OOW17 - Hurd in the Oracle OpenWorld keynote: carrots and sticks

If Sunday’s opening night keynote at Oracle OpenWorld with Larry Ellison was poetry, Mark Hurd’s keynote the next day was definitely prose.

Where Ellison spoke of the near future and its possibilities, Hurd drew the assignment of discussing reality in the form of the economics of the IT department—small innovation budgets and the high overhead of just keeping the lights on formed the basis of this discussion.

Zero-sum competition framed it.

Competitive threats

It was carrot and stick because no one in the enterprise is going to spend a penny that’s not required—on IT or anything else—so with the carrot firmly in view, the reality of the stick had to be brought home.

Hurd spoke knowingly but also congenially about today's difficulty in generating net new business given the amount of competition from both traditional competitors as well as from upstarts bent on disruption. He painted a zero sum picture in which one business gains at the expense of another That fits with Oracle's go to market strategies where Oracle has to win and you have to lose. But that's where we can differ.

While the competitive situation is undoubtedly...err...competitive, it speaks more of where the industry, and to a greater degree, the world economy is today but not necessarily where it’s going. An event like OpenWorld ought to be about where things are going. For instance, and just by coincidence, on the same day Hurd spoke, both Ford and General Motors announced big plans to revamp their entire fleets by the mid 2020’s using electric vehicles. According to the New York Times, GM’s CEO Mary Barra:

…announced plans for 20 new all-electric models by 2023, including two within the next 18 months.

And shortly thereafter,

Ford let loose with its own announcement, saying it would add 13 electrified models over the next several years, with a five-year investment of $4.5 billion.

That’s how change and disruption happen these days and it’s why IT investments today are so important. It’s also why Oracle’s earnings have begun to spike as it goes full tilt after the cloud market. Customers intuitively understand all this. So it’s likely that Hurd’s keynote wasn’t exactly aimed at the GM’s and Fords of this world but at the smaller enterprises that sit on the fence waiting for the right time. That time is now.

Invest now

Here’s what I mean. I met with Patrick Benson, CIO of Clubcorp, a small enterprise comprising country clubs, city clubs, private clubs, and alumni clubs and the largest company in its niche. The 60-year-old company went public in 2013 and understood the need to update its systems, which were last upgraded around the Y2K event. As a result, Clubcorp’s systems were aging and it needed to make decisions about replacing both hardware and software. So there were decision points about every aspect of its IT systems. Which it eventually resolved by going to the Oracle Cloud.

But it wasn’t a simple replacement process. The change required moving some systems to the cloud via IaaS before replacing the software and only then replacing everything. All of this had to be done carefully to preserve the customized workflows the company had developed over many years. Eventually the datacenter moved to the cloud and modern systems prevail today.

In many ways Clubcorp is typical of the change happening everywhere. Although it’s hard to see IoT making much of a splash in the company’s business, it’s reasonable to expect that the company wanted to save money on its transition as well as on its costs going forward.

But according to Benson though there are cost savings, the reasons to undertake this kind of upgrade are more about improving operations and delivering better service to users because in the end, competition isn’t so much about the technology as it is about the service level that the technology delivers.

My take

The future that Ellison looked towards is one that will make new demands on IT for security and service.

It will undoubtedly have an IoT component and require a great deal of automation and global connectivity.

It will not be optimized on the backs of systems that were last updated or installed when we realized we needed 4 digit date formats.

Most importantly, the IT systems we implement today won’t be prized for their ability to help everyone play a better zero-sum game. They will be used to build and penetrate new markets, and new industries at a time when nearly everything is being disrupted.

As I’ve noted previously, we’re at the end of a long economic cycle or a K-wave, a time that favors capital efficiency over true innovation, growth, and profits. But that’s ending and the next economic move won’t be about zero-sum competition.

The first part of the next wave will be inflationary and it will drive growth which is what many of us long for and frankly it’s something that should be more up front in any discussion of business and macro economics.

This year’s OpenWorld is two sides of a coin with carrots on both sides—important new technology on one side and important new business opportunities on the other. I wish Hurd had spoken more about the carrots.