October 3, 2010

Ray Lane and the integration of software and consulting at Oracle

Oracle pretty much doubled revenue every year until it got around the $1 billion level. Then things got tougher, industry-standard revenue recognition scandals not excepted. At one point there were only three buildings on the Oracle campus, with large portions of them eerily empty. But the ship righted itself, best exemplified by three transitions:

Political battles still raged at Oracle — Mike Fields vs. Craig Conway, Terry Garnett vs. Jerry Baker, and later on Mark Benioff vs. pretty much everybody. But the company was ready to move to next level. I personally bought Oracle stock around that time, and it grew into a rather significant fraction of my total IRA.

*For a guy who

Mike Fields has a lot of fans — including me. Some people actually do deserve to fail upwards, and I think he was one of them.

The person who made Oracle into a truly major enterprise technology company, however, was nobody I mentioned above. Rather, it was Ray Lane. Some of the reason, as I’ve already noted on DBMS 2, was general good management. Ray was also a tireless salesman, for example once telling me of a very large deal he won by being the only executive of his seniority to show up and give a pitch. But the most interesting part of his success was the strategy he fostered, namely the integration of packaged software and high-margin professional services.

In theory, that integration is blindingly obvious.

*or at least can be represented as

In practice, despite many attempts, it had rarely worked well before. Reasons included:

Some of the few successes were:

Apparently, highly regulated customers felt they had to have what they had to have, and paid whatever price was necessary to get it.

I haven’t identified a silver-bullet insight that Ray Lane’s Oracle had that other companies didn’t, allowing them to succeed where others had failed. They just executed and got it in large part right. Indeed, their technology for semi-custom applications went just as awry as most other vendors’, most notably in an effort to provide industry-specific I-CASE (Integrated Computer-Aided Software Engineering) models as project starter kits. Even so, the business model just seemed to work.

In large part, the industry followed suit. To this day, professional services are a bigger part of software vendors’ business mixes than they were before Ray Lane.

One might ask, “What about all those system integration partners who recommend software, and don’t want to be competed with?” Those came to the fore in the 1990s as well, after Rob Kelley and Brian Sommer paved the way at Andersen Consulting (now Accenture) in the previous decade. SAP owed a large part of its success to them, as did Siebel Systems, whose early success had a lot to do with a super-close Andersen relationship. Indeed, by all signs they are a major reason Oracle retreated — partially — from Ray’s strategy. Services (mainly consulting), which hit 58% of revenue in FY 1999, were down to 21% a decade later.

Other possible reasons for abandoning its successful strategy include:

But those are subjects for another time.

Comments

7 Responses to “Ray Lane and the integration of software and consulting at Oracle”

  1. Ray Lane at HP | DBMS 2 : DataBase Management System Services on October 3rd, 2010 8:35 pm

    [...] I’ve added more about Ray Lane and Oracle in the 1990s over on Software Memories. Categories: HP and Neoview, Oracle, Vertica Systems  Subscribe [...]

  2. Notes and links October 3 2010 | DBMS 2 : DataBase Management System Services on October 3rd, 2010 9:10 pm

    [...] added more on Ray Lane’s tenure at Oracle over on Software [...]

  3. Ajay on October 4th, 2010 6:55 am

    It would be interesting if you could muster up the energy to compile a book on Software Memories.

  4. Curt Monash on October 4th, 2010 2:04 pm

    I wish.

    I’m not even mustering the energy to post what would be small sections or sidebars.

  5. Eliot Ness on October 11th, 2010 7:22 pm

    Lane has interesting challenges on his hands in other contexts:

    http://www.CarnegieMellonFraud.com/Memo-to-Ray-Lane.htm

  6. An execution worksheet for enterprise IT vendors | Strategic Messaging on January 30th, 2012 1:22 pm

    [...] Business models for post-sales support can change over time. [...]

  7. Applications of an analytic kind : DBMS 2 : DataBase Management System Services on February 11th, 2012 8:32 pm

    [...] Incomplete applications rarely sell well. [...]

Leave a Reply




Feed including blog about software history Subscribe to the Monash Research feed via RSS or email:

Login

Search our blogs and white papers

Monash Research blogs

User consulting

Building a short list? Refining your strategic plan? We can help.

Vendor advisory

We tell vendors what's happening -- and, more important, what they should do about it.

Monash Research highlights

Learn about white papers, webcasts, and blog highlights, by RSS or email.