Clash of the Software Titans
Are you ready to RUMBLE?
Larry Ellison, CEO of Oracle (NAS: ORCL) , threw down the gauntlet last Tuesday, when he suddenly removed Marc Benioff, chairman and CEO of rival salesforce.com (NYS: CRM) , from the list of speakers at Oracle's OpenWorld technology conference in San Francisco.
Benioff responded by saying Ellison was out of touch with modern trends.
Ellison shot back, calling salesforce.com "the roach motel of clouds," meaning its proprietary cloud computing and storage technology keeps customers' data hostage. They can "check in but can't check out," he said.
Hey-hey, you-you, get off of my cloud!
So this little spat is over the next really big thing in enterprise computing: "Software-as-a-Service," also known as "SaaS," or, more popularly, "the cloud."
In the SaaS model, all the customer needs on hand is a Web browser. The enterprise software is at the provider's site, and the customer subscribes for its use. This is a world away from the traditional model of distributing programs on physical media. The customer doesn't need a specially trained IT staff to maintain and update the software -- something particularly attractive to smaller businesses.
salesforce.com is a market leader in enterprise cloud computing. Oracle, the dominant force in the database software industry and a growing force in enterprise business software, finds itself in the unfamiliar position of playing catch-up in the new world of clouds.
David vs. Goliath
salesforce.com is a much smaller company than Oracle, with trailing-12-month revenues of $1.9 billion and a market capitalization of $16.4 billion. Oracle's numbers are $36.5 billion in revenues and a market cap of $151.3 billion.
But ... salesforce.com has been coming on like gangbusters. Its comparable trailing-12-month revenue growth has been 33%; 2010 over 2009, 21%; 2009 over 2008, 44%; 2008 over 2007, 51%. It just hasn't stopped growing.
Giant Oracle has been doing pretty well itself, especially considering its much larger size: 25% trailing-12-month revenue growth; 2010 over 2009, 15%; 2009 over 2008, 4%; 2008 over 2007, 25%.
It's a street fight
Benioff is certainly not shy about using the OpenWorld incident to get his company in the spotlight. "This is the best possible outcome," Benioff told a New York Times reporter on Tuesday. "It's free publicity, and it is clear that Oracle is threatened by us."
Well, if not threatened, then certainly annoyed, and it has to recall last year's OpenWorld conference, when Benioff took a potshot at Oracle's Exadata sytem, calling it "the false cloud" and saying it just doesn't meet the needs of modern cloud computing.
Ellison takes this personally. He used his keynote address at the OpenWorld conference to jab away at Benioff, belittling his book Behind the Cloud by showing a slide that labeled it "Way Behind the Cloud." He also called the salesforce.com model of cloud computing something that "was the state of the art 15 years ago," and that lacked proper security safeguards.
Ironically, Benioff once worked at Oracle, but he's pulling no punches when it comes to trying to take business away from his former boss. Last August, Benioff said it was time for business to rise up against the traditional enterprise technology sold by the likes of Oracle, SAP (NYS: SAP) , Microsoft (NAS: MSFT) , and IBM (NYS: IBM) , that business should stage a revolt like the Arab uprisings last spring.
Of course, Benioff was only touting the way salesforce.com's social-networking software ties in with the cloud. He noted that the demonstrators showed "no signs that said, 'Thank you Microsoft.' ... There were no signs that said, 'Thank you, IBM. ... The signs said 'Facebook.'"
A sweet deal for salesforce.com, bittersweet for Oracle
In salesforce.com's latest earnings conference call, Benioff was quite excited talking about some "eight-figure megadeals" the company had signed. One of those happened to be with the federal General Services Administration, or GSA.
But news came out Thursday that Oracle had just agreed to pay $199.5 million to settle a claim by the Department of Justice that Oracle had "failed to meet its contractual obligations" in regard to sales with the GSA. Oracle denied committing fraud but said it is settling to avoid the distraction and the high cost of litigation.
Corporate kung fu
This food fight reminds me of the opening scene from the old television show Kung Fu. The young Kane, an acolyte of some Shaolin priests, cannot leave the temple until he has mastered the ways of his teachers. Kane is finally able to grab the stone from his old master's hand and make his way in the world.
Benioff has said that Ellison had introduced him to The Art of War by Sun-Tzu, the classic tome of martial strategy. He apparently has learned his lessons well, but perhaps he's gotten too cocky. He said he was sorry that he had offended Ellison by tweeting that Oracle had "set a low bar."
But, he said, "He did train me. I'm just being a good student."
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At the time this article was published Fool contributorDan Radovskyhas no financial interest in the above-mentioned companies. The Motley Fool owns shares of Oracle, Microsoft, and IBM.Motley Fool newsletter serviceshave recommended buying shares of Microsoft and salesforce.com, creating a bull call spread position in Microsoft, and shorting salesforce.com. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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