Thursday, September 24, 2009

An evening with Larry Ellison

On Monday this week the Churchill Club organized an evening discussion with Larry Ellison, held at the San Jose Fairmont. Larry has been CEO of Oracle Corporation for the past 32 years, since founding it with two other guys and an initial stake of $2000.

Larry came across as an extremely articulate, passionate and driven individual. He seemed quite relaxed, and there was none of the "arrogance" that he is famous for - although I am convinced that many confuse passion and a drive to win with arrogance.

The evening was not as probing or informative as I had hoped, but there were a few pearls of wisdom:

On Competition

I can't remember his exact words, but they were something like "be careful when selecting your enemies, because you'll end up looking like them". To me this was extremely profound - he mentioned that Microsoft is now really focused in the consumer space, likely because they see Apple as their biggest competitor (e.g. Zune to meet iPOD). But Microsoft made their money in the Enterprise, and should they be focusing away from that core strength?

Novell hated Microsoft so much in the 90s that they tried to assemble a company almost identical (remember DR DOS?), and as we know, that almost killed them (although it's been a long lingering death). Novell could have been Cisco, but they focused so much on being Microsoft that they were blind to bigger opportunities.

I got the impression that Larry sees his biggest competition as IBM, especially the IBM of "Thomas Watson Junior". He talked about them in very respectful terms many times, especially how they were able to deliver a complete solution. So another takeaway here is that it's OK to respect the competition.

On the economy

Larry sees the recover as being "L" shaped i.e. he sees a very long recovery, and predicted things won't be getting better for five years. The past boom as based on unsustainable debt driven spending, and we need to return to higher house hold savings. There was also a discussion that the US may need to implement tariffs to combat goods produced where energy is much cheaper (and dirtier).

On Product vs Solutions

The discussion I enjoyed the most was where Larry described the IT industry as reaching a point of maturity (like aerospace), where it will be dominated by 5 or so companies that provide complete solutions. He believes strongly that the past approach of a horizontal environment where the customer integrated the solution was wrong, and we need to return to the IBM model of old where a company delivers a complete working solution.

I personally believe very strongly in the need to vertically integrate, even at the portfolio level, rather than stretching out horizontally. And at the company level, Apple and RIM have shown that a complete vertical solution can function without significant integration issues or costs. If you think about the core message of the Apple versus PC advertisements, it's really all about vertical integration versus a horizontal solution that must be integrated by the buyer.

A final word

On the prophetic words was his advice to startup entrepreneurs to look outside the maturing IT industry if they want to have a shot at building another Oracle. He felt that Biotechnology in particular offered much more opportunities, given the early stage of that market. Sobering words for entrepreneurs.

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