Recoded live onstage at the Oracle campus.
On this episode of Recode Decode, hosted by Kara Swisher, we take you live to Oracle’s headquarters for Media Day. Kara interviewed Oracle co-CEO Mark Hurd onstage, then took questions from the audience. Among the topics covered: Cloud, cloud, cloud and cloud. With a smattering of acquisitions.
You can read some of the highlights from the interview at that link, or listen to it in the audio player below. We’ve also provided a lightly edited complete transcript of their conversation.
Kara Swisher: Today we have an interview I conducted with Mark Hurd, the co-CEO of Oracle. We spoke in front of a live audience in May at the company’s headquarters in Silicon Valley. Let’s take a listen.
All right. We’re here with Mark Hurd. We’re on the Oracle campus. You’re here. What’s this day today? This is a press day?
Mark Hurd: We call it Media Day, Kara. It really is an opportunity for us to try to give people some context to what we’re doing, how we’re doing it, a little bit about our industry. We had a panel with some of our customers, and again, an attempt to drive familiarity with our strategy and our direction.
All right. Let’s get right into the news today. I think probably the biggest thing, and I want to get into a whole bunch of things you guys have been doing lately, but let’s talk about the cloud, because that seems to be the big focus. You announced a new agreement with AT&T, who had been a customer. Could you explain it? Then I have questions about that.
Sure. I think most people are familiar with AT&T as a company. Obviously they do a lot, particularly in this country. Big company. They’ve been a customer a long time. They have actually, Kara, a lot of data. I talked a little bit this morning. I think they have in excess of an exabyte of data, which is you ask how much, it’s just a lot. They have it in a lot of Oracle databases, and some of those Oracle databases are actually really big Oracle databases, and so what we’ve come to as an agreement to really bring all the benefits of Oracle out to AT&T, and we’ll work together collaboratively as we migrate those databases to the Oracle cloud. It’ll be very exciting. We also announced Oracle applications that AT&T will take advantage of. We highlighted one specific one, which was our field service. AT&T’s got roughly 7,000 technicians, and that process will all be automated with an Oracle field service application.
So, this is taking the existing customer and bringing them to the cloud essentially?
Yeah. I think that’s a good description of it.
Is this taking too long? I mean, cloud has been something that’s been happening for a while. Talk a little bit about your process for it, because you, and not just you, but Microsoft, Google, and others have led … Amazon, I think they have about a third of the cloud business, both commercial and otherwise. Have you guys taken too long to get to this?
Well, let’s talk about the industry overall, Kara. I think it’d be probably interesting to get some concept. Our industry is a couple of trillion dollars of spend. Half of it’s consumer. Half of it is everybody who’s not a consumer, companies. Of that trillion dollars of spend, it’s hard to even get to 50 billion of it yet is in the cloud, so as a percent of total enterprise spend, still relatively small. If somebody asked me a baseball analogy, I would say we’re in the first inning of all this.
All right. If you insist on a baseball analogy, but go ahead.
I don’t insist, but it’s just one analogy. Now, that said, the cloud revenue, albeit small compared to the enterprise revenue, is growing roughly 50 percent per year, so it is beginning to compound, and the traditional on-premise world is in decline. In that context, now you look at our numbers, we’re doing awful well. We’re gaining a lot of share. We’re gaining a lot of share relative to those cloud vendors, where the growth rates we put up over the past couple of years.
Talk about those rivals, because no one had thought Amazon would do this. Obviously, Google then jumped in. Microsoft has jumped in. You’re at, what $10 billion? Is that correct?
We’re roughly at a $4 billion plus run rate. We’ve talked about getting to $10 billion relatively shortly, given the growth rates we’ve got. I would say that all these companies, Kara, get described in the same bundle, but they all really do different things.
Okay. All right. Separate them for me.
At the infrastructure layer, basically compute and storage, you would have somebody like Amazon. If you went to the application layer, which would be called SaaS by most people, you’d have companies like ourselves. You’d have Salesforce. You’d have others that have software applications as a service.
There’s a second tier called platforms as a service. Platforms are basically everything that’s not an application or not compute or storage. We and Microsoft would probably be the two most complete platforms. Microsoft would have Windows, .net, SQL Server. We’d have Linux, Java, the Oracle database. Those would be the two most dominant platform companies.
Then if you went to the infrastructure layer, you’ve got, as I said, Amazon, Google to a degree, although not quite as scaled at the enterprise layer. You’d have people like ourselves and Microsoft, but we’re coming in with more of a complete stack, applications, platform and infrastructure.
How did you think about this, because again, I don’t want to get on the too late, but you have this business that makes a lot of money. I get that, but it’s like that with media, like any other business. It’s obviously changing. How quickly did you guys note this? How do you assess your performance?
Yeah. Your performance on it, and recognizing it, and doing something about it.
Well, I mean, listen. Like anything, we assess our performance in number. We could talk a lot, but it’s a lot better when we have results. Our view was we went after this hard, but we went after it with a very discrete strategy, which was we were working on apps. This company was working on apps moving to the cloud before I got here, so this has been nine, 10 years. By the way, this idea of moving apps to the cloud, if you went back to NetSuite, when Evan Goldberg founded NetSuite with Larry, this was an idea before there even was the term cloud.
So, this idea is not a new idea. We started on this, like I said, about 10 years ago, and it was really to get a best-of-breed suite of applications and then bring them together as a suite of products. The next thing to do was to really get the platform right, and then now what we’re very focused on is bringing the infrastructure in place to support that platform and support that applications and incremental commercial workloads that customers need.
When did the lines cross for your …? When do you imagine?
Well, they’re getting pretty … I mean, if you look at our company, we’re circa $40 billion in revenue. You’ve talked about sort of where we are in our cloud performance. If you looked at the company a little differently and just looked at our applications business, I forget whether it’s in the cloud or on premise, the applications market I would guess is growing 1 percent. I’m sure there are people in the room that could give a guess, but I’m sure I’m close.
Our applications business is now growing double digits, and almost all of that growth, all of that growth is coming from the cloud. In our database business we’re growing mid-single digits, which is more than the market’s growing, and again, a lot of incremental growth coming from database as a service. We’re focused on how we do in the applications business overall, how we do in the database business overall, and most of that growth, because of customer choice, is now coming from the cloud.
How do you shift a company like that, when you think about …?
Ah. Kara, it’s hard.
I get that. I get that. I don’t really care. You get paid a lot.
Thank you. Thank you.
How do you do that in terms of management, because a lot of companies have hit the shoals on these kinds of things, and it takes … Microsoft has had a tough road moving itself that way.
Well, I think any company that’s got … I think you said it right. We’re a company that’s had great success, and it’s hard to move. Actually, companies that are winning and getting winning companies to change. It’s actually harder to change them than companies that are losing that have to change.
Well, losing companies don’t tend to do that well either.
Well, I’ll be honest with you. The quickest innovators, if you look at history, are those companies that historically innovate and those that are in deep trouble, because they have to. In our case, you could have made the argument, we don’t have to. Let’s just keep doing what we’re doing longer. We made the decision to go at this hard three or four years ago and changing virtually everything in the company. We made the decision to build all of these global data centers to deploy this technology and to do it fast. We invested in incremental R&D. Our R&D six years ago was $3.7 billion. It’s now over $5 billion. I can tell you, there are many people, particularly investors, that say …
“Why are you doing this?”
… “Why are you doing this?” But we did it quickly. We increased the size of our sales force. We actually changed the way, who they call on, changed the way we paid them. I could go on, and we did all this stuff simultaneously, which, you can imagine, causes a lot of ripples in a big company, particularly a big, global company. Our strategy was to start with let’s do this right, but let’s do it right, and do it as fast as we can do it right, and get this behind us, and that’s what we’ve done.
I want to hear more about the difficulties of doing that, because again, many companies have problems doing it and cannot shift over, even companies that were founded relatively recently. There was just a story, for example, on what’s going to kill Google. Now, Google’s not that old. All around search, and innovation, and things like that would have been the more difficult parts of shifting that. Then I want to talk about the enterprise business as a whole, because it’s undergoing an enormous shift of how businesses are run. What’s the most difficult to manage when you’re doing that? I know you’re winning, and everyone thinks they’re great, and they don’t want to change, or give me an example of something that’s been …
I think, you know, any time you try to get any of these processes, particularly in a big company that’s had success, these processes, as much as I like to pretend we’re as nimble as they come, just like a startup, we’re not. We’re big, and we’ve got processes in place that frankly, as you move from this world to the new world, the new world being in cloud …
I’ll give you one example, the way we write contracts. We historically used to write contracts with big companies, and the contracts were big contracts. Now, we’re going to do a contract with a company that’s a startup. We’re going to go contract with Lyft for financials. Lyft doesn’t have a procurement department. They don’t have even an IT department per se, and now they want a contract. We can show up with a bunch of lawyers and a big, thick document, so we changed our process to go to click to accept. All the terms we usually negotiate, we have this big negotiation. There’s a bunch of terms that 80 percent of the time, if you just asked, you got them. We made our decision to say, “Let’s just put all of those into the contract,” and now put it into an automated way, you can just click to accept it, and try to get all of the friction out of the process. That single decision around here is like, you gotta be kidding.
You like to be in those long negotiations with all the people.
It’s just the way we’ve been trained. You know, it’s what’s in our DNA, and so going back now to try to taking all the friction out of the process and making it just frictionless, it’s a lot of work. I could go through this process by process by process. The new world for us is different, and we’ve had to approach each one of these processes looking at it that way.
Tell me about the enterprise business overall, because there’s startups all over the place in every bit of your business, every part of your business. How do you look at what’s happened over the past five years? Obviously the consumerization, all kinds of different ways. How do you assess rivals at this point? Who do you consider your major rivals right now?
That was good. You could be on our analyst call. That was like eight questions in one question.
No. Your analyst call would be, “Oh, how smart you are,” but go ahead.
Ah. It doesn’t work like that. Trust me.
Ah. Come on. Those analysts.
If I went to our competitors, our competitors have shifted.
Name them now. Who do you …?
Well, let’s talk about the applications business. Historically we would compete most often with SAP. They would have been the historic, first round of ERP. The two biggest categories in software over the past 28 years or so are ERP and database. ERP, historically we would compete with SAP. They’ve really not rewritten their applications for the cloud, a big decision on their part. They didn’t do that. Now, who do we compete with? Not clear yet. I mean, we have one company who’s built an HCM application, Workday. They’ve tried to do financials, haven’t had much success with that yet.
Nice little dig in there, but go ahead.
Thank you. But in the end, we’re going to be competing on cloud SaaS ERP. This is the way customers want to go. I mean, to give you an example, I don’t know where we’ll end this coming up quarter. We ended last quarter with almost 4,000 customers that are now running their ERP application in SaaS cloud. This is an amazing speed by which this has transitioned. I might even say, if I went back three years ago and thought how fast customers would change their ERP to take advantage of the cloud, I probably underestimated the speed by which customers would move, so I would say our competitive landscape has changed in applications.
In platforms, probably not a lot of change. I think that there’s a lot of talk about … There always has been a lot of talk about different databases that come into the market, but not a lot of change. The three biggest databases in the world today are Oracle, SQL Server, and, to be very frank with you, IBM. IBM still has a big legacy database. While there have been a lot of companies to try to get at it, some of this work, exampled by what we did at AT&T, is hard to change, so platforms, not nearly as much change.
Infrastructure, a lot of change. You’ve now got the movement of what had been Dell, HP, IBM, operating system companies that would support them, and some percentage of that now beginning to move to the cloud, and those competitors would be who we’ve described, Amazon and others.
And others. I’d like you to specifically drill down on Amazon and what they’ve done. Was that a surprise to you, their entry? I’m going to go through each of these rivals really quickly.
Well, I think that they’ve done … If you went back to the history of it, they built an IT organization, like most retailers, when they started, and they built an IT organization that unfortunately had to be built for the bubble of the holiday season. The original thesis was I’ve got this excess capacity in the early part of the year. Why don’t I rent that and leverage the infrastructure I’ve got that I have for the bubble of the year, and that began the process starting AWS. I think they’ve done a good job creating a frictionless acquisition environment for customers, not even so much enterprise companies, but the individual developer, making it easy to spin up and provision a job and get to work. I think that’s been the key piece of innovation that they’ve delivered.
What about Google? Very late.
I don’t see them much, to be very frank.
I don’t know.
They talk about it a lot. They’ve hired Diane. They’ve got …
Yeah. They may be talking. I’m not here to make a comment about them, as much as if you ask me, do I … You didn’t, but …
Why don’t you see them then?
I don’t know.
Do you feel like it’s their natural area?
When I go in front of customers I don’t see them much.
Were you surprised that you didn’t see them more?
You know what’s hard? I will say this, and it’s not just about Google, but it’s when you are a consumer company becoming an enterprise company, I remember very much Steve Jobs telling me, many, many years ago, that he would never want my job, that when you …
That doesn’t seem like his work, but go ahead.
He’s like, “You know, do you actually get on airplanes and fly and see customers?” I’m going, “Yeah. Yeah. Yeah. I go do that.” He goes, “You know, customers come to see me. Do you actually do special things for these customers?” “Oh yeah. Yeah. Yeah. I have to do unique things.”
Yeah. A lot of golf tournaments. Right?
Yeah. Yeah. Or help them with a different piece of technology or modify something. I said, “Yeah. Yeah. We do that all the time.” He goes, “That doesn’t sound like fun.” When you’re in the consumer business, it sounds really easy to go work with these big companies, yet all these big companies have special needs, special strategies that they want you to adapt to, and they have contracts, and procurement departments, and all this. It’s not the easiest of move to go from the consumer world to the enterprise.
So, your talents of being obsequious is helpful. Correct?
Do you have any more questions there, Kara?
No. But, wait. It’s interesting, because I imagine Google should have been doing more. I’ve pressed Sundar and others on why that is, and obviously they’ve hired Diane. They’ve hired all these top AI people. They’re clearly … It’s going to be their focus.
Great company, so I have no comments about that.
I don’t feel like their moonshots really are the … you know, their invisibility cloaks and their times machines is not going to really take off.
I’ll just stick by I just don’t see them much out there.
Yeah. And Microsoft?
Again, a good company. I’d say in some ways they’re similar to us. They’ve got a very strong position on premise. They’ve got some applications, very different applications than what we have. They’ve got Office and so forth, and their focus has been try to get Office from on prem into the cloud. They support that with a platform, as I described. They’re supporting that with infrastructure. Their strategy, as I read it, makes a lot of sense to me.
Okay. Lastly in this section, any startups that you look at and you think, “That’s super interesting”? You dissed Workday a little, but there’s tons of others that are sort of eating around the edges of your businesses.
You know, I don’t see that there are any in the core business that we have that I would say startups. I think of startup specifically is real, real startups.
Today, obviously we’re very busy always. We’re obviously serial acquirers.
Yeah. I want to talk about that next.
We spend over five billion on R&D, but we buy in a lot of innovation based on who we buy, so we’re constantly looking. I would say it’s interesting in the cloud market that when you look through all of the companies participating today and you talk about M&A, I usually make the comment that, well, we talk about it generically. When you start to look for specific companies, there aren’t many out there to go acquire who are really born in the cloud, that have any level of scale, even at the $20, $30, $40 million mark, which is not obviously a big-scale company. You don’t have that many out there today, and certainly those that have crossed the chasm. If you thought about just companies in the applications market, the SaaS market, that have crossed a billion dollars, I mean, a year ago there were only four of them. There was Salesforce, Workday, ServiceNow and NetSuite, and one of them is gone.
Yeah. You bought one.
One of them is with us. Then when you go below a billion, you have to go down the stack quite a bit. There’s not many even that close to a billion, so the competitive environment …
Are you interested in purchasing the other three on your fingers there?
Well, you know, I’m sure you’re thinking that I’m surely going to answer that.
I was hoping. It could happen.
It’s happened before.
It could. It could.
It’d be like that Jack Nicholson movie with Tom Cruise. I’ll just push you to it, and then you’ll admit that you called for the Code Red.
Yeah. Yes. You’re damn right I did.
You’re damn right I’m buying Salesforce. Yes, I am.
Listen. I think that for us, we are … I’ll give you the answer you of course don’t want. We’re very happy with where we are today with our portfolio.
Yeah. That’s just what people say just before they buy something. You know that.
We are really happy with where we are with our portfolio today.
Okay. Well done. Well done, Mark. We’re here with Mark Hurd of Oracle, and we’re talking about the enterprise business and other things.
All right then. We’re here with Mark Hurd of Oracle, who’s being very amusing about purchasing, but let’s talk about who you did purchase: Moat. Please explain for the people.
So, one of the big parts of our business …
Explain what Moat is, because most people don’t know.
Moat’s a company, very focused on the data business.
Right, but the ad business.
The ad business.
The programmatic ad business, a shift for you all. Correct.
Let me try to talk a little bit about it and try to give you context. I talked a little bit about the software as a service layer, the platform as a service layer, and the infrastructure as a service layer. There’s really a fourth piece to this, which is the data as a service layer, and the opportunity now for customers to take advantage of just data. Most of the ad campaigns that are run today, if you’re a brand online, the two most places where you would go would be Facebook and would be Google.
That’s pretty much it actually. The latest data shows they’ve sucked up everything.
In most cases, what they want to do is have you, the brand, use their data to run the campaign. What we do, and both of them are customers of our data business, but we also sell data to other customers, because I think what happens with most brands, Kara, is that they want to use their data. They want to use your data at Google. They want to use their data at Facebook, because they want their data to become richer and more robust. The ability, when you talk about ads, the ability for I, as the company, to learn more about personalization, more about targeting, so that I can target the right buyer with the right offer at the right time through the right channel.
Well, they don’t trust that data, presumably. I mean, they want someone to verify.
All of these great brands want to get smarter about the customer, so they’re not wasting your time. They’re not wasting my time. I can do a better job with a very specific offer at the right time with the right thing. To do that, their data has to get more robust and richer. I think long run — long run being defined as you get the next two to five years — companies can’t ignore this. They have to focus on enriching their data. If you and I are competitors, and you’ve got better data, and you know your customer better than I do, more than likely you win, and so for us Moat was a part of this aggregated data as a service business.
Last points I’ll make on it. We spent some time. We bought a company called BlueKai. We bought a company called Datalogix, and Moat is another piece of that entire data portfolio.
Really, one of the things that’s important about it is the ability to verify these two massive programmatic advertising winners essentially?
I think it’s bigger than that. I don’t think you just want to verify them. I think you, as the brand, want to own your data, own your knowledge repository of your customers and your market, and so I think it isn’t just verified, because verified would be one piece.
Well, they’ve had some issues around that.
They have, but they have to go past that, because this has to become, if you’re a brand, a competitive differentiator for you. This is back to the whole broader enterprise strategy. Would you rather spend your money modifying an ERP, and debits, and credits, and all that, or would you rather do what we’re talking about, which is get to know more about your customers, serve them better in a timely fashion? I’d much rather do the latter and spend my money there to differentiate. The problem you have in the market today is for CEOs that frankly don’t last very long in their jobs. Most of it is there’s not a lot of revenue growth out there. The S&P has not grown more than 1 or 2 percent in the last five year, and so the ability to grow has to do with taking share. Getting your money in IT …
Taking share from others.
Taking share from others. Yeah, because most of the money’s fixed in IT. Most of the money is keeping the lights on, so how do I shift that money from keeping the lights on for applications that don’t make a difference for me into an area that could make a difference for me and help me grow my revenue, help me keep the customers I got and help me expand my customer base? That focus and having the data then that support that strategy becomes a key issue for me.
What happens with your relationship with Google and Facebook? I’m only mentioning, because they’re the entire …
Well, they’re customers of ours too.
Right, but I mean in this area. Does this put you at cross purposes with them, or do you feel like …?
We don’t think so. We think our view is to be agnostic to that. I mean, our view is to be a great provider of data, to the degree that we can supplement and help Google, we can help supplement Facebook and also help our customers at the same time, we think is a good thing.
But presumably your customers would be the focus here, not Facebook and Google?
No. It’s actually both. It’s actually both.
Do you imagine this area of in the ad space as being a big part of your business going forward? Is this correct, $850 million? Was our report correct?
I’d have to validate the exact number. I don’t remember, but it sounds roughly right. I think the opportunity for us to continue to make our data business more robust will be a focus you’ll see going forward.
In other areas, not just …
I predict no M&A, other than …
Okay. All right. Predict it.
… other than this was an important thing for …
Are there other areas that you want to get into? Programmatic ads. What else? What other areas do you think are interesting?
I think really focusing on the data itself is really key.
Whatever it is?
Yeah. Again, I think companies long run will have strategies specifically around their data. Data will become a currency. The more relevant my data, the more robust my data, the better chance for me to win. I think our job is to help the customers build out that data set.
You just said something I thought was really interesting, which was that growth is going to be really hard to find, and you have to take it from others. Why is that? Why do you think that? Are we in a period of lack of innovation? Many people feel we’re at another cusp in Silicon Valley. Are you worried about innovation?
Well, I start a step before that. I start with our customers. I mean, if I look at worldwide GDP growth, just simple? I look at 2 percent. I’ve seen people show numbers that are a little better than that. I’ve seen 1.8, 2, 2.1, 2.2. If I go take that …
They’re not great.
Not robust. It’s, again, 75 trillion, so it’s $1.5 trillion. If I further double click on that, I think roughly 40 percent of all that GDP growth is in one country, and it’s in China. For our customers, if they don’t have exposure to China …
Which is difficult.
They’re competing for $800 billion worth of growth. Now you start clicking that back to somebody who says, “I want to grow my company,” and most companies grow roughly in line with GDP, trade positive or negative based on their ability to keep their customers and gain share. Most of our customers are in the position where they have to take somebody else’s customers to drive any real, real growth. I think it gets back into this whole issue we’re describing. If you look at IT, IT in the enterprise can be 10, 12, 14, 15 percent of all the expenses that our customers spend. By the way, if you go back to the S&P, the earnings growth exceeds the revenue growth, which tells me most of our customers are cutting their expenses. That’s how they’re driving their earnings growth.
When you look at the stock market and you start to say, “Why is the stock market up so high?” good question, because it’s certainly not coming with robust revenue. This current quarter is the most robust set of predictions for revenue growth for the S&P in years. We’re talking about 4 to 5 percent predicted growth. We’ll see if it happens. If that happens, that will be a very positive breakout that we’ve seen, but I still click back to even GDP in the U.S. You saw for Q1, not very exciting.
Yup. Weaker. Why is that? Who do you create an opportunity for more, or is it just the way it’s going to be?
Well, listen. I mean, the only ways I know to grow economies, at least from when I was back in school, was you have more people. You make the more people more productive. You invest capital. Those are the three core ways you grow an economy, so in this environment you’ve got some of the markets that generally have more people. That’s where you see some level of GDP growth, productivity being aligned to that property growth, which drives more productivity, and then markets that have more capital. That’s where all of us that run businesses have to drive our businesses to get growth. Not all of our customers, to your point, Kara, have that opportunity to go do that. It’s very hard to do what I just said, to go take advantage and move your business over here, over there, set up distribution, develop relationships, etc., etc. Very hard.
I think us in technology, we’ve got a very interesting Valley here. You’re talking about the Silicon Valley. You’re talking two miles long, six miles wide. We spent a long time in the enterprise business, all those piece-part companies. I mean, you know this as well as I do. Most of these companies here sell you a disk drive, or sell you an operating system, sell you a server, sell you this or that, and then we ask the customer, “You put all this stuff together, and you make it work.” I think what customers are saying today is, “Make that easier for me. I can’t spend all this money doing that. I need to spend my money doing other things,” and I think that’s why this cloud thing has so much attraction.
How do you feel about innovation right now in the Valley and where it’s going? Many are worried that it’s sort of, we’re at the end of a major cycle of innovation.
Well, I don’t want to get into some dramatic prediction of this yet. I think our job as an industry, and much of it emanates here, is to continue to drive innovation to help the customer do something different.
I think first thing, we have to make it easier. I don’t know how most everybody in here, when they get a car, they don’t buy a pedal and a brake and then put it together in their driveway. You buy a concluded car. I mean, you don’t get electricity. You flip a switch, and it goes on. That’s basically what happens in the cloud now. You get to get software over the network.
I think this modernization of our industry, so we tend to look more like, not entirely, but more like a utility with IP, it does a couple things. I think it lowers our customer’s costs. I think it simplifies things. It allows us, if we do the right job innovation-wise … We talked about one of those areas, like something as fundamental as data, and get our customers into the right opportunity where they can spend their money to help grow their businesses. I think if the valley can help do that and just operates on this, make this simpler, make it easier, make customers more efficient, I think we’ll have done a heck of a job.
Okay. We’re going to move to an area I know you love to talk about, politics.
Oracle has been, or Safra has been very supportive of President Trump. Most companies in the Valley are less so, are more reluctant to do so. How do you look at this administration as a company? I’m just curious why everybody sort of has to skulk around around. They never want to talk about the Trump administration the way they did around other government. Is this going to be a better government for business?
Well, listen. I, in the end, don’t have — historically — never talked about any administration. I don’t like the company to become political.
Yeah, but yet you are now.
In fairness, we were not involved in the election. The company was not involved in the election at all, and so when we look at what we want as a company, we’re a global company. We’re headquartered in the U.S. We want growth to the various points you and I’ve talked about now for the however long we’ve been talking, so broad economic growth we think is good, and so the opportunity to drive more growth will be very supportive.
What do you want from this administration?
Well, I mean, let’s take something like repatriation.
Yeah. Everybody wants that.
It’s a big deal, in fairness.
It’s not just that you want it. I mean, the end of the day is, we’ve got our money overseas. We have today $50-some billion overseas that we want to get back.
Apple has $200 billion.
Yeah. There’s a couple, $3 trillion stuck overseas that almost all those companies have paid tax on, where they’ve earned it. Now, the opportunity to bring it back here and invest it in this country is a big opportunity. You have most companies borrowing money for their U.S. operations, therefore not investing much, while their money is trapped overseas. The opportunity for us to bring that back and invest it here is a big opportunity.
Is that something Oracles going to …? I mean, Apple’s just announced a U.S. … Should you be spending more money in the U.S.? Or is that just PR?
Yeah. I don’t know enough about what Apple announced. I haven’t read what they announced.
There’s going to be, I don’t know, like a factory of Kansas, and Trump and Cook will go together. That’s my guess on something like that.
Sounds great. For us, we assemble all of our computers here in the U.S. Obviously around this campus we do a lot of our development right here. That’s another point that I would tell you is that we have many talented engineers in U.S. universities, and they’ve come from someplace outside the U.S. to study at our schools. We’d like to hire them.
What were your thoughts on the immigration ban?
Well, I’m not going to get into my specific view on that.
Well, you like immigrants working for you. Correct?
I do. I do. I like trained … We’ve been very supportive of hiring immigrants that have … those that have done a great … They’ve learned at the best schools in this country. We let them come learn here, but we won’t let them work here?
Right. So, have you made those objections known to the new administration?
I’ll make them known to anybody who will listen. I mean, at the end of the day, we, Oracle, need talented people. I think the fact that they can practice their craft and their trade in the U.S., pay taxes in the U.S., build great companies here in the Silicon Valley, innovate great products here at Oracle, these are all fantastic things.
You know, listen. We want growth. We want the ability to hire great talent. We want the ability to not pay for our earnings twice. We’d love to see the U.S. get more competitive from a corporate tax. I know you know all this, Kara, but the tax base in this country is incredibly high. We need to get more competitive. If you want to attract more companies here, more investment, you’ve got to get more competitive. Again, we’ll see how all this plays out over the next couple years.
Are you worried about politicization that’s going on right now? Silicon Valley’s always tried to keep itself out of politics. Now, it’s being dragged in quite heavily.
You know, I only worry about it in the context of I try to be very clear that my No. 1 job is Oracle. My No. 1 job is putting Oracle in the best position to compete and to win, and there are things that we’ve just gone through that I think would be great outcomes for us. My guess is those are the very same things that would be great outcomes for other companies too. We really want to see those things change.
I didn’t see you at the table, at the Trump table, which was interesting.
We’re going to take another quick break now for a word from our sponsors. We’ll be back in a minute with more from Oracle co-CEO, Mark Hurd.
All right. Let’s get some questions from the other reporters here. This is Mark Hurd of Oracle. We’re talking about a lot of things, from politics to the changing enterprise to cloud.
Speaker 1: Why hasn’t the world adopted cloud faster if it’s so dramatically good? And my continuation would be, what has been the main obstacle for its adoption here in the U.S. and worldwide, of course, because it’s different?
KS: That’s a great question.
No. I think it has moved relatively quickly. If you think about the cloud business as sort of zero several years ago to 50 billion now, it’s growing quite quickly, materially faster than anything in the enterprise business, because the rest of the enterprise business is in decline. My guess would be enterprise IT in totality is flat to up 1 percent, and in it is the 50 billion or so growing 50 percent. It would tell you it is going fast. Now, if you said, “What are the roadblocks to doing it?”, first, it’s a lot easier to say, “Hey, let’s move to the cloud,” than it is to actually do it, so there’s actually a lot of work to move workloads from here to there. When you start getting into applications and databases …
… all of this stuff is hard to do. Second, let’s take care of this point. Security started out several years ago as a huge fear. You know, can you make your cloud as secure as what I do on premise. I would always answer, “I have a really hard time making it that bad.” That’s how weak security is on premise, but it’s been a fear of many customers for a while.
Third, there’s a lot of politicization around it, and so let’s go through it a little bit. In some countries there’s a view that you can’t move data out of the country, whether that’s employee data, customer data, and so when you start moving to other countries, there becomes the issue of I want that data domiciled in the discrete country that I’m at. If I wanted to leverage a cloud provider and that data was moving to insert country here, you just simply can’t do it.
There’s a fourth dimension, which is regulatory issues, which gets down to in certain industries you have certain roadblocks that can get in the way, so those are sort of the four core issues, yet in spite of all that, you have the growth of the cloud.
KS: Eventually there’ll be 100 percent, I mean, almost all the cloud. Correct?
Say what now?
KS: All cloud eventually.
You know, I’ve given speeches before where I’ve said, “In the next 10 years,” and I probably started this a year ago, you know, “80 percent of the corporate data centers will go away in that timeframe.” All of DevTest, which is a third of the industry, will go to the cloud. All the commercial applications will go that have a commercial alternative, and security, which is one of the issues we’ve talked about, will actually flip from being a concern to being a benefit. The security implications in the cloud, particularly of the big enterprise providers, you will be more secure there than you will be on the traditional on-prem world.
KS: That’s a big prediction. Okay. Right over here.
Speaker 2: Hi. I want to know what are the big opportunities for Oracle in Latin America and in particular in Mexico. Do you have a strategy for that country? And like Kara says, we have this kind of politics right now with the new administrations and with the relationship with Mexico are not so good, but what is your opinion?
Well, first, I love Mexico. I think it’s a great market for us. We have obviously a great customer base in Mexico. We’ve just had a couple of very big events in Mexico. One of the biggest … I’m not sure if we’ve released it, but I will now. Bimbo, for example, has moved to all cloud ARP, one of the fastest moving companies certainly in your country to move to SaaS cloud, and they’re moving their whole global operations to SaaS ARP, so you see a lot of innovation down in Mexico, a large desire to take advantage historically. Remember, in Mexico, like Latin America, one of the biggest issues has always been the lack of available skilled resource, which in the old on-premise world really hurts you. So, when you needed people that could write and extend and customize code, you didn’t have the talent there.
The cloud world is changing all that. The fact that now the IP that’s running it at GE is the same IP that’s running at Bimbo, you now get that done by us. It is not customizable. It’s extendable, but not customizable. That’s a big difference. The opportunity now for companies in Latin America to get absolute leading-edge IP that you couldn’t get before has changed dramatically.
I’m sure you know. We’ve invested heavily in Latin America. We’ve put data centers in Latin America. We’ve extended our sales force in Latin America. We’re gaining a material amount of share in Latin America, and I think it’s been because we’ve invested ahead of the curve. We invested in Columbia. We invested in Chile. We invested in Peru. We’ve invested in Argentina. We’ve continued our investment in Brazil, in spite of the recession. It’s all been because we believe what Karen and I have been talking about is going to happen across the entire region, and so our investment in Latin America’s significant.
KS: Would you like to make the “we’re building bridges, not walls” comment that Mark Zuckerberg enjoys? No. I’m teasing. I’m just kidding.
Thank you though.
KS: Next question. Over here.
Speaker 3: Hey. Blair Hanley Frank from IDG News Service. One of the things, as you’re talking about the Oracle data cloud, one of the things we’ve heard today is how those tools are going to make it easier for companies to understand user behavior before they hit company-owned websites, so that you have a user profile that can then tell you, the Oracle data cloud customer, what somebody has been doing before they get to your website and be able to tailor experiences around that. How do you explain that to a privacy conscious or privacy concerned consumer, who’s thinking like, “Why does Oracle know what I’ve been doing with all of my browsing data and my behavior as a customer?”
Yeah. In that case, most of the data isn’t about Mark. It’s anonymized, so the ability to get at specific activities that you do are eliminated. If you opted out, you don’t get included in that data set either. You still have the same privacy opportunities you’ve always had. Nothing changes in that environment. You would have had to have opted in and participated to be part of that process.
Speaker 4: Hi, Mark. Denis Pombriant, Beagle Research. Moving to the cloud usually represents a pretty significant change to the revenue model. As someone who’s sort of in the midst of it, do you have any advice for other CEOs?
Tech CEOs that are moving?
Denis P: Yeah.
Listen. I think it’s hard. You know, first, the revenue becomes ratable, so in our old license business, if we sold something, it was recognized right away. Now we sell something that’s recognized over quarters and frankly in years, so it does have an impact to the revenue model, but in the long run if you want to make this move to the cloud, you need three core things. You need IP. You can’t move without IP. Second, you have to have capital. To your point, it wasn’t exactly your point, but I’ll make it mine, which is you have to be able to invest in the end to be able to deliver that IP via the cloud. You got to have IP. You got to have capital. And you got to have — I don’t know what the right word for it is — the patience, or the whatever word you’d want to use to stick it out, because it takes …
If you look at us, we spent three years with basically flat earnings per share, and this is not the formula for being admired by the investment community. You have to have the ability to deal with that, because … Now, I will say, once you get to the other side of that, it’s a bit like … I use the example sometimes like the hotel business. The problem with the cloud is you got to build a hotel, and it’s got to be finished before you can rent any rooms. The problem is, while the hotel’s going up there’s no revenue. Once the hotel is finished, you can start renting rooms. You have to have enough ability to be able to sustain that while you’re going through the process. There’s no quick way through it.
We’ve taken the strategy, right or wrong, to try and do this move to the cloud, to do it right, to do it quickly, and to make sure we took no shortcuts. We’ve tried to do all three of those things at the same time, and listen, we wound up with the result I described, which is flat earnings during that timeframe. Our best quarters have been the past several quarters, as we’ve now come out of that. Where you start to see the benefit, in terms of revenue, that’s now coming in as rooms are getting rented in the hotel.
Speaker 5: Mark, you articulated pretty well. Cloud is Capex heavy. Why doesn’t Wall Street seem to understand that? It seems like every CEO, like Microsoft five years ago when this started to build almost hid the fact that they were investing a lot in Capex. Wall Street just does not want to seem to hear that it takes a lot of Capex. Magically, customers are moving from Capex to Opex. Somebody’s got to make that Capex investment.
KS: Mark, why doesn’t Wall Street understand you?
See, the problem with investors and Wall Street is I don’t think they particularly care about my problems or some other company’s problems. Nobody wants to hear, “I had a bad day.” Nobody cares. Right? The only issue they care about is performance, and so I think at the end of the day you have to perform.
Back to this point, right, that says, when you say to me, “I’m going to take a time out to transition our business.” The investor says, “Okay, I’ll come back after you’re done.” I think that that whole point about why doesn’t the investor understand? I think they do. I think their point is we want to see performance. Whether we like it or not, what they want is earnings per share, they want cashflow, or they want revenue growth. They want one of those three metrics they can hang their hat on, and they’ll give you and reward you for that. If you’re in transition from here to there, not so much.
I think on the Capex point, let’s be honest about the cloud business. Capex is a dimension of it. You have to have the capital to invest, but in the end, in isolation, Capex won’t give a great solution in isolation. You have to have capital, but if you don’t have IP … By the way, if you ask me, “Does Capex in isolation give you an advantage?” If I do something technically, I might be able to halve my Capex cost. I might be able to turn it into a quarter. If I multi-tenant my database, if I put it in memory, if I multi-tenant my middle tier, I can actually shrink the number of data centers I need and actually shrink my Capex at the same time. I need capital, but I also need innovation, and I need technology.
Okay. Last question back here.
Speaker 6: Hey, Mark, Kara. John Ferriss here. Good to see you again.
Hi. How are you?
John Ferriss: As we chatted months ago, the cloud is the biggest shift of innovation and wealth creation we haven’t seen since the first generation of the computer industry and going back to the whole client-server things we talked about, yet everyone seems to be No. 1 in the cloud. Amazon’s No. 1. Microsoft’s No. 1. Oracle’s No. 1. What data should people look at as the key scoreboard metrics for being No. 1, because how can you have all these No. 1s?
Well, it’s possible, depending on how you segment the market, they could all be right.
KS: Marketing. It’s called marketing.
Again, remember what people are talking about is where are they in SaaS? Where are they in infrastructure? Where are they in platforms? We tend to, here, come up with this term cloud, which in isolation doesn’t really mean much. Cloud is a generic term for a whole bunch of things, and so what you see is many people talking about, “I’m No. 1 at that thing within the cloud. I’m No. 1 at that thing within the cloud. I grow the fastest in that thing within the cloud. It’s a segments market. It’s a lot of different things.
I do think it’s a mistake to just generically talk about the cloud, because in the cloud, just to give you an example, our applications business, or if you would, SaaS, our application business and SaaS is growing double digits, and so how does that applications layer in the cloud and into totality? Look, I bet the applications market, I think we mentioned earlier, is probably 0 to 1 percent. We’re generalizing about a lot of different things with this term.
KS: Amazon. Amazon’s No. 1.
Just keep looking at the revenue numbers. I think it’s better to not listen to what people say. Just listen to what they do and what the revenue looks like.
KS: All right. Mark, I’m going to ask you one final question before we go. Jobs has been the center of this entire politic season, and everyone’s aware of the issues around AI, automation, robotics. There’s going to be an enormous shift in jobs. Self-driving cars. You can go through everything. Retail, there could be no retail stores. There could be no car drives. Do you think Silicon Valley has a responsibility to come up with solutions, because it was much attacked during this political season around that issue of eliminating jobs and creating a really problematic situation going forward. How much of a responsibility do you think tech has to create solutions, because largely they’ve abrogated their responsibility on all kinds of things?
I think our view is to keep innovating; we want to have that innovation. My preference would be we do it here, because if we don’t do it, somebody else will do it. Our job is to get customers in a position where they’re the most efficient and effective they can be. Then I would think move that investment to other areas so they can further their innovation. We also don’t want that innovation going on anywhere but here. If we don’t drive it, I assure you somebody else will.
KS: Well, what if that innovation means no more jobs in driving, or no more jobs in retail, or no more jobs in …?
Again, economies shift, and investment shifts. If in the end I can automate a process and I can make that process more effective, whatever it be, driving, hospitality, etc., and I can take the capital that I, the company, spend on that, and then now invest that in more innovation so I can do something better, I’m in a better space than I’ve been before. We should not get scared about innovation. It makes us more efficient and frees up capital for our customers to reinvest in other things.
KS: I get that, but does that mean jobs for real people?
I think so.
KS: One of the things that Sam Altman just gave an interview recently where he said, “Any repetitive job that doesn’t have an emotional creative connection is finished.” That’s a lot of jobs. That’s a lot of people.
It’s a more complex subject, but it still gets to the core of what are the things that are core to driving economy. We talked about people and productivity. At the core of that is education. Our opportunity to get educated people, educated workers in the jobs that are driving innovation, more valuable jobs. It’s not to say that some of those jobs aren’t valuable, but in the end of the day, if we can automate those processes and get our money, our customer’s money into other things, we create better outcome. I do not think, in any way, shape, or form, the Valley or any company should stop investing in innovation. It’s going to hurt us in the long run. We want to be the ones helping get that done.
KS: Even if it’s automation, robotics?
I think so. Yes. Because I think it’s going to free up capital to invest in other things, and that’s good.
KS: All right. Mark Hurd. Thank you.
All right. Thank you. Thank you.
KS: Thanks again to Oracle co-CEO, Mark Hurd, for joining me on the podcast and for the team at Oracle for hosting our interview.
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