Subject: Re: Larry Ellison on FSBs
From: "Ben Tilly" <>
Date: Tue, 25 Apr 2006 07:41:02 -0700

 Tue, 25 Apr 2006 07:41:02 -0700
On 4/24/06, Stephen J. Turnbull <> wrote:
> >>>>> "Ben" == Ben Tilly <> writes:
>     Ben> Um, a decade ago the phrase "open source" had not yet been
>     Ben> coined. And it was far from obvious that open source
>     Ben> databases were going to become important.
> I don't see that that makes a bit of difference.  Entrepreneurial
> business is not about knowing *who* is trying to get you, it's about
> knowing "they" are trying to get you, and staying one step ahead of
> "them".  Open source may not have been what anybody expected, but that
> doesn't mean that Oracle and Microsoft aren't going to be the best in
> the business at dealing with it.

Clayton Christensen would disagree.  His finding is that by doing
everything that you're supposed to do (paying attention to your
customers, etc) a company will be successful in ordinary business
situations but will fail miserably at dealing with disruptive
innovation.  Because it is the nature of disruptive innovation that
your customers will tell you that they are not interested in it until
it is good enough for their needs, at which point it is too late for
you because you have entrenched competitors whose cost model you can't
compete with.

> In the interview, did LE brag that his database was the best?  Did he
> claim that RHEL was buggy?  He did not.  He said, Oracle makes money
> because we deliver services to our customers, and they're willing to
> commit to long-term contracts for it.  He said, RHAT is struggling
> because they haven't learned to deliver the services.  He said, we
> have a five-year plan to grow the profits we make at 20%/year, and two
> years in, we're on track.

CC also found that at the point where a disruptive wave gets started,
established companies increase their profits.  Therefore by paying
attention to the business prediction, without even looking at Oracle's
balance I would have predicted that they'd be doing well at the

> KISS for the new millenium: "Keep Investing in Service, Stupid."  The
> software business is not about software.  It's about business---your
> customers' business, and how you support that.

There is exactly one situation that I'm aware of where paying
attention to your customers becomes a losing long-term strategy, and
that is the situation that Oracle's core business is in right now.

> LE could be wrong, but he sure makes a lot of sense.

He does make sense.  Unfortunately so does Clayton Christensen, and
CC's thesis predicts problems for LE.

>     Ben> Furthermore new businesses or not, it still hurts Oracle to
>     Ben> see their cash cow evaporate.
> Companies like Oracle don't drink milk, they eat steak.  Unexpected
> visitors?  Kill the fatted calf and have your barbeque a week early.

Strangely enough this kind of confidence has not helped any other
company that I know of which has faced disruptive innovation.  One
doubts that Oracle will prove to be an exception.