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Case Studies

Winning the Future

Oracle CEO Mark Hurd shares his thoughts on the ever-evolving digital landscape— and the vision it takes to stay ahead.

by Aaron Lazenby

February 2015

“The world is changing dramatically,” Oracle CEO Mark Hurd said from the main stage of Oracle OpenWorld 2014, the world’s largest conference focused on Oracle technology. According to Hurd, the rapid acceleration of technological innovation—cloud computing, the data explosion, social media, increasingly sophisticated customers, the rise of mobility, and more—is opening new business opportunities for savvy and forward-thinking managers.

But this digital disruption, said Hurd, is putting new and significant pressure on technology leaders. “This is changing the way we live, the way we work,” Hurd elaborated. “So there’s a need for IT organizations to change the way they work.”

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Profit sat down with Hurd at Oracle headquarters in Redwood Shores, California, to talk about the impact digital disruption is having on the office of the CIO, the complexities of changing demographics, and the confidence Hurd has in “the greatest breadth and depth of products I think probably we’ve ever announced at an Oracle OpenWorld.”

Profit: You spoke at Oracle OpenWorld 2014 about the impact of digital disruption on business—and IT in particular. Beyond the rapid advance of new technologies, what other market factors are driving this disruption?

Hurd: As you mention, it’s more than technology that’s driving this disruption, although that is a factor. But if you look at the demographics of who employees are and who customers are, they are changing every day. And as these demographics change, they become a force multiplier for technological disruption.

In the next eight years, 40 percent of everybody working in the US can retire. And the implications of that—swapping out 40 percent of the workforce—will shake up the workplace in some radical ways. This is going to affect how you recruit, how you onboard, how you train, how you work, how you share work.

Those same demographic changes will affect consumers. When you look at the data about young customers and their increasing buying power, you’ll see that they are materially less loyal. They’re more likely to complain. They are more mobile and more social than their predecessors. So eventually, the demographics will change how you sell, how you buy, and how you deliver customer service.

For example when I get replaced—either in my job or as a consumer—by somebody currently coming out of college, there will be an added complexity to my departure because I’m being replaced by a digital native. That person grew up in this technological environment, with much higher expectations of customer service than I had. They have much higher expectations of a collaborative culture and work tools from a potential employer.

CIOs have the unenviable job of maintaining the status quo while, at the same time, radically redesigning systems to fit the modern world.”–Oracle CEO Mark Hurd

Oracle’s customers have to face this change. It doesn’t matter whether you’re the CIO, the head of human resources, the head of marketing, or the head of sales; you have to deal with this collision of the demographic changes and advancing technology.

Profit: Is the current state of enterprise IT prepared to deal with these changes?

Hurd: In many cases, our customers are still using applications that are more than 20 years old. That means the applications may be older than the people they’re serving. If you are running an application written or installed in 1994, it was commissioned before there really was a consumer internet; certainly before there was search like we know it today. Mobile phones were only used to make phone calls. Pick a technology: social, big data, the Internet of Things—none of this existed in any real way two decades ago.

The strategists and developers behind these applications never foresaw the world we live in today. So trying to add modern functionality onto a legacy application, in a way that can deal with all these secular market changes, is extremely difficult. In many cases, it’s not even possible.

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This is the real challenge over the next five years—to effectively redeploy enterprise applications with the sort of flexibility and upgradeability that can respond to user expectations. Companies that cannot do this effectively will get left behind.

Now, that said, the problem you’ve got if you’re a CIO is that with all of the obvious transformation that has to occur, the trains still have to run on time, so to speak. You have to deliver the systems that allow your company to report every quarter. You have to maintain the systems that close the books. You have to be able to deliver paychecks every pay period.

Profit: How do these competing priorities affect the role of the CIO?

Hurd: CIOs have the unenviable job of maintaining the status quo while, at the same time, radically redesigning systems to fit the modern world. The new systems also need to be flexible enough to adjust in the future, so CIOs don’t have to face this same problem one generation from now. How can you resolve these tensions? This is very hard stuff.

The history of many IT departments is they operate like a technology R&D division of the companies they serve. They have preferred to do things themselves—write their own applications, build their own computers. In the world we’re moving toward, it’s critical to get as much of that work pushed back into the industry as possible. The IT department shouldn’t spend their time writing applications. You want Oracle doing that for you.

I think this reflects a cultural shift that is beginning to happen in IT departments. CIOs have to understand the technology and understand the business. They have to invest in new technology, but they have to save to deal with flat budgets. They have to deal with legacy systems, but they have to roll out new functionality quickly.

I think it is Oracle’s job to help our customers bridge these tensions. To help them save money so they have more money to invest. To help them drive new efficiencies so they have the resources they need to innovate. And when you look at the product portfolios available in the IT industry, no company has what Oracle has to help our customers.

It takes very serious people to prepare for the future—and serious partnerships to help get it done. That’s why I like Oracle’s chances. I think we’ve got a great portfolio and a great set of people to help customers do exactly what I described.

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Profit: You spoke with several CIOs about this cultural change on stage at Oracle OpenWorld 2014. This format was a bit of a departure from previous presentations. Why did you take this approach?

Hurd: Every year at Oracle OpenWorld, I get the opportunity to interact with hundreds of Oracle customers in meetings that don’t get bigger than 20 or so people. I get a lot of customer input this way, and I’ve learned lessons about what our customers want to know. For the most part, they want to hear how their peers are dealing with a highly dynamic business environment.

So we started thinking of Larry Ellison’s keynote and my keynote as complementary presentations that address this customer need. Larry does an amazing job of announcing our products at Oracle OpenWorld, talking about new functionality, and in some cases even demonstrating it.

My presentation is focused on talking about how our customers are actually putting the technology to use. We had eight CIOs on stage talking about changes in their landscape, talking about the strategies they used to approach new challenges and the way they executed those strategies. All of those conversations involved the digital disruption and change we’re talking about. It’s so powerful to hear about new technology from a CIO who is your peer, instead of just hearing about it from Oracle’s CEO.

Profit: Speaking of Larry’s presentation, he showed off some powerful new cloud technology and made a strong case for Oracle’s success in software as a service [SaaS]. How do you like Oracle’s position as a provider of cloud solutions?

Hurd: I’m very proud of what Oracle has accomplished. Not just what we spend on R&D, which is significant, but the yield we get on our R&D investment. The lineup of exciting products we showed off at Oracle OpenWorld is nothing less than sterling.

I think Larry’s overview of our success in SaaS is spot-on. You can look at our recent financial results as proof that we’re seeing a significant uptake of cloud technologies within our customer base. We have a full suite of applications, each of which we believe to be best of breed. We can now deliver those SaaS applications globally, and certain business functions—marketing, HR, and sales in particular—have accepted SaaS as an essential way to quickly add new business functionality.

Larry does an amazing job of announcing our products at Oracle OpenWorld, talking about new functionality, and in some cases even demonstrating it.”–Oracle CEO Mark Hurd

But we can offer more than SaaS capability. Let me give you an example. If you buy Oracle HCM Cloud [Oracle Human Capital Management Cloud], you will probably get three new releases a year. If you have the product for five years, that means you are going to see as many as 15 releases. Now, you might get 500 new features with every release. So that’s 7,500 new features over the life of the product—and you didn’t have to do any of the work to build them. You can choose to take all 7,500, or zero, or any number in between.

But if you need to add a business-specific feature, you can extend the application yourself. At Oracle OpenWorld, Larry did a demo of some extra-cool platform-as-a-service [PaaS] functionality that would allow an Oracle HCM Cloud customer to build a new, business-specific capability and clip it onto the app. IT doesn’t have to tinker with the core HCM code to make that happen. So the custom functionality doesn’t inhibit the ability to take future upgrades.

Larry also announced the release of infrastructure as a service [IaaS] to complement our SaaS and PaaS offerings. We are now the only company in the cloud that has solutions at every tier of the IT stack. Bringing this all together was a tremendous accomplishment. And I think it gives our customers the tools they need to face the future.

Profit: Where will you lead Oracle over the next year?

Hurd: I just want to do more. Our strategy for this year is no different than it was last year, which is, frankly, to work day by day, week by week, quarter by quarter to help our customers deal with change.

And we think we are the only ones in the industry that have the abilities to help them be more efficient and save money, yet innovate and deal with a series of changes that require not only cloud, but a complete portfolio of cloud capability that allows them to transform IT.

We don’t think there’s anybody in the industry that can do it but Oracle.

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