive, you should play around with it — they were a mere $5M in inflation-adjusted revenues. Mark Logic, in year six (from its A-round funding) is many times that and should break $50M, in my estimation and with continued good fortune, in year 7.

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Oracle’s Become Computer Associates (CA)

It’s all happened so quickly.

  • I’ve become my parents,
  • SQL has become Cobol,
  • and Oracle has become CA

Things were different back in 1985, when I, fresh from Berkeley, VAX/VMS documentation in hand, rode the 51 bus to Alameda where my first real employer, Ingres, was based.

You see, back then, Oracle wasn’t the establishment. Oracle was the rebel, a $50M-ish hyper-aggressive competitor trying to steal the relational database market out from underneath its lethargic inventor, IBM.

Back then, there was one software company that I didn’t understand. It didn’t really invent anything. It just bought up all the sick and dying software companies, often those who’d missed the mainframe to mini-computer transition. It acted as a software-industry garbage collector.

Being a bit of geek, I’d always thought of it as the planet-eating doomsday machine from Star Trek.


Who was this company? Well, CA, of course.

CA made money with the following strategy. They’d:

  • Pay a pittance for a broken software company (often less than 1x revenues)
  • Fire all the staff, leaving only a skeleton crew
  • Perform only basic maintenance on the acquired software
  • Crank up the maintenance fees on the largely helpless installed base

In fact, you could argue that CA was the first software company to truly value the maintenance annuity, at a time when most software companies were focused on the higher-margin license fees. And CA fully exploited the switching costs built into the enterprise software market.

Well, who’s doing that strategy today? Oracle, of course. Since my kids have been doing test prep, I’ll phrase this as an analogy: Oracle is to minicomputer as CA is to mainframe.

See this article, Oracle Fees for Maintenance and Support under Fire, which prompted me to write this post, an idea that I’d been mulling for some time.

Oracle's Become Computer Associates (CA)

It’s all happened so quickly.

  • I’ve become my parents,
  • SQL has become Cobol,
  • and Oracle has become CA

Things were different back in 1985, when I, fresh from Berkeley, VAX/VMS documentation in hand, rode the 51 bus to Alameda where my first real employer, Ingres, was based.
You see, back then, Oracle wasn’t the establishment. Oracle was the rebel, a $50M-ish hyper-aggressive competitor trying to steal the relational database market out from underneath its lethargic inventor, IBM.
Back then, there was one software company that I didn’t understand. It didn’t really invent anything. It just bought up all the sick and dying software companies, often those who’d missed the mainframe to mini-computer transition. It acted as a software-industry garbage collector.
Being a bit of geek, I’d always thought of it as the planet-eating doomsday machine from Star Trek.

Who was this company? Well, CA, of course.
CA made money with the following strategy. They’d:

  • Pay a pittance for a broken software company (often less than 1x revenues)
  • Fire all the staff, leaving only a skeleton crew
  • Perform only basic maintenance on the acquired software
  • Crank up the maintenance fees on the largely helpless installed base

In fact, you could argue that CA was the first software company to truly value the maintenance annuity, at a time when most software companies were focused on the higher-margin license fees. And CA fully exploited the switching costs built into the enterprise software market.
Well, who’s doing that strategy today? Oracle, of course. Since my kids have been doing test prep, I’ll phrase this as an analogy: Oracle is to minicomputer as CA is to mainframe.
See this article, Oracle Fees for Maintenance and Support under Fire, which prompted me to write this post, an idea that I’d been mulling for some time.

Quiz: How Many People Work at Oracle and SAP?

While we all carry intuitive notions of size, one of my favorite things to do is quantify things. Simple example: what does it mean to say a kid is “very good” at soccer? Is he/she:

  • Better than 99 out of 100 kids
  • 999 out of 1,000
  • or 9,999 out of 10,000?

There is a huge difference among the three answers and I’d argue in all cases one might say, “very good,” while perhaps in the last case one might say “exceptional” or “outstanding.”

Today’s example is corporate. While we all know that Oracle and SAP are “big” — exactly how big are they in terms of headcount? Quick, make a guess.

[Blank space inserted to somewhat hide the answer]

And the answer is:

  • 86,657 people work at Oracle
  • 51,863 people work at SAP

Per recent research from JMP Securities.

By the way, the same report also says that Oracle is in the midst of laying off about 1,500 staff and that SAP is laying off about 7-8% worldwide (i.e., ~3800), with a particular focus on the Americas where cuts may be up to 20%.