Information Technology for The World

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THE FINER POINTS OF DATA warehousing, SQL servers, and e-business solutions usually are lost on non-engineers. Within the information-technology community, however, Redwood Shores, Calif.-based Oracle Corp. generally is regarded as the gold standard. Eyes may glaze over in corporate boardrooms when discussions turn to scalability and data granularity, but, among those who keep the computer systems that are at the heart of American business up and running, Oracle's systems software is indispensable.

But being No. 1 in relational database management systems isn't what it used to be. The market for big, pricey data storage and retrieval systems is saturated, and attention has shifted to business applications software, growing at a 23%-a-- year clip and projected to reach $100 billion in sales by 2005. Applications software represents only 10% of Oracle's $9.7 billion in annual sales, and the company is playing catch-up with well-entrenched software providers. It's also trying to overcome a reputation as a sometimes difficult vendor and is shifting to a more high-touch marketing approach.

Oracle doesn't shy away from competition. It goes toe to toe with IBM and Microsoft in the systems segment and maintains the lead with a huge installed-user base, a quarter of which consists of government agencies. Superior engineering helps Oracle overcome a pricey image in systems software. Selling applications software will mean communicating its expertise to an audience that's not technology-oriented. It pushes Oracle to go head to head with just about every big technology firm it hadn't already been competing with-SAP, Siebel Systems, and PeopleSoft in the red-hot customer relationship management segment, for example. Its $30 million ad budget is dwarfed by Microsoft's $600 million war chest, and Oracle's contentious founder and leader, Larry Ellison, has a propensity for picking fights with competitors and erstwhile partners alike. Nonetheless, Oracle is coming out swinging with products like E-Business Suite and Collaboration Suite, and the man charged with communicating why these products are the best software value is Mark Jarvis, Oracle's chief marketing officer.

MM: How has Oracle's movement into applications programs affected marketing?

Jarvis: Ten years ago, we were talking to IT managers and sub-administrators. It was a case of geeks talking to geeks. To market applications, we had to learn about business and what motivates those customers. High- tech companies have been guilty of forcing customers to learn our way of doing business and the solutions that we offer. We felt it was much more important to learn what motivates them.

How else does applications marketing differ?

People buy our databases because they are the best, and the users know it. In the applications business, you have to provoke the customer into realizing they have a problem. You do that by inciting fear.

Oracle is perceived as a high-price provider. How is marketing combating that?

We hit on two points in all of our ads: Our products are better and cheaper. The message is, "If you want the No. 1 product, you have to be prepared to spend less."

Changing the high-price perception is going to take time, but it is beginning. Others are seen as cheaper enterprise resource planning (ERP) solutions, but a footwear company recently spent hundreds of millions of dollars and finally stopped without ever successfully applying an ERP package. We give customers a fixed installation price and a guarantee it will be up and running in the agreed time, or we'll pay them. After three years, we haven't paid anyone yet.

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With mega-software sales becoming a rarity, is Oracle marketing more to small- and mid-sized firms?

That's definitely where we're focusing our attention now. Selling to that market doesn't change the product, but it makes you think differently about how you present it. If we're talking to a $100 million company in Idaho, the first thing you have to say is, "Let me tell you about Oracle."

What media do you use to reach your audience?

Mostly print. Television ads are rare and limited to major sports events. Today, you have to lower the cost of sales and be more efficient. We don't do as much banner advertising on the Internet as we used to do, and that has a lot to do with our focus on educating the customer on our own Web site. We eat our own dog food here, so we developed the concept of guided selling and applied it in house to work out the bugs before offering it to others. Our products are technical, and we can't expect our own sales force to be experts on every aspect of our business. Guided selling helps execute the transaction.

Salespeople use the program to educate the customer about capabilities and what application best addresses their needs.

Define guided selling.

It's leading the customer from interest right through to the sale, and doing it with automation. That requires having a totally seamless link between marketing and sales. Ten years ago, Oracle had a large sales force. We have a much smaller sales force today, yet application selling requires a lot more customer interaction. Guided selling is another contact point, and it lets you offer lower pricing.

How are customers reacting to guided selling?

In the technology business, we are the 800-lb. gorilla. It's very easy to sell database solutions in the manner you choose when you're the dominant player. However, in the applications business, Oracle is still a shrimp, and applications is a high-touch sale. If we can shift a large part of the database technology into something that requires less person-to-person contact, it will allow us to develop the applications side, even with a smaller sales force.

Is guided selling best-suited to commodity products?

Some technologies that are more or less commodities definitely could apply this approach. It's important to remember, though, that automating your sales goes far beyond putting your catalogue online.

The Oracle Web site is less about marketing and more about education. If we educate the user base, that goes further than trying to sell them a solution you think they need. The ebusiness network on our site includes a broadband, play-ondemand video library. A lot of those videos don't talk about Oracle at all; it's a very subliminal kind of message. But it allows us to find out what each visitor's interests are and helps us link them to the appropriate products.

You advocate simple, easy-to-understand marketing messages, but products like E-Business Suite are complex. How do you simplify that application's message?

It's the thing we spend most of our time on, going from the complexity of the product to the simple message. One of E-Business Suite's distinctions compared to Microsoft is email. Our e-mail is not only cheaper, but it doesn't crash like Microsoft's. That message became "Unbreakable."

The "Unbreakable" campaign was a three-month effort. We went through much iteration before we hit on that. We began by describing the technical issues and then applied a technique we call Japanese gardening, gradually taking things out until we got to the technical essence. When you transfer that essence to the business problem, the words become easier. The business problem can be summed up as, "How do I keep my system up and running?" The answer is a product that is unbreakable. The campaign began in September 2001, and I think we were successful in transcending the technology with the message.

Did focus groups play a role in the campaign's development?

Absolutely not. We don't use traditional testing methods. Generally, there's still too much dependence on traditional tools to market technology products. Besides, we know our products better than anyone else.

Oracle wages software wars on every front, even with former collaborators. Are you a little over-extended?

You could say that, but every day one of our competitors disappears. Ariba was the darling of the investment community, but they're fading fast. Former business partners said they will support other databases, but they forget that customers choose the database, not software companies. And their customers use Oracle.

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Erosion of the user base is seen as Oracle's Achilles heel. Won't some of them choose to implement a different database system?

The influencers of those decisions are the members of the Oracle user group, and they are very pro-Oracle. It's like a football club: You not only support Manchester United, you have the jersey, the shoes-the whole bit. Part of Oracle is the culture of Oracle.

A few years ago we started Club Oracle, which has more than 72,000 members. They get VIP access to discussion groups, special treatment at user conferences, newsletters, and other perks. Whenever you go to an Oracle conference, there are people with Club Oracle T-shirts walking around.

How do the user conferences fit into the marketing program?

The platform from which all of our marketing for the next year emanates is the user conference. They are break-even events. The last one was in San Francisco and drew 30,000 to 35,000 people, and all the content was related to Oracle technology.

How much user loyalty can be created through Oracle's education-oriented Web site?

Napster developed tremendous loyalty by creating a community of users. We have a community of 2.5 million developers who visit our Web site regularly. They're students, corporate IT people-the ones who get their bread and butter from using technology. There's often an inverse relationship between marketing dollars spent and creative output, and the Oracle site is a case in point. It's the cheapest but most effective marketing method we have. The budget today is precisely what it was four years ago: zero. On those occasions when someone attacks our technology, we watch the fires burn for three days and allow our own users to come to our aid.

How would you characterize the participants?

The United States is the biggest segment, of course, but No. 2 is India, and China is No. 3. We launched in Mandarin in early summer, and since then we've added 70,000 software developers in China.

Never-used software programs are a huge wasted cost for business. Is Oracle beginning to unbundle software packages? You can buy the whole pizza or buy the slice. Customers

who buy a program suite typically make their decision based on the accounting application and then build out from there.

Ultimately, we don't think the customer will buy any software for their own IT department. We will run it and deliver it to them over the Internet on demand for their use. That approach is easier for the customer, who no longer has to deal with the bugs and crashes in the system, and it's easier for us because, if there is a problem, it's at our end.

Are corporations ready to outsource such a sensitive function?

About 200 are doing it right now. We have the pioneers now, and we've been able to learn along with them. We've spent three very painful years developing this delivery approach, but the bugs are out. Our competitors haven't even begun to develop this capability.

Cigna Insurance is one of our users. They have offices in 29 countries, all linked to the home office via the Web. It changes the relationship between Oracle and Cigna. Typically when a customer calls with a problem, we have to qualify what kind of product they have, what the configuration is, and other technical issues. When Cigna calls, we simply say, "Hi, Cigna, how can we help you?"

What about security concerns, particularly sensitive data such as health records?

I think it will get into health records very rapidly. By putting individual's medical records online, lives will be saved by giving healthcare providers critical information in emergencies. Consider the current situation: I'd rather have my medical records residing in an Oracle database than sitting in a manila envelope in a doctor's office where the summer intern can look through it and tell all her friends about my condition.

To get industry moving in this direction, we have to promote the concept in the press and make sure it is debated thoroughly. Privacy and civil liberties advocates have to come out and debate it. Common sense hopefully will prevail.

It's analogous to the electrification of America. If everyone had installed their own generators instead of plugging into a grid, the situation would have been ludicrous, yet that's how companies address their technology needs. The idea that a database has to reside within the four walls of an office is old-- fashioned.

Oracle's CEO is nothing if not volatile. What's life with Larry like?

(Laughter). This is definitely the last job I'll ever have. It is extremely exciting to come to work here every day and to have a visionary as a boss. Even in an economic downturn, he has Oracle moving forward.

Despite being a $9.7 billion corporation, Oracle seems to have remained entrepreneurial.

We're like 200 Starbucks entrepreneurial offices with the same name. We do not have a hierarchical structure; this is a roll-up-your sleeves culture. That gives us the ability to execute quickly

Almost half of sales are outside the United States. Will the international market account for the bulk of Oracle sales in five years?

There are great opportunities in virtually untapped areas like Eastern Europe and Asia Pacific, although that region is not a good place to be right now because its economy is driven by the United States. China is another market with intriguing possibilities. Bill Gates went over there a while ago and essentially told them they were all thieves, so the Chinese people now hate Microsoft. We encourage our users to steal as much software from Oracle as they can.