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Ellison and Jobs: Two visions of tech
By David Kirkpatrick
FORTUNE.COM
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(FORTUNE.COM) -- What kind of an industry is technology? A slowing, conservative, consolidating one, hungry to sweep up profit whenever possible? Or an industry of visionaries confident that profit will come if they invent new tools to make life better?
Several recent news events raise such questions. First, Oracle's bid for PeopleSoft is something fundamentally new for the industry -- a hostile takeover of a venerable software maker whose products are used, mostly with satisfaction, by thousands of companies. Many people view Oracle's effort as pointing the way for the entire industry -- these people see tech consolidating and innovation diminishing, and they believe business will henceforth be conducted in a more measured, conventional fashion. Immediate profit would be the watchword of such an industry.
Then we have Apple's announcement yesterday of a raft of new products, services, and features in its increasingly dazzling array of offerings. Among the revelations: a commercial personal computer that will be by far the most powerful for the price -- a first for Apple, and a refutation of the notion that it is pointless to butt heads with the huge and monolithic PC industry ecosystem. By partnering with IBM instead of surrendering and moving to an Intel chip inside the Macintosh, Apple has shown that it can do fundamentally new and unique things. (For more on the IBM 64-bit technology at the heart of this chip, and the move to speedier computing, see my FORTUNE story from February, "See This Chip?") Separately, Apple's new video chat system, for use in tandem with AOL Instant Messenger, and a spectacular update of its OS X operating system, known as Panther, show how much innovation and advance is possible for those with open minds and a customer-centric approach.
Apple's Steve Jobs and Oracle's Larry Ellison are friends, but it appears they have a fundamentally contradictory view of what's possible with technology. Ellison wants to use market power to make more money by locking in the customer and restricting his or her choices. Jobs wants to give customers even more choices, and believes that better and better products will eventually give Apple a reliably profitable and growing business. It's the short-term versus the long-term view.
Ellison fundamentally miscalculated when he launched his PeopleSoft bid back on June 6. By saying he had no intention of continuing PeopleSoft's product lines and by making it sound like he planned to jettison most of the employees of his corporate prey, he signaled a disregard for customers' best interests and for their ability to choose. To refresh memories, here are some quotes from my June 6 interview with Ellison: "We're after their people, their customers, and we're after money...It is not an integration. We will take their top developers and they will work on the Oracle E-Business Suite." His rhetoric focused mostly on how the deal was good for shareholders seeking a financial return, not on how customers would feel about its impact in their businesses. Granted, he also said "We have to bend over backwards to do a good job with the customers," but his ideas for that mostly ran along the lines of doing a good job helping them migrate to Oracle solutions for everything.
Ellison arrogantly believes that Oracle's products are and will be best, and that customers thus are stupid not to realize that. Many customers and outsiders believe, by contrast, that in many categories PeopleSoft has done a better job solving the problems of customers.
Now Oracle is furiously backtracking. An ad in the New York Times starts off saying, "We will not shut down PeopleSoft products." It also says PeopleSoft customers can move to Oracle for free. Yet Ellison is misrepresenting the actual process of using enterprise software, and customers know it. The biggest costs are not in buying the applications per se, but in training people and managing the organizational impact of software transitions. One PeopleSoft customer, Chris Alderson, program director at Air New Zealand, is quoted in PeopleSoft's anti-Oracle ads saying, "Even if the upgrade to Oracle had been free, there would have been unpalatable implementation and training costs resulting in no benefit."
This is a big deal at a time when software of the types that Oracle and PeopleSoft sell is increasingly at the heart of corporate activities. Customers depend on this stuff to work. Otherwise their businesses essentially can't function. In addition, many PeopleSoft customers run their applications on databases from IBM or Microsoft. Oracle clearly intends for that to change. Will it promise there will be no cost for that transition either?
With Apple's continuing stream of innovation, Jobs signals a marvelous confidence in the continuing ability of technology to improve people's lives. Ellison, by contrast, confirms the skeptics' worst fears about the industry. Many businesspeople came to believe during the dotcom bubble and the Y2K transition that technology companies wanted nothing other than revenues. Customers felt themselves under tremendous pressure to buy products, and the industry preyed on them. The later realization by customers that they didn't in fact need many of these products reinforced their prejudice against the suppliers.
In the end, Ellison may very well succeed in buying PeopleSoft. But my heart remains with Jobs. I don't get excited about tech because it's an industry that may enrich investors. I think technology can enrich society. The former should properly be a function of the latter.
This all relates to another tech topic in the news: the continuing brouhaha about Harvard Business Review article by Nicholas Carr entitled "IT Doesn't Matter." Writers like the normally sage Steve Lohr, writing in Monday's New York Times business section, act as if Carr's point was that the technology industry won't rebound anytime soon. That's a financial and investing question, one that Carr only glancingly referred to. In fact, the HBR article was almost entirely centered on the notion that companies could no longer effectively use technology to gain business benefit and competitive differentiation. That's a broader question. Carr believes tech's benefit is disappearing. He's wrong. Just ask PeopleSoft's customers -- or Steve Jobs.
Questions? Comments? E-mail them to me at dkirkpatrick@fortunemail.com.
