Business software maker Oracle is finally adapting to a shift in computing that is threatening to turn the company into a relic.
The 35-year-old company hailed its technological transition June 6 at its Redwood Shores, Calif. headquarters, where hyperbolic CEO Larry Ellison announced plans to distribute more than 100 business software applications over the internet instead of selling them as products that have to be installed on individual office computers.
The concept of leasing software applications reachable on any internet-connected device is known as “cloud computing.” It’s an idea that Ellison has frequently mocked as a passing fancy, but his comments June 6 made it clear that he realized some time ago that the trend had become a serious business.
Ellison said it took thousands of Oracle engineers the past seven years to develop the company’s suite of cloud computing services. The work was code-named “Fusion,” but Ellison acknowledged it became so disjointed that he understood why it was skewered as “Project Confusion.”
Despite all the manpower and money that Oracle poured into its cloud computing expansion, the company still couldn’t build everything on its own. To fill the gaps, Oracle has spent more than $3.5 billion buying some of the early pioneers in cloud computing, including RightNow Technologies and Taleo.
“This was as difficult a thing that we have ever done at Oracle,” Ellison conceded during a presentation that The Associated Press watched on a webcast. He said he now believes Oracle has “the most comprehensive cloud on planet Earth.”
All boasting aside, Oracle will have to prove that it can adjust to the changes triggered by cloud computing—while still trying to profit from the old model of installing and maintaining software on the premises of its corporate, government, school, and university customers.
Ellison acknowledged it won’t be easy, saying “very few technology companies cross the chasm from one generation to the next.”
Oracle Corp. is in no danger of fading away anytime soon. The company remains of the of the world’s most successful software makers, with annual revenue of about $37 billon and a market value of $137 billion.
But the 67-year-old Ellison, an elder statesman among Silicon Valley’s CEOs, doesn’t want to risk becoming obsolescent. He is trying to stay a step ahead of longtime rival SAP as it also embraces cloud computing. Oracle also is trying to catch up to one of Ellison’s former proteges, Marc Benioff, who is now CEO of Salesforce.com, which many universities use to track and manage constituent relations. Not long after leaving Oracle to start Salesforce, Benioff emerged as cloud computing’s more persuasive evangelist.
Salesforce.com is expected to generate $3 billion in annual revenue this year and has a market value of $19 billion.
Ellison, who has an estimated fortune of $36 billion, was one of Salesforce’s earliest investors. He also owns a 46-percent stake in a Salesforce rival, NetSuite Inc., run by another former Oracle executive, Zach Nelson.
Oracle’s expansion into cloud computing also puts Ellison on a collision course with an old antagonist, software entrepreneur David Duffield. Ellison bought Duffield’s former company, PeopleSoft, for $11.1 billion in 2005 after a bitter takeover battle that lasted 18 months. Duffield has since started a cloud-computing service called Workday that sells human resources management tools.
Ellison predicted Oracle eventually will trump Salesforce and Workday by offering a wider and more secure range of services that will fulfill all the cloud computing needs of large companies, government agencies, school districts, and universities.
Oracle’s new services include “”social relationship management” tools to analyze what people are saying on Facebook’s social network and other online forums such as Twitter.