It’s the middle of 2014, and Oracle (ORCL) is still around. That wasn’t really meant to happen.
Oracle’s decline into irrelevance was supposed to have started about 20 years ago with the arrival of the MySQL database in 1995. This open-source software had two major advantages over Oracle’s expensive database software: It was free, and it was to become the favored database of the Internet whiz kids. Just as the open-source Linux operating system undermined the proprietary operating systems (and cash cows) of such companies as Sun Microsystems, IBM (IBM), and Hewlett-Packard (HPQ), MySQL would undermine Oracle. Chief Executive Officer Larry Ellison would have to downgrade from yacht to dinghy. Or so went the conventional thinking.
The basic idea behind all the Oracle doom and gloom was that no new interesting work would take place on an old database. Sure, retailers, banks, automakers, and the like would continue to pay Oracle for upgrades and support on their existing databases. But all the exciting new stuff would happen on MySQL and the Web, leaving Oracle’s business to languish over time. For proof of this, one need only look at Google (GOOG), the biggest MySQL backer on the planet, and Sun Microsystems, which paid $1 billion to acquire MySQL in 2008 in a bid to once again become the darling of the Internet.
And then, in 2010, Ellison did one of those things that only Ellison seems to be able to do. Oracle bought Sun Microsystems, and antitrust regulators, whom Ellison loves to openly ridicule, approved the deal. Oracle owned the past and the present.
Of course, with the technology industry being what it is, the peace of mind the company had purchased disappeared the moment the deal closed. Amazon.com’s (AMZN) cloud services started to take off and seriously threatened Oracle’s way of life. Oracle’s aggressive salespeople have no place in a world where customers hop on a browser to order their computing services. And there’s not much need to pay Oracle to fix bugs and update its software when Amazon’s engineers are doing all this work for you in the background.
What’s more, a competitor to both Oracle and MySQL had arrived—dubbed NoSQL. This was a catchall term for a bunch of data-cataloging systems developed by consumer Web companies including Facebook (FB) and Twitter (TWTR). No company in its right mind would buy a database again for new-age work with all these free, rapidly advancing options around. This time Ellison would have to trade in his McLaren for a Nissan Leaf.
The weird thing is that Ellison is as rich as ever thanks to Oracle’s ability to withstand a ton of competitive pressure. In the last week the company’s market capitalization rose above that of IBM, one of its major competitors in the database and business software market. That means it closed about a $50 billion gap in the past five years. For much of that time, analysts insisted that IBM was doing everything right and that Oracle had no future. Now it’s IBM that has the tough questions to answer about its strategy. Oracle’s shares have also outperformed those of Microsoft (MSFT) and SAP (SAP) over the past two years and are dead even with those of Salesforce.com (CRM), cloud computing’s hero.
Mark Hurd and Safra Catz, the executives who run Oracle day-to-day for Ellison, deserve praise here. They’re less ostentatious than someone like Salesforce’s Marc Benioff but operate with precision and unrivaled effectiveness.
There’s no question the company’s database sales have slowed since its glory days. Oracle has also made a host of embarrassing mistakes. Its customers were tortured waiting for a revamped suite of business applications known as Fusion to arrive. Oracle completely ignored the rise of the Hadoop data analytics platform. It also tried to ignore the cloud for as long as possible. And while Oracle continues to champion the cash it has earned from the Sun acquisition, the idea of selling really expensive mainframe-like computers looks beyond archaic in the cloud computing era.
Of late, though, Oracle has started to demonstrate that it’s thinking more about the future. At the end of May it unveiled something called MySQL Fabric, a response to the NoSQL movement. And on June 10, Ellison is scheduled to show up for the launch of an entirely new database called Oracle Database In-Memory. As the name suggests, this database will make use of techniques currently in vogue that allow huge volumes of data to be stored in high-speed memory instead of on spinning hard disks. The result is that data analysis jobs run at record speed.
These announcements underscore what Oracle has done perhaps better than any other major business software maker, which is make the transition from the old to the new in a highly profitable way.
