Why Oracle wins by Larry Ellison stepping down

“A relationship is like a shark, it either has to move forward or it dies. And that’s true about your company.” — Larry Ellison

So, Larry Ellison, the longest standing CEO in the Valley and the last of the original founding fathers of enterprise technology, finally steps down. A lot of people have been saying that this announcement is the “end of an era.”

While I understand the sentiment, I don’t necessarily agree.

In my view, the impact of this will not be as significant as Gates’s announcement in 2008 or the untimely departure of Jobs in 2011. Given Oracle’s current place in the cloud industry, stepping down and focusing on his own core competency, the product, is one of the smartest things Ellison could do.

The End of an Era? Not Exactly

Along with Gates and Jobs, Ellison brought technology to the masses. He managed to be a “tech celebrity” despite the fact that the end-user never really interacts with his technology in any way. He is the guy that built the stuff that sits way behind the scenes. Yet everyone still knows of him, because his brilliance is matched in equal measure by his flamboyance. His lavish lifestyle includes owning a $100 million home, one of the largest yachts on the planet, and even a Hawaiian island! He is vocal and not shy with it – often controversial, but always witty, direct, and never scared of speaking out against the competition. Ellison is an extrovert and someone who made the tech industry a lot more colorful.

As the new Chairman and CTO, Ellison has positioned himself to perform the role he has been doing over the last few years and one that he excels at. He is a product guy, and Oracle’s huge success, still to this day, is built on the database that he introduced to the commercial world in the late 70s.

Oracle in 2014 and Beyond

Today, Oracle faces a lot of competition in its core competency with the new generation of database products gaining traction. As well as open-source products (PostgreSQL), a major threat is emerging from NoSQL products (e.g. MongoDB), which fundamentally challenges the concept of relational databases, handling trillions of data points for companies such as Facebook and Twitter.

Possibly more worrying than these is the emergence and rapid growth of Big Data technologies such as Hadoop. With many vendors now adding SQL-type analytics to their framework, these lower-cost and higher-performance alternatives are gaining traction and becoming the preferred choice for many CIOs who are under pressure to deliver more with less.

Unfortunately, Oracle does not appear to have done much to combat this threat, leading me to believe that its strategy will involve an acquisition at some point, most likely Cloudera, which is currently used in Oracle’s Big Data Appliance.

Moving Beyond Databases

Oracle has deep pockets and has always been a very active player in the acquisition market, but recently its acquisition strategy seems to have changed. Whereas some of the earlier purchases such as Siebel, Peoplesoft, and BEA were to acquire clients (and to convert them to Oracle), the more recent acquisitions have been more about the technology (Eloqua, Responsys) and vertical industries (Micros Systems).

Despite Ellison’s initial reluctance to embrace the cloud, Oracle now has the second largest cloud application SaaS revenue (approx. >$1bn) after Salesforce (>$4bn). Yes, most of this has been through acquisitions, but it is a telling sign of where the company is heading in the future. Does it actually see databases as its primary market in 10 years?

Safe in the Short Run, With a Caveat

In the short term, Oracle’s saving grace is that its existing customers tend to have sophisticated and bespoke requirements. Most will have invested a lot of money in tailoring their solutions, and these customers will continue to drive revenues for a while.

Oracle’s challenge is in retaining this business over the long term and, more importantly, competing for new business. This will require more focus on product innovation, product alignment, and successfully transitioning to the cloud.

And who but Larry Ellison for Oracle is the man to meet this new challenge?

Ajay Patel is the CEO & Co-Founder of HighQ.