How Oracle managed to survive the technology fallout

Ian Smith, Oracle's UK managing director, talks about his flamboyant boss and why the software giant has managed to survive
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The Independent Online

By normal conventions, Oracle, the US software giant, should be on its knees. It's a hi-tech company selling an expensive product to other companies that are tightening their purse strings. What's more, it has lost – and has yet to replace – two senior executives. And it is run by a brash billionaire playboy with a penchant for the fast life – jets, yachts, cars and women.

A recipe for disaster, some may say. But Oracle has always done things a little differently. Last week it confounded its critics by posting a decent set of results, while many around it were losing their heads – including the much-praised Cisco Systems.

The question on the lips of Wall Street analysts is can Oracle keep up its oddball act as the economic chill grips America?

If you believe everything Larry Ellison, the company's larger-than-life founder, says, then the answer is an emphatic "yes". Buoyed by Oracle's last set of results, Mr Ellison promised on Wednesday that in five years Oracle's rivals Ariba, Commerce One, PeopleSoft, i2 and Sybase will have vanished. Given that Oracle has lost a stream of senior executives to these companies (see column by Keith Rodgers, right), Mr Ellison's vehemence is easily explained. But at the same presentation, he also dared to poke fun at IT leviathan IBM, a company that has been one of the sector's most solid performers for the last five years.

Not everyone at Oracle is as cocky as Mr Ellison, but most are as bullish. Ian Smith, Oracle's managing director for the UK, Ireland and South Africa, is one of them. In an interview with the Independent on Sunday, he argues that Oracle is poised for growth, but warns that Europe could lag behind due to companies' attitudes to IT investment and delays in the introduction of high-speed internet access.

"Now the dot-com phenomena has passed, it is back to business as usual," says Mr Smith. But he argues that today companies want to "pay as they grow", instead of buying a system that "is six sizes too big to grow into" – a coded dig at IBM and its reliance on servicing big computers. He claims Oracle's latest application, 9i, allows companies to upgrade using clusters of smaller computers instead of whole systems.

Mr Smith – who left school at 16 and started his career as an electrical fitter at a Portsmouth dockyard – was initiated in the ways of Oracle on his very first day in the job in October 1999. He was due to meet Mr Ellison at the company's San Francisco head office, but at the last minute the arrangements were changed.

Mr Smith recalls: "Instead, I spent four hours having lunch with Larry on his patio at his villa." This is no small thing, as Mr Ellison has built a replica Japanese garden at his lavish home on the fringes of Silicon Valley. "We talked about everything," he continues, "me, him, the UK. Larry has two personas. One is the showman on stage, which is a thrill to watch. The other is a man who is a very good listener. I left that meeting feeling very inspired and motivated."

Mr Smith – who employs 3,000 people in the UK and is based at Oracle's European head office in Reading – speaks to his boss about once a month. A recent topic of conversation was the state of the European market. Mr Smith is concerned that, in many firms, the IT decisions are made by the wrong people. "In Europe swathes of companies leave the e-business spending decisions to the IT departments," he says. "This means members of the board don't actually understand the technology they are buying."

Another thing that keeps Mr Smith awake at night is broadband, or high-speed internet access. He is critical of the UK Government for failing to deliver what he describes as a "clear and concise strategy" on the roll-out of broadband. "It is the fourth utility," he says. "If parts of the UK were without gas, electricity or water, then there would be an outcry. Broadband is the same."

Mr Smith argues that the Government should provide subsidies or tax credits as an incentive for telecoms companies to develop broadband services. "There needs to be a fundamental and cultural shift in attitude," he argues.

Change isn't something that Oracle can be accused of failing to embrace. A couple of years ago its corporate culture was very different from the one that exists today. Oracle salesmen were wheeler-dealers, negotiating individual deals with customers. Mr Ellison put a stop to that. Today, Oracle has a standard set of prices for its software – any deviation has to be personally approved by Mr Ellison. This situation, argues Mr Smith, didn't suit everyone and led to the departure of some senior staff – including Mr Ellison's former number two, Ray Lane.

"Frankly, Ray was a deal maker," says Mr Smith. "We don't do those deals any more and that was the catalyst for him leaving."

Wall Street claimed Oracle couldn't live without Mr Lane, who was said to be the antidote to Mr Ellison's exuberance. But Oracle has proved that, though a bit of an oddball, it can keep its head above water even while many others are drowning.