Last night, Ed Zander (ex-CEO of Motorola) interviewed Larry Ellison at the Churchill Club.
The interview proved to be fascinating, with Ed Zander a perfect choice to push and prod Ellison on topics ranging from ORCL's early years, his motivations for buying Sun, to politics, sailing, and the prospects for the US economy.
The title of the post "living history" hit home last night. We are fortunate to not only live in a place where monster companies are born and scale, but also to work in an industry where many of the pioneers remain active - Ellison, Jobs, Ballmer, Dell....
While the story behind ORCL is well-known, Ellison made a few very interesting comments worth sharing.
First, he argued that the reason behind the Sun acquisition is to move into the systems business. He believes that the tech industry treats customers like "computer hobbyists." Customers are forced to buy components - servers, storage, switches, databases, app servers, applications....- from a long list of vendor and to then spend vast sums integrating systems to address a given application. His goal is to leverage Sun to create systems - billing systems, airline reservations systems....where engineers optimize the integration not customers and service providers. He envisions building the successor to Tom Watson Jr's IBM, which he views as the most successful enterprise company of all time.
The systems vision is an interesting one and one that flies in the face of conventional wisdom - ie that the industry and customers are best served via a focus on horizontal specialization. Components rather than systems, the industry long argued, delivered the greatest innovation at the lowest total price. His systems vision challenges orthodoxy that specialization trumps integration.
Interestingly, Steve Jobs is also driving a systems based approach. Rather than follow the PC model of separation between hardware, software, peripherals, applications...., Apple provides integrated solutions - systems - that despite the significant price premiums are trumping the PC approach to consumer marketing and strategy. The integration of software, hardware, applications, and services (iTunes) provides greater consumer utility than the "computer hobbyist" the PC industry espouses. The Mac vs PC ads hit this point time and time again.
Second, Larry Ellison is bearish on the US economy. Rather than seeing a W, V, or U shaped recovery, he humorously called for an L-shaped recovery - ie a decline to a new equilibrium from which we will not see any meaningful recovery for at least five years. His logic - 70% of the US economy is premised on consumer spending and US consumers are so overwhelmed by debt that they will be forced to save, not spend, to service massive debt obligations.
Finally, he reeks of competition. He cannot go five minutes without commenting on IBM or SAP. He clearly takes tremendous energy from focusing on an competitor and on rallying the company to take share, to win accounts, and to out market the competitor in question. He made one comment that really struck home - "pick your competitors carefully for you will quickly come to resemble the companies you compete with."
Thanks to the Churchill Club for a great event.
