Chapter One: Larry and Me
I first met Larry Ellison in his office at Oracle's Redwood Shores headquarters on December 8, 1997. I had recently become The Economist's technology and communications editor, and this was the first of what became regular visits to Silicon Valley. I had just completed two days of meetings at Microsoft's campus at Redmond, Washington, 800 miles to the north, where an array of impressively on-message executives had been wheeled out for my benefit -- though unfortunately not Bill Gates himself. I would see him on my next visit, I was assured. But there was a strong hint that "face time with Bill" was conditional on The Economist's taking a more sympathetic line toward Microsoft in the antitrust case that the Department of Justice was preparing against it. After a similar turn involving Oracle's most senior managers, I had been promised time with Ellison himself.
It turned out I'd picked a bad afternoon. I didn't know it at the time, but Oracle was about to issue its first earnings warning since the firm had nearly gone under in 1990. The economic crisis in Asia had taken its toll, and in North America, slowing license sales of Oracle's most important product, its all-conquering database, seemed to support the argument of some analysts that Oracle was dominating a market that was getting close to saturation. The following day, the stock lost 30 percent of its value.
As I waited, I could see Ellison through the glass doors of the eleventh-floor boardroom, huddled in conversation. He was already an hour and a half late for his interview with me and I knew he had to fly to New York later in the day to deliver a keynote speech at an Internet conference. I had heard stories about Ellison's lateness and didn't believe the press flak's distracted excuses about an "emergency" being the cause of the delay. Let's leave it for another time, I suggested grumpily. But at that moment, I was suddenly ushered into Ellison's handsome office with its expensive Japanese artifacts and panoramic views across the bay.
Despite the strain he must have been under, Ellison was courtesy itself. After apologizing profusely for his lateness, he began to talk about technology. His theme was the failure of the prevailing computer architecture of the day, known as client/server (because the job of running software was shared between server computers in corporate data centers and their desktop PC "clients"). He believed client/server was an "evolutionary dead end" that was "distributing complexity" with disastrous consequences. The answer was a new model of computing based on the Internet, in which the complexity and the computing would be hidden in the network. Users would be able to access everything they needed through a web browser that could be run by a machine much less expensive and cantankerous than a PC -- a network computer.
There was nothing unexpected in this. It was a drum that Ellison had been beating for some time, and conceptually it was little different from Sun Microsystems's famous slogan that "the network is the computer." Ellison had first declared the PC "a ridiculous device" at a technology conference in Paris more than two years earlier. The speech, at the height of the hoopla surrounding the release of Windows 95 and in front of an audience that included Bill Gates, caused a minor sensation.
Ellison ran through a well-rehearsed routine, but there was nonetheless something extraordinarily compelling about his argument. He seemed to be speaking directly to the problems that anyone who depended on computers at work knew all too well: the crash-prone PC with its incomprehensible error messages; the incredible effort of maintaining thousands of PCs across a company; the apparently insurmountable difficulties of getting reasonable performance and scalability across wide-area networks. The arguments seemed utterly rational and commonsensical, while Ellison himself was passionate and funny.
Over the next three years, Ellison was proved to be far more right than wrong. The network computer itself proved to be a dazzling digression: Ellison had been right about how the Internet would change the way computers were used, but most people still reckoned that the best way of getting to the Internet was through a PC. A few network computers were made by Oracle and a loosely knit coalition of Microsoft's enemies, such as IBM and Sun Microsystems, but tumbling PC prices and the limitations imposed by slow dial-up connections quickly condemned them to irrelevance. Microsoft crowed; Ellison was made to look a bit foolish. But the PC versus the NC was a sideshow that stole attention from the real struggle for the future of computing. What mattered was that Ellison had understood better than anyone the potential impact of the Internet on enterprise computing in general and on Oracle in particular.*
While the technology analysts in the investment banks and the consultancies confidently predicted the maturing of the database market, Ellison realized that the Internet would exponentially increase both the number of database transactions and the number of people who would interact with Oracle's databases. That would mean more license growth than the analysts had dreamed of. Every time someone looked for a book on Amazon.com, bought stock through E*TRADE, or put something up for auction on eBay, that person was using an Oracle database. Ellison believed that the database would be the essential platform for Internet computing, effectively displacing the once all-important operating system.
Within companies, the same thing would happen. Instead of business software being used by only a handful of specialists, Internet-based applications could be extended to anyone with authorization and a browser. Every time one of those applications was used, there was a good chance that it would query the database that the application ran on. When the networking giant Cisco Systems talked of having a "URL for everything we do," it was another way of saying that everybody they employed was constantly using the firm's Oracle database. In a client/server world, less sophisticated databases, such as Microsoft's SQL Server, might have become "good enough" for many businesses, but with Internet computing came the need for databases that could support millions of users at once. With the coming of e-business, Oracle's databases became at least as much an essential element of infrastructure as Cisco's routers or the big server computers made by the likes of Sun that were also back in fashion. It was no coincidence that in early 2000 those three companies -- the three superstars of the Internet -- had a combined market value of nearly a trillion dollars.
If that was a stroke of luck for Oracle, what wasn't was Ellison's decision, to the horror of many colleagues and customers, to abandon all further development of client/server-based applications and concentrate the firm's entire engineering effort on building for the new computing architecture of the Internet. While rivals in the apps business, such as the German powerhouse SAP and PeopleSoft, talked up the Internet and put a web front-end on some of their products, Ellison went much further. Oracle was the first established software firm to risk everything on the new paradigm.
His rationale was simple: Oracle could never hope to be number one in enterprise applications as long as client/server prevailed -- it was fated always to play second fiddle to SAP, whose strength in the enterprise apps market almost matched Oracle's dominance in databases. By getting to the Internet first, assuming that the software could be made to work, Ellison would force Oracle's competitors to become followers, gaining vital time-to-market over them. And, crucially in an industry in which perception is as important as reality, if Ellison's bet came off, it would make Oracle appear very cool.
The strategy of harnessing Internet hype and turning Oracle from stodgy to hip -- Ellison's mantra had become "the Internet changes everything" -- helped drive Oracle's market cap in 2000 to within touching distance of a Microsoft brought low by the government's antitrust case. Ellison even briefly overtook Bill Gates as the world's richest man, with a net worth of more than $50 billion. If newspaper and magazine articles about Ellison still found plenty of space to describe in loving detail his high-rolling ways, they were also forced to concede that there was substance too. Even though Ellison refused to conform to their idea of what an Über-geek should look and sound like -- Gates had that one sewn up -- there was a growing willingness to concede that, although as arrogant and addicted to hyperbole as ever, Ellison probably was an authentic business and technology visionary.
In December 2000, when I was thinking about writing this book, Ellison told me that he was preparing to bet the company all over again in a do-or-die attempt to make Oracle not just the biggest software company, but the world's most influential corporation. To Ellison, that meant not so much passing Microsoft in revenues, although that would be nice, but Oracle having become the successor to industrial icons such as Ford and IBM, whose products and vision had changed the way the world works. He couldn't bear to include Microsoft in that pantheon. At first it sounded like a characteristic piece of Ellisonian exaggeration. With Ellison, you never quite knew whether he was being provocative for the sake of it or whether he really meant it.
Before deciding to do the book, I went to see him at his home in Atherton. I needed to gauge how serious he really was. After talking through the day and well into the night, I concluded that he was very serious indeed.
His logic went like this: The arrival of the Internet meant we were now living at the beginning of the information age -- "it's the information age, not the fucking operating system age" -- and Oracle, it just so happened, was the leading company for helping people to manage their information. Software was the product that made the world go round, and the software business, according to Ellison, is and always has been based on the principle of winner take all. IBM and Microsoft, in their heydays, had demonstrated that. But now the rules of the game had shifted in Oracle's favor, and it was its turn to become the dominant force in computing. IBM and Microsoft had both bestrode their respective eras -- eras that had been defined by the prevailing computer architectures of the day, the mainframe followed by client/server.
Ellison was convinced that Oracle was now poised to claim the mantle that Microsoft had snatched from IBM. But while these two companies' reigns had been temporary, Ellison reckoned Oracle could be on top for a very long time. He believed that the world was inexorably moving toward "one network [the Internet], one database [from Oracle]."He says: "I really don't think there will be another paradigm shift. This is it."
But the database alone could not bring Oracle the degree of success that Ellison was after. For that, he needed Oracle's applications to become the enterprising computing equivalent of Microsoft's ubiquitous Office. In other words, Oracle's Release 11i, or the E-Business Suite as Ellison preferred to call it, would need to become the standard package of applications for automating the world's businesses. Release 11i had shipped some six months earlier at the beginning of June and Ellison was convinced it was going to turn the economy of business computing on its head. Engineered for the Internet from scratch, it was one of the biggest and most complex pieces of software ever created. It brought together traditional enterprise resource planning (ERP) applications for running all of a company's back-office functions with the much newer customer relationship management (CRM) programs, which were designed to deal with every outward-facing task from sales automation to choreographing a sophisticated marketing campaign. It was, Ellison boasted, the only integrated suite that could do everything that most business customers would ever need it to do.
The consequence, Ellison argued, was that it was no longer necessary to hire expensive systems integrators from IBM or Accenture to glue together market-leading applications from different software vendors -- the practice known as bringing together best-of-breed. "Building an integrated system out of several different software products that were never designed to work together is a very difficult task. At Oracle, we used to sell and deliver these best-of-breed systems; selling was easy, delivery was hard. IBM has thousands of consultants eager to help you make it work. The more complex the integration project the more likely it will be late and over budget. It may even fail completely. And in the end it's the customer who assumes the financial risk for the success or failure of these projects. This best-of-breed software product assembly approach is absolutely unique to the computer industry. If Detroit ran like Silicon Valley, nobody would sell cars -- just parts. Customers would have to figure out which were the 'best' parts -- a Honda engine, a Ford transmission, a BMW chassis, GM electrical system -- and buy them and try to assemble them into a working car. Good luck. I know it sounds crazy, but that's how companies put together business systems today."
But not for much longer, if Ellison had anything to do with it. Ellison was betting that companies with the bitter experience of lengthy software implementations that never fully delivered or returned their investment would be willing to break with the past and buy nearly everything from Oracle. He was also betting that among software vendors only Oracle was big and powerful enough to put together a complete "soup-to-nuts" package of e-business applications, tightly integrated with the database, that would work reliably straight out of the box. And finally, he was betting that the giant systems integration and consulting firms, who recommended to clients what software they should buy, would not turn against Oracle for trying to destroy a large and lucrative part of their business. Ellison leaned back in his chair, grinning: "I feel slightly dizzy when I think about it. We have this one chance to win, and I know that unless we screw up, it's going to happen."
Ellison was, in effect, going to war with nearly the whole of the computing business. Mooning Microsoft was one thing, but challenging so much of the industry's conventional wisdom and vested interests at one time and with few allies seemed unnecessarily foolhardy. I wondered whether Ellison would have the stamina for such a grueling challenge. He was fifty-six years old and, thanks to the 24 percent stake in Oracle that he had clung to through thick and thin since the initial public offering in 1985, he was wealthy beyond even his own understanding.
Although he always talked about technology and Oracle with passion and intensity, he didn't have the methodical relentlessness that made Bill Gates so formidable and feared. By his own admission, Ellison was not an obsessive grinder like Gates: "I am a sprinter. I rest, I sprint, I rest, I sprint again." Ellison had a reputation for being easily bored by the process of running a business and often took time off, leaving the shop to senior colleagues. One of the reasons often trotted out for Oracle's success in the 1990s was Ellison's decision to hire Ray Lane, a senior executive credited with bringing order and discipline to the business, allowing Ellison just to do the vision thing and bunk off to sail his boats whenever he felt like it. But Lane had left Oracle nearly eighteen months before after falling out with Ellison. Since then, Ellison had taken full control of the company -- how likely was it that he would he stay the course?
One reason to be skeptical was that Ellison just seemed to have too many things going on in his life besides Oracle. During the afternoon, we took a break from discussing the future of computing to take a tour of what would be his new home -- nearly a decade in the making, and at that time, still nearly three years from completion. In the hills of Woodside, California, framing a five-acre artificial lake, six wooden Japanese houses, perfect replicas of the fifteenth- and sixteenth-century originals in Kyoto, were under construction. The site also contained two full-size ornamental bridges, hundreds of boulders trucked in from the high Sierras and arranged according to Zen principles and an equal number of cherry trees jostling for attention next to towering redwoods. Ellison remarked: "If I'm remembered for anything, it's more likely to be for this than Oracle."
In the evening, I noticed in Ellison's dining room a scale model of what would become his second home: a graceful-looking 450-foot motor-yacht capable of circumnavigating the globe. Already the owner of two mega-yachts, bought secondhand and extensively modified (the 192-foot Ronin based in Sausalito and the 244-foot Katana, which was kept at Antibes in the South of France), Ellison wanted to create the perfect yacht. The key to achieving this had been his successful courtship of a seventy-two-year-old Englishman, Jon Bannenberg, recognized as the greatest designer of very big, privately-owned yachts. With a budget of $200 million -- about the same as that for the Japanese imperial village in Woodside -- it would be Bannenberg's masterpiece. Bannenberg had committed himself to "handing over the keys" to Ellison in time for his summer holiday in 2003.
Then there was Ellison's flirtation with biotechnology. He had often said to me that when he finally left Oracle (yes, a life after Oracle was something that he contemplated), he would like to work in biotech, even describing it as a new career. He already owned an intellectually formidable Israeli company called Quark Biotech, a pioneer in applied genomics-based drug development, which develops therapeutic products that treat diseases such as cancer and osteoporosis by attacking their causes rather than their symptoms. Ellison's main philanthropic effort, through the Ellison Medical Foundation, was funding essential research into the diseases of aging. His detractors alleged that he was praying that his foundation would come up with an elixir of youth. It was a good joke given Ellison's distaste for mortality.
If Ellison could devote as much or as little time as he felt able to his two mammoth construction projects, the same could not be said of the America's Cup. After winning four maxi-class world championships in his 80-foot sloop Sayonara and narrowly escaping death in the lethal 1998 Sydney-to-Hobart race, Ellison had turned his attention to winning yachting's most prestigious prize. Although the races (in Auckland) to decide who would challenge Team New Zealand for the "auld mug" would not begin until the fall of 2002, in common with the other major syndicates, Ellison's team, Oracle Racing, was already in training on the water. Would Ellison be happy just to pay the bills -- he had agreed to provide a budget for the team of $80 million -- or was he planning a more active involvement?
If Ellison decided to take the helm, he would be up against the best professional "drivers" in the world and he already employed one of them: Sayonara veteran Chris Dickson from New Zealand. When I asked him, he looked sheepish: "It depends how fast our boat is. If it's fast enough, maybe. But I'm not telling anyone yet. I don't want to have a mutiny on my hands." I wasn't sure whether he was talking about the America's cup team or his colleagues at Oracle. I was sure, however, that Ellison had no intention of standing in the background obediently signing checks. And if he was planning on driving in some of the races as he had hinted, what sort of commitment in terms of preparation and weeks spent away from Oracle did that imply?
Finally, although I didn't know then, there was even the possibility that Ellison might start a new family. Although Ellison's views on monogamy would never make him a standard-bearer for the moral majority, his five-year relationship with Melanie Craft, a writer twenty-five years his junior, had evolved into a deep mutual commitment. After three failed marriages, one other long-term relationship, and a string of less serious girlfriends, Ellison had pretty much convinced himself that being a husband was just something he was not very good at (although he gave himself higher marks as a father to his two teenage children). As his children by his third marriage were reaching young adulthood -- David was eighteen and Megan fifteen -- the idea of having more was growing on him. It wasn't something that he talked about, and he was sensitive enough not to want to put any pressure on Melanie, but it was there all the same.
I had been swept along by Ellison's arguments and exhilarated by his recklessness and the sheer grandeur of his optimism. As usual, everything he was saying made perfect sense and was intellectually compelling. Part of me thought: "He's right. If the E-Business Suite is all he says it is, why shouldn't he succeed with this? And if it does, why shouldn't Oracle become the most important company on earth."
However, Oracle's aggressive and sometimes arrogant style had made it plenty of enemies, and with the launch of the E-Business Suite it seemed that Ellison was intent on making a great many more. Critics had accused Ellison and Oracle of overclaiming and hyping products that sometimes failed to live up to their billing (not exactly a unique crime in the software business, but one that was persistently pinned on Oracle). And although Oracle had the second biggest enterprise applications business in the world, the history of its applications had been, to put it mildly, torrid. If the software didn't deliver on Ellison's promise, there would be plenty of people more than happy to see him crash and burn.
Ellison was desperate for Oracle to fulfill what he saw as its true potential, but was he prepared to do what might be required in terms of sheer grinding slog for that to happen? Ellison had become used to having never to do anything he didn't want to. Was he ready to make the sacrifices that would likely be demanded of him? The progress of this campaign -- certainly his most important and possibly his last -- would have profound consequences both for Oracle and the reputation of its founder. I very much wanted to know how it would turn out.
Copyright © 2003 by Matthew Symonds and Larry Ellison
