Oracle Shows What Happens When Sales Runs the Show
An aggressive sales-first mantra has made billions for Oracle. This approach may be backfiring, though, as competitors and former partners line up to take Oracle down and customers start to call the company's tactics hostile. Will this hurt the firm's future?
Every once in a while, a powerful vendor behaves in a way that polarizes the rest of the market against it.Enderle GroupRob Enderle, Principal Analyst
The downside, which is becoming more obvious of late, is that sales-driven organizations tend to be overly focused on compensation-good salespeople know to focus on what pays the highest commission, after all-and not that focused on customer satisfaction or product results. In short, they want your money, and everything else is secondary.
They also tend to be a bit loose with financial reporting-numbers aren't as inflexible to salespeople as they are to engineers or accountants-and also a bit loose with the facts, since closing the deal can have priority over telling the truth. This is why we have so many unfavorable stories about door-to-door, car and many other types of salespeople.
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In short, the very things that make for a great salesperson, in terms of placing financial success over customer loyalty, can make them a dangerous CEO both to competitors and their own companies. That's why we don't see many CEOs like Larry Ellison.
Creative Advertising May Get Oracle in Trouble
Truth in advertising is one problem area for the company. Oracle has been chastised not once, but twice, for misleading or false advertising. The first time the company was caught claiming its systems were twice as fast as IBM's, and the second time for claiming they were 20 times as fast.
It isn't what Oracle claimed that showcases the problem but, rather, how the situation escalated. Most companies would have either held off for an extended period before making the claim or made sure that future claims could be properly supported. Oracle actually went in the other direction and found a creative way to increase the claim.
Rather than change its bad behavior, the company pushed harder. This is the combative sales nature taking hold. Unfortunately, Oracle doesn't seem to realize that it's not really being combative with IBM but, instead, with the National Advertising Division. Behavior like that can lead to government sanctions for false advertising.
Currently, Oracle is running a $10 million challenge to argue that it is faster than IBM.
Even if it doesn't face sanctions, it is increasingly unlikely that IT buyers would believe the first claim, and certainly not the second, given Sun's recent history against IBM. While these efforts may seem to Oracle to be in IBMs face, they simply obliterate any appearance of honesty. Buyers typically don't like to do business with companies they don't trust, and Oracle-at least in the years when Ray Lane wasnt running the company-has traditionally had a trust problem with customers. This kind of behavior just makes it worse.
Currently, Oracle is running a $10 million challenge to argue that it is faster than IBM. However, the rules of the challenge create a near impossible scenario where you are comparing two identical data warehouse deployments in production.
Typical comparisons are done with common data sets in test environments, because no one in his right mind would put a massive number of existing customers into a contest like this. The potential risk could run into the billions. It isn't as if IT folks won't read the rules and be offended by the idea.
All this seems to do is remind people that Oracle isn't competitive. I doubt it fools any professional who sees this, especially since the IT decision makers in the Oracle-IBM space are career professionals. You don't get to run billion-dollar data centers right out of school-well, at least I hope you don't.
Competitive Partnerships Form to Take Down Oracle
One reaction to Oracle's combative approach has been driving unique partnerships. The most recent is the EMC, Cisco and SAP HANA appliance solution, which has a distinct displace Oracle flavor. You can see that flavor in this post acquisition of a Hawaiian island to a secret SPECTRE base like that used by Dr. No.
I doubt the partnership would even exist had Oracle not acquired Sun and turned longtime partners EMC and Cisco into competitors, significantly and indirectly improving SAP's relationship with them as a result. I talked to these companies recently. The SAP HANA in-memory database appliance they have created together is impressive, both in eliminating complexity and reducing cost and in how well it matches up against the weaknesses (particularly pricing) that surround Oracle's competing offering.
In short, Oracle's aggressive approach is both creating new competitors and driving those competitors into partnerships focused on displacing Oracle.
Today's Oracle Looks Like Yesterday's IBM
Every once in a while, a powerful vendor behaves in a way that polarizes the rest of the market against it. That appears to be happening with Oracle-which, perhaps not coincidentally, seems to be becoming more and more desperate. The company can't seem to keep a CFO on staff. On top of that, Oracle is polarizing both existing competitors and past partners against it while moving to lock in its customers. As IBM found out in the 1980s, IT customers are difficult to lock in permanently. Based on my own conversations with Oracle customers, they increasingly view the company as hostile.
This showcases the downside of a company run by sales. While sales are certainly critical to any company's success, without balance it can create tactical situations that can destroy the firm's strategic value and future.
I think we are seeing this with Oracle now, which suggests that folks approach the company with caution and consider the alternatives, from partnerships such as the EMC, Cisco and SAP HANA project and from competitors such as IBM and HP, especially as what is likely a problematic relationship with Oracle becomes increasingly hard to get out of.
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