Q&A: The Oracle Speaks

How Larry Ellison sees the future for tech companies

On Feb. 8, in a public forum that was part of BusinessWeek's continuing "Captains of Industry" series, Oracle Corp. CEO Lawrence J. Ellison sat down with Editor-in-Chief Stephen B. Shepard at the 92nd Street Y in Manhattan to talk about himself, Oracle, Microsoft, Apple, and why he sees good times ahead. Excerpts:

Q: You were a so-so student in high school. You didn't finish college. How come?

A: The very things that caused me to fail in school have made me successful in life. I have always had difficulty with conventional wisdom. So teachers would say certain things--and I wouldn't necessarily believe what they had to say. Just because they said it, and they were experts, and they were in authority did not automatically mean they were right.

It created problems between me and my parents at times. And between me and my teachers, and me and my peers. But in the end, when you go out into the real world, it's when you find errors in conventional wisdom--when everyone says A is true, and A is not true--that you gain your competitive advantage. Only a few times do you have to find errors in conventional wisdom to make a living.

Q: Now suppose one of your kids walked in and said: "Dad, I've decided I'm not going to college."

A: It would be great. I've been trying to talk them out of it for a long time. I've got a 15-year-old daughter and an 18-year-old son. My son first wanted to go to Stanford, which I thought was O.K. The weather is pretty good, and it's a fairly short drive to the beach. But it wouldn't be as good as, let's say, Pepperdine, which is in Malibu. And he said: "Dad, what about the education?" I said: "Clearly, I failed as a parent."

Sure, I'd be thrilled if David went to Stanford or Dartmouth or Harvard or any of these wonderful schools. But there is something inside of me that would be kind of gleeful if he went to Pepperdine and spent part of his time on the beach, playing volleyball and learning about life--as opposed to some of the things they teach in school.

Q: Are either of your kids interested in technology?

A: Yeah, my daughter is very interested in biotechnology, which I think is the next great thing. My son is also interested in technology--computers, plays classical guitar, does all sorts of interesting things. He's an aerobatic pilot--still trying to figure out what he loves most.

Q: He's 18, right?

A: Well, I'm pretty old, and I'm still trying to figure out what I love the most.

Q: When did you get really serious about building a company?

A: Oh, I got serious about feeding myself. It took until I was 26. I can recall running out of money between paychecks, and living on macaroni and cheese and rice. But I didn't take money very seriously until my late 20s and I wanted to buy a house. I thought: If only I had a house--I had never lived in a house before. I'd figure out some way to make enough money to get a house.

Q: There's a process of reinvention going on now at Oracle. Tell us a little bit about that.

A: I never exactly ran the company. I was only interested in engineering. I was interested in creating these really cool programs that did these cool things. And other people could worry about selling them and servicing them and counting the money. I've always run engineering at Oracle and left the rest of the stuff to others.

A few years ago, it dawned on me that the Internet was this extraordinary global network where all of our employees were suddenly accessible, attached to the same network. Everyone we were trying to sell to, everyone we were trying to service, everyone that worked for us.

All of a sudden, 60 seconds after we set a price, we publish that price on our global Web store, and all of our salespeople in every country see it. In fact, all of our customers see it instantaneously. Suddenly, we can make decisions and communicate them to everybody. We can create policies and procedures and implement them and voice them all over the world.

Q: So, it's a little bit about centralizing authority, but it's also about saving money. Is there a huge cost savings?

A: Oh, yeah. All those people who used to set price, we don't need them anymore. But it's not just pricing. They'd invent their own way of invoicing customers, filing expense reports. They would reinvent every business process we had. There was such a duplication of effort. It was costing us a fortune. We decided to do it once, to do it globally, to do it on the Internet. It saved us $1 billion last year. It will save us $2 billion this year.

Q: You've been saying lately that software is dead, which is an odd thing for a software guy to say. What do you mean by that?

A: Well, a couple of things. Look at the way our industry works. If you're running a fairly large company, this is what you do: Your sales department goes out, and they buy software to help them run the sales department. Then your accounting department does the same thing, and they buy software for accounting. They're buying all these different software components.

And then someone has to assemble these little components together to run your business. There's a whole other industry--Andersen, IBM, 300,000 consultants--eager to help. And they show up with glue guns, and their job is to make the E.piphany marketing system talk to the Siebel sales system, talk to the BroadVision Web store, talk to the the SAP accounting system, and the PeopleSoft HR system.

In fact, if the software entrepreneurs left the software industry and reinvented the automobile industry, this is the way we'd work. There would be no Ford. We're much too smart for that. There would be Larry's Windshield Corp. And we would make the most magnificent windshields in the world. You could buy the Honda transmission, and the BMW engine block, and the Corvette front bumper, and the Lexus chassis. You would have the deep satisfaction of knowing that you had bought the best components in every single area. Unfortunately, these parts were never intended to fit together.

Q: So you think corporations need to tie themselves together with an Internet-based technology, rather than software pieces?

A: What we're selling is cars. We have a marketing system that talks to the sales system, that talks to the service system, that talks to the accounting system. All the pieces fit together. Our critics say: "But you haven't got the best windshield in the world." Yeah, that may be true, but our windshield fits in our car. That's the reason there's no air blowing on your face when you're driving.

Q: How far along do you think companies are in making the transition to running themselves and managing themselves, via the Internet?

A: We're very early in the process. We came out with our integrated E-Business Suite--our car, if you will--in May of last year. The most aggressive company in the uptake of this technology has been General Electric. Where a lot of companies are very conservative, waiting for conventional wisdom, it's interesting that one of the very best managed companies I know of is being almost reckless in their move to this new technology, because the benefits are so enormous.

Q: Is this what we mean when we talk about the New Economy? That there's a productivity revolution going on that enables companies, by using technology, to raise productivity so that the economy can grow faster without inflation?

A: Oh, absolutely. And I don't think we yet have a grasp of the magnitude of this change. You know, the computer industry has overpromised for so long and underdelivered for so long. But this time, this Internet thing is big. This fundamentally will change the way companies run internally, the way companies interact with their suppliers and their consumers. The way they buy things, the way they sell things.

Q: How is the economic slowdown affecting high tech? Can Oracle continue to grow 30% a year?

A: I think we can. The good news is our products are aimed at saving companies money. You can argue there's even great incentive to put your business on the Internet, because as times are tough, you've really got to trim the fat in your business, and our software will help you do that.

Q: Let's talk a little bit about the Microsoft case, your favorite company. Would you like to see...?

A: Put them all in jail.

Q: Apart from putting them all in jail, would you like to see the company broken up along the lines that Judge Jackson has proposed?

A: Oh yeah, I'd like to see them break it up--like, every employee gets his own portion of Microsoft: 25,000 different Microsofts. What do I think is reasonable and fair? I think Microsoft broke the law. They told everybody they were going to destroy Netscape. And in fact, Bill Gates went out and made the following statement. He said: If I give away all of my Internet software and Netscape gives away all of its Internet software, I like Microsoft's business prospects more than Netscape's.

So they make all the stuff for free and drive Netscape out of business. They thought Netscape was an incredibly dangerous company. They thought that the browser would become the platform for the next-generation application. As it turns out, I think they were mistaken. They should have been shooting at us, when they were shooting at Netscape. In fact, we used to refer to Netscape as the heat-shield. They were so busy destroying Netscape, they kind of lost sight of what we were doing. And in the Internet, it's not about the desktop software. It's about the server software. The irony of all of this is they broke into the wrong bank.

They repeatedly broke the law. They said to Compaq: If you want to get a good price for Windows, you better not put Netscape on that computer. That is using an existing monopoly, Windows, to obtain a new monopoly in browsers. That's an explicit violation of the Sherman Antitrust Act. They did it over and over again and over again.

Q: Do you ever think about competing with Bill Gates in philanthropy?

A: I've got very strong feelings about philanthropy. For one thing, it's measured entirely the wrong way. Let me posit the following question: Mr. A, sitting over there, has given $10 billion to cure cancer. Mr. B, sitting over here, has given $10,000 to cure cancer. Mr. B cures cancer. Mr. A does not. Who is the bigger philanthropist?

We measure philanthropy by how much money you waste. We measure the size of your donation, not results. Actually, I've given a lot of money to a lot of things that Bill has. In fact, I started giving money to infectious diseases--malaria, and schistosomiasis and tuberculosis--long before Bill did. And I have a medical foundation that's working on it. I don't think it's terribly interesting how much money I gave. If you ask me, I'll tell you. I don't think it's terribly interesting because we haven't solved any problems yet.

Q: This is a question about Apple. Steve Jobs is a friend of yours.

A: My very best friend.

Q: And you're on the board.

A: I am.

Q: You've said many times that Steve Jobs saved Apple. Yet Apple is hurting now. What's the future for Apple?

A: Apple was flatlining when Steve got there, and he really brought it back with a wonderful new set of products. The iMac and we've got the new laptop coming out right now. We've had one bad quarter after a string of very, very good quarters. The whole PC industry is hurting. So, to some degree, it's broad. It goes way beyond Apple. I mean, Dell is in trouble, and Compaq's in trouble.

Apple has a new set of software coming out--System 10. I'm very optimistic about Apple's future, because Apple has the guy who invented the PC industry. He invented the whole industry. Andy Grove was asked who he admires most in the PC industry, and he said it was Steve Jobs, because everything in the PC industry was invented by Steve--if not invented, popularized, whether it's the laser printer, the display, the mouse, all of these things Steve has delivered. The gorgeous industrial design--I think Apple's biggest competitor in the future is going to be Sony. And I think Apple can be the greatest provider of digital appliances in this new market.

Q: It's interesting that you said digital appliances and not PCs. A few years ago, you were championing the idea of a network appliance. And you felt that Apple should do it. Why hasn't Apple made a network appliance?

A: Because Steve didn't have a lot of time to save the company. It's all well and good for me to have my fantasies of how the world is going to be some number of years from now. Steve had to make the next quarter and the quarter after and the quarter after. And they have a lot of loyal Mac users. It's a wonderful system, and they had to deliver high quality. They had to greatly improve their product and serve their installed base. He had to save the existing business before he could venture forth into new businesses.

It's a good defense of your best friend. Thank you.

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