Emperor Palpatine (Larry Ellison) Retires

The word is that Larry Ellison, the Emperor Palpatine (or Darth Sidious, if you prefer) of the software industry, has given up his CEO title at Oracle. This is a good time to revisit his legacy and contributions to the technology industry.

Oracle’s Background

Oracle is one of the largest software companies on the planet, with total revenues of over $38B, $29B of which come from software. The company is a leader in database software, HR software (through the acquisition of PeopleSoft), financial management software, supply chain management software, J2EE platform software (through the acquisition of BEA), and high-end hardware (through the acquisition of Sun Microsystems, which also led to Oracle’s ownership of Java).

Oracle’s Business Practices

Oracle is renowned for its tough business practices. It uses complicated enterprise software agreements to lock customers into multiple products and to try to extract the maximum amount of revenue from each customer. This has led to the phrase “Oracle pricing,” which refers to any vendor that uses extremely complicated and expensive pricing and licensing practices. It has also led to the phrase “Oracle does not really have any customers, only hostages.”

The Retirement of Larry Ellison

It is clear that Larry Ellison has one of the sharpest minds in the software industry, as well as one of the best understandings of both technology and market dynamics. In this respect, he is probably in the same company as Bill Gates and Steve Jobs. But Larry Ellison set the tone for the Oracle sales organization from the top. Aggressive goals and aggressive sales management led to aggressive sales practices, which have made Oracle less than popular with many of its customers. In that respect, Larry Ellison is perhaps the Emperor Palpatine of the technology industry. You can come to your own conclusions as to which you think is more evil.

Larry Ellison
Larry Ellison
Emperor Palpatine
Darth Sidious, a.k.a. Emperor Palpatine (copyright LucasFilm)

But the one thing that you have to grant Larry Ellison is his sense of timing. Because, while building a huge technology empire around expensive software, expensive hardware, and expensive services, Ellison also put Oracle on the wrong side of history.

Oracle and the Future of the Technology Industry

Oracle, like IBM, BMC, HP, and CA, is on the wrong side of several of the most important dynamics in the computer industry:

  • The center of gravity in databases is shifting from the relational model, best suited to transactions, to the big data models, which are best suited to the rapid ingest and consumption of information. The new big data technologies are all open source, and they look to be licensed on terms that are significantly more customer-friendly than the terms for an Oracle database. Companies like Cloudera, Hortonworks, and MapR are now carrying the flag of innovation in this business, a flag that Oracle is highly unlikely to reclaim.
  • There is a move toward consumption of applications on a Software as a Service (SaaS) basis. While Oracle claims that its cloud business is rapidly growing, this is probably occurring at the expense of its on-premises enterprise software. This means that Oracle is trading in dollars for dimes, which is not a good long-term business strategy.
  • Cheap commodity hardware is replacing expensive hardware on all fronts. The value is shifting into virtualization layers like VMware vSphere, NSX, and VSAN. Oracle is essentially a non-player in the layer of software that is most directly commoditizing the hardware business.
  • The application development tools business has been completely commoditized, with open-source projects leading the way.
  • The application platform business (WebLogic) has shifted away from complicated and expensive J2EE application servers toward simpler and cheaper alternatives, again coming out of the open-source community.

Larry Ellison is retiring at a good time. Cloud companies like Amazon are offering inexpensive and easy-to-consume hardware, software, and services, putting pressure on vendors like Oracle, IBM, HP, CA, BMC, and Dell.

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