Funny,
I just replied to a friend about this column in an e-mail. Here it is:
Berst Alert
WEDNESDAY, AUGUST 12, 1998
Oracle's Hidden Weaknesses
Jesse Berst, Editorial Director
ZDNet AnchorDesk
A home buyer's worst nightmare. The house looks great on the outside, sturdy and solid. But unbeknownst, dry rot is silently destroying the foundation.
Oracle is the world's leading maker of industrial-strength database software with roughly 30% of the $7 billion market. It's an imposing edifice from the outside. In reality, five factors are invisibly eating away at its business.
1. Slowing Database Market. Despite the occasional strong quarter, sales of Oracle's "classic" relational database are leveling off. These days, Oracle actually makes more money from two other sources: services (consulting) and applications software (which runs on top of its database). Although those areas are growing, they also bring problems (see below).
This is true. Sales of the server are slowing. This is partially due to people putting off new development projects to concentrate on Y2K remedies. However, many of the companies I know of that are building big web sites are using Oracle's RDBMS underneath.
2. Outmoded Business Model. The very things that got Oracle to the top may be its downfall -- slick, expensive salespeople and a focus on the high end. Like all low-volume, high-cost businesses, Oracle is vulnerable to a competitor who offers 80% of the functionality for half the price. A competitor like Microsoft, with its low-cost, high-volume, commodity approach.
My prediction. The threat from Microsoft SQL Server seems worrisome in 1998. By this time next year, it will be a major challenge that adversely impacts Oracle's earnings and stock price.
This is crap. SQL*Server is years behind Oracle7 in terms of functionality and behind Oracle V5 for stability and scalability. Egghead.com was developing their online site on top of SQL Server. When they tried to scale it to production, it failed. It is rumored (on SI) that Microsoft offered $500K in free consulting to fix it, but Egghead declined. Now they are Oracle end to end. Look at the press release on Oracle's web site.
3. Poor Partnering Skills. As the Wall Street Journal reported last month, Microsoft is quickly recruiting an army of partners, many of them former Oracle loyalists. Microsoft can afford to outspend Oracle as long as it takes to buy their love. Oracle's arrogance and its propensity to compete with its partners also helps drive them into Microsoft's arms.
True, but these guys are selling SQL Server at the Departmental and Workgroup level. Oracle is still meeting with the CIOs and CEOs.
4. I-Hate-Bill Disease. This malady has infected many an executive before Oracle's Larry Ellison, including Novell's Ray Noorda and Bob Frankenberg, Borland's Philippe Kahn and Sun's Scott McNealy. One symptom is an obsession with beating Bill Gates instead of delighting customers. Executives with this disease do things to hurt Microsoft instead of to help their constituency.
Ray Lane is widely acknowledged as one of the best technology execs in the business. He acts as a damper on Larry's "Kill Microsoft" excesses.
5. Flawed Vision. I-hate-Bill disease also distorts vision. In his urge to beat Bill, Larry Ellison takes his company outside its core competency. And when he does that, he wastes time and money on wrong-headed schemes. Like his silly 500-channel TV idea. His abortive efforts to buy Apple. His failed network computing initiative.
The network computer initiative is far from failed. As more and more applications become web-based, the Network Computing Architecture (three tiered, with thin clients) is taking hold. Nobody wants the headaches of maintaining thousands of PCs. NT5 is not going to ship until 2000. NCA is out there and it works now. Just because people are not buying NC hardware in vast numbers does not mean that the paradigm shift has not begun. They are just using incredibly overpowered clients (Pentium PCs).
To be sure, Oracle has many strengths. Its sales force is one of the best in the world. Its high-end database is much more powerful, reliable and scalable than the Microsoft equivalent. And it has competitors like Sybase and Informix that insist on shooting themselves in the foot. Oracle can probably grow for several more years just by gobbling market share away from its bumbling rivals.
But even the biggest building will topple if dry rot destroys the foundation. Or if a competitor like Microsoft eats away from the low end of the market. Oracle's many strengths may not be enough unless it moves quickly to fix the rot at its core.
Let's see. Oracle is more powerful, more reliable and more scalable. Microsoft is cheaper. So Microsoft is going to sell enough copies of SQL Server for under $1,000 (my guess, I don't know their pricing structure) to undermine Oracle's enterprise wide $100K+ server installations? I don't think so.
-Michael |
