Jim Harding, CIO for the $4.1 billion health care company Henry Schein Inc., doesn’t like taking risks with other people’s money. Especially not the money of the people who control his salary.
It’s certainly fair to say that Harding is risk-averse, but that doesn’t prevent him from considering unproven, cutting-edge technologies such as voice over IP. That’s why I was startled when he spoke so vehemently this week about his fear of buying products from Oracle.
“To make a major, multimillion-dollar decision here on a new ERP [enterprise resource planning] system, I have a hard time picking Oracle because I don’t know where it’s headed,” Harding said.
“Are we going to have to migrate? It’s a very dicey world. It’s much easier to pick SAP because you know what you’re getting. Would I want to stand in front of the chairman and put our company at risk like that? Not unless I absolutely have to.”
Harding’s comments sounded eerily similar to those I heard recently from another CIO, Neil McCarthy, who runs the technology operations at the $3 billion Wawa convenience-store chain.
While Harding was trying to decide between Retek and SAP, Retek was purchased by Oracle. “Thank God we didn’t go with Retek,” he said, because of all of the changes and uncertainty that will surround Retek “for the next two years as Oracle tries to integrate it all in.”
Fear of Oracle because of perceived lack of product direction? This is Oracle, which for years has been seen as the safe choice, akin to the old “you can’t be fired for choosing IBM” days. As long as a CIO could stomach Larry Ellison’s strutting-peacock media comments, Oracle was an easy option.
Microsoft was a control freak, and Computer Associates priced its services as though its customers were arch-enemies of its ancestors, but Oracle was simple.
Oracle’s sin? Ellison’s appetite for buying companies, including PeopleSoft, Retek, ProfitLogic and J.D. Edwards. It may take a tough man to make a tender offer, but it takes an even tougher CIO to ride it out until all of those acquisitions are figured out, rationalized and cleaned up.
Fueling those fears is the fact that—let’s be honest—the high-tech industry has a horrible track record of managing large mergers. When Hewlett-Packard’s then-CEO Carly Fiorina fought various family board members to push through her acquisition of Compaq, she staked her reputation. If the Compaq merger didn’t deliver all of the exciting things she promised, she’d be toast.
Oracle’s latest acquisition that of was ProfitLogic. To read more about that takeover, click here.
For her to win, the merger had to work well. Her enemies smiled. That’s like a presidential candidate whose only chance of winning an election is if he can find a bunch of congresspeople willing to do what’s right against their interests.
Bold as ever, Oracle has been executing multiple acquisitions. To make this fail, only one of those acquisitions has to fail miserably. For it to succeed, all four must work well. Ellison would have fared better had he ignored his M&A attorneys and instead listened to a shrewd horsetrack bookie who knew how to calculate odds.
This is not to suggest that Oracle’s gambit is comparable to winning the Trifecta or the lottery. On the contrary, somebody is likely to win the daily Trifecta and lottery eventually. That’s more than I can say for the Oracle moves.
Even thought the Oracle deals make a lot of strategic sense, bunching them together makes CIOs nervous.
This is true even though—and here comes the other hand—the SAP choice is not only just as risky, it’s arguably more risky.
Oracle’s executives have been very effective at pointing out that SAP is actively shopping for companies to fill out its retail and some related areas. SAP had aggressively bid for Retek, and there are strong indications it had bid for ProfitLogic, too, although ProfitLogic isn’t in a kiss-and-tell mood these days.
The SAP-Oracle war of words is getting downright nasty. To read more, click here.
In other words, at least CIOs know who Oracle has gotten into bed with. SAP’s still dating, and what that combination—if it ever happens—will look like is a big mystery.
SAP’s executives have done a brilliant job of spreading FUD (fear, uncertainty and doubt) about Oracle, while avoiding the issue that SAP’s own future is arguably more clouded than Oracle’s, although both are certainly murky.
In some respects, that’s the point. CIOs know that Oracle is going to endure the pain of multiple, simultaneous integrations while SAP’s future is unclear. It’s sort of like the “devil you know” argument reversed. They know Oracle is going through the integration pain.
This situation actually flips around quite a few cliches:
Evan Schuman is retail editor for Ziff Davis Internet’s Enterprise Edit group. He has tracked high-tech issues since 1987, has been opinionated long before that and doesn’t plan to stop anytime soon. He can be reached at [email protected].
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