Oracle's Marathon Man: George Roberts

It's midwinter, and Roberts is surely one of the youngest people at the hotel complex, which bustles with rich and elderly snowbirds from the Northeast. He has traveled a long way to address Oracle's partner advisory council, a group made up of a dozen or so handpicked IT integrators and VARs who make their livings selling the company's flagship database. It's not an easy way to make a living, given the history of Oracle's stormy relationship with solution providers. Those partners must compete every day, not only against a wide range of rivals, but also against Oracle's own direct sales force. Roberts has spent the better part of two years trying to figure out a way to leverage this channel and play nice with partners.

Oracle is making progress in generating more revenue from partners, but Roberts has had to tackle two thorny issues. The first is Oracle's culture of relying on direct sales, and the second is convincing his mercurial boss, Larry Ellison, that an indirect sales channel is in Oracle's best interest long-term. He has worked hard on both, and on this day he would tell partners that he was allowing them to sell unencumbered to businesses with annual revenue of less than $1 billion. Many

Oracle executives have made proclamations concerning closer channel ties in the past, but they didn't last,the victims of internal politics and people inside the company who favored direct sales. But it's clear it will take someone swinging a very big stick to knock Roberts off his channel soapbox.

Roberts is a straightforward, no-nonsense Midwesterner who more resembles a pro-football middle linebacker than one of the industry's top computer executives. He makes his work ethic known, poking fun at those who cavorted and played golf the day before. "Some of us have to work for a living," he half-jokes. And, indeed, Roberts was working. On the day before he was to speak to Oracle's partners, Roberts departed Wisconsin,he lives there with his family rather than closer to Oracle's headquarters outside of Silicon Valley,at 3:30 a.m. to travel to the hotel and phone in for several Oracle conference calls. Despite his long day, he arrived fresh and ready to talk about Oracle's partners, his views on the industry and Ellison.

VB: It looks like perseverance has paid off in terms of winning over, or changing, the Oracle culture to embrace partners,be they VARs, service providers, ISVs or integrators. What has making that change been like and how tough has it been?

GR: I think it's fair to say that this business, this industry, is a marathon. It's not a sprint. I can't think of any move that you make that's dramatic that doesn't take at least 18 months to get done. If you have issues and you make changes, you'll start to see some results in about six months. [Altogether, it takes a full 18 months because you've got to get through all the cultural issues,whether they're internal or external,with customers, partners or employees. It's all people. These programs take time to develop. And it takes time to develop people, time to develop resellers and time to change behavior. Also, frankly, it takes time to learn. The only constant we at Oracle face, and our partners face, is change,which means that what we did a year ago to be successful will not make us successful this year. You've got to continually change because the marketplace changes. Your customers' expectations change, product lines change,everything changes. So you also have to continually move the program forward.

VB: What's the vision you've had for the channel, and what kind of lasting power do you have in that regard?
GR: Everything we've done during the past several years has been done to make sure the channels understand that we're interested in a channel program, that we believe they offer value, that any program we do is going to be around delivering value, and that, over time, if they prove that they can deliver value, we'll continue to find a way to expand the VARs' role. Now, the role might change. In some cases it might be reselling, in other cases it might not be reselling. So, if you look at our channel strategy, we didn't want to leverage technology through the channels. We knew they needed some time to invest, so we came up with the all-indirect models so they kind of had a protected area. But we backed away from the channel on the applications side because we believed that customers want to buy applications directly from the development organization.

VB: Explain your applications strategy.
GR: On the applications side, the way in which we develop the channels is through the Oracle service-provider program and the applications-affiliated program, so it doesn't mean resellers don't get to participate and they can't be successful. But it's a different role for applications in technology, because [while historically Oracle has been a direct-sales organization, that's not where our future is. Our future is in the optimized distribution model that leverages all the various channels you can go to market with. And so we look at a direct-sales organization as one channel. We look at our partners as another channel. We look at telesales as a channel. We look at the Web store as a channel.

VB: The bar has gone from [attracting $200 million customers to billion-dollar customers. How many partners scale in that space? What skills will they need? Can those who were addressing the [$200 million space move up and embrace the Oracle product quickly?
GR: As they move further up, their role may change from reselling to something else. But they get to participate. I think it's also fair to say that, usually, as you move higher up in organizations, those organizations will appreciate the value-add that the partners bring. A lot of those companies also, frankly, do want a very direct relationship, even on the technology side, because of the importance we play to their enterprise infrastructures. So what we need to do is find a way in which the partners can play to help us identify opportunities. Then when we're both successful or we're successful, they get rewarded. That could be reselling or an affiliate-type program like we have for applications.

VB: How do you think that will impact Oracle's customers between $200 million and $1 billion, which is the space that was kind of run by the Oracle direct sales. What were those customers saying to you as you talked to them and said: "Hey, we're going to re-engage our channel partners here. They're going to service your accounts?"
GR: We really didn't go to the customers as much as we looked at, "How do customers buy?" So, if you've got a partner who's developing a project with a client, it makes sense for them to carry that all the way through. If the client is developing the project or the plan with them, they're obviously comfortable. There's no reason why,if they're capable,they shouldn't be able to take the business. Now, if there's an issue and they want to take it through Oracle, there was always the [question of how a partner gets compensated. I think we've nailed that one down with a whole registration system, so that if something does change,either the terms or whatever, the partner still gets compensated for the effort. That's a whole lot cleaner now. And [we're putting the systems in place so we get the human intervention out of this process,get the gray areas out, get the filters out. It's interesting, because I won't deny that we have some conflict. But, you know what? It's not always us. Often, the partners aren't doing things correctly, too, and that's not meant to point fingers. It's a two-way street.

VB: Let's talk about trust. What are the elements of success in that regard? There are some who would argue that, in the channel, once trust is broken, it takes twice as long to rebuild it.
GR: Three things: You've got to be able to listen, you've got to be able to make a decision and you've got to be able to communicate. It doesn't pay to let issues foster or fester or hang around. I told our partners, "I'm not going to guarantee your role won't change. You should build your business around delivering value for the customer,not around Oracle software,because that's the franchise that no one can take away from you." And so every partner should never forget, they should never get so wrapped up that they think they're building their business around Oracle software. It should be around the value to the client and using Oracle as an enabler to make the client successful. That's what I would recommend to all the partners.

VB: You view the IT sales channel and the IT selling activity from a fairly high level, and it sounds like you get down in the trenches as well. What do you see at this point?
GR: Let's go back to 1996, when people spent money around a project. They did the pilot and when the project was successful, they'd roll it out and they'd spend more money. We had these three back-to-back "unnatural" events, Y2K, dot coms and B2B,that forced five years of overinvestment without a concern or a thought to what the return on investment was for any of this.

I don't see any events like that on the horizon. That's over. And so I think we're back to people. Their buying habits have changed during the past five years...I think we're back to where people are very focused on projects. Return on investment should be the operative words for all partners when they talk to their clients. And they're all focused around how [to get a short-term ROI,in 90 days or six months. Certainly no longer than 12 months.

A couple of years ago, if you could configure an order, you'd be successful. Today, you actually have to ensure you can deliver value,that the ROI is there. And that's not going to go away. That's the way it's going to be. So this is grind it out, one yard at a time. It won't be a sharp rebound. It will be a recovery over time.

VB: Where do you think the greatest opportunity is for Oracle?
GR: Look at your customer and ask, "What are your priorities?" Are their priorities taking cost out, or are their priorities revenue growth? If it's taking cost out, how do they more effectively build, deploy and maintain or manage enterprise systems? How can our technology,like 9iAS, like real application clusters,help the IT guy do more with less?

Managing infrastructure and driving cost out of infrastructure and leveraging more with less is one area that people are looking to take cost out. Now, on the other side, if they're looking at increasing revenue and top-lying growth, there could be things around business intelligence so they can better manage their business around the marketing or the sales areas. It could be a portal pulling together disparate systems to give their executives a view or their sales force a view [of everything. We have a portal called Sales Dashboard, and it includes anything a sales rep would ever need to do in their job. I talked to the CEO of Intertel, and he put in a Web store,I think it was October,and by the end of December he had 60 percent of his clients putting in their own orders and his accuracy went up 70 percent. Those are pretty strong benefits for a business.

VB: With the program change to address the larger accounts, one of the things I hear from VARs is that they don't have access to all the products. Will that change?
GR: We're in the platform technology business, and we're in the applications business. As far as the technology business goes, they have access to everything. Anything that helps our sales force be more productive, I want the partners to have access to.

On the applications side, our strategy is still going to be direct, and what we'll be focusing on is leveraging the applications-affiliate program, which has been tremendously successful. Thirty percent of our applications business gets found initially by partners, which means that they get compensated on 30 percent of the business when we close it. And then there are the Oracle service providers,making the client successful with the applications is real key. So those are two areas. But I think from an applications perspective, it's too important for us to delegate that responsibility. It's strategic in nature: Our position is different in the marketplace than it is in technology. In technology we're No. 1; in applications we're No. 2. Clients buy differently,technology vs. applications. So it's a different channel strategy, but it's still a channel strategy, and they still get to participate. We sell more applications in the space than JD Edwards does. It's a huge business for us. More than one-third of our general B2B is applications.

VB: What about Linux?
GR: Linux during the next several years will become absolutely crucial to companies taking cost out of their infrastructures. It performs better than Unix, it's more manageable than Unix and it's free. We moved our application-demonstration system on it, and it runs much faster and more reliably than on Unix. And so we're in the process of doing some very leading-edge things with Linux, but all indications are it will continue to grow as far as the role it will play within corporate America. So if companies aren't looking at Linux, they should find a way to dabble in it because it's coming.

VB: Tell me about your integrated suites.
GR: The integrated suite stuff is just logical; it has worked in every other industry. I don't care whether it's cars or stereo systems or anything else. People don't buy components and put them together. They buy it all together. When you buy your PC now, do you really bother to buy the monitor from someone else or the printer or anything? You buy it all together.

VB: Well, about the only piece of that left is the white box. Those guys are still building it and putting their generic label on it.
GR: Right, right. But it's just the next logical step. So if you can deliver a comparable functionality, integration carries the day all the time. We had a Customer Leaders' Day at OpenWorld, and we had a whole group of customers on stage and one was asked: "What's your biggest challenge on a daily basis?" His answer was keeping more than 250 pieces of software working and running 24/7 in a shop. He said, "I've got to reduce the number of moving parts." It's just logical.

And so, for an Oracle customer, if we have an application server, sooner or later integration will carry the day. They get tired of installing three or four pieces from three or four different vendors, paying three or four different maintenance contracts, training their people on three or four different things and having the development cycle take three or four times longer because you've got to put it all together. They never get to the Nirvana that they're promised, which is getting the best functionality in each product, because they never get them installed [properly.

VB: That's why you buy Oracle once and take on more of the integration or the finished work.
GR: Yes. We'll take more accountability, and I think the clients want us to take on more accountability because their lives are too difficult.

VB: This is really a win for the partners, too.
GR: Yes.

VB: What about distribution? GE Access? Looks like it had a pretty good outlook for its Oracle business and then, all of a sudden, you guys parted ways. Can you give me some insight?
GR: You could tell me. I've been searching high and low. So has everybody else in the industry. We can't figure it out.

VB: Perhaps GE was looking to cut costs?
GR: I think that's what it was. I'll be honest with you, they were our leading reseller and they dumped us. I was surprised. I couldn't understand the move. If you ask Avnet or Pioneer, they'd say they don't get it, either. So I think their management looked at it, and I think GE squeezed some more profit and they said, "You know what? We've got to drop one, so we'll stick with the Sun hardware..."[but Sun has got some real issues.