Hurd’s Move to Oracle Will Eventually Backfire

Well, that didn’t take long.  Only a month after resigning as CEO of HP, Mark Hurd has been hired as co-president at Oracle.  Hurd will replace Charles Phillips, who has resigned.  The other current co-president, Safra Catz, will remain in place, sharing the president’s office with Hurd.

The saga took an ugly turn when HP sued Hurd in a lawsuit that will most likely be merely a nuisance.  Oracle responded quickly with a brief press release in which Oracle CEO Larry Ellison accuses HP’s Board of “acting with utter disregard” for the long-term partnership the two companies have shared.  Ellison concludes with “The HP Board is making it virtually impossible for Oracle and HP to continue to cooperate and work together in the IT marketplace.”  There are almost certainly more fireworks to come in that battle, but little (beyond posturing) is likely to happen.

Ignoring the lawsuit, here’s my take on what will happen at Oracle: Hurd’s hiring will appear to help initially, partially because he’ll get credit for some good things Oracle already has in the works.  However, sometime in 2012 things won’t look so rosy.  By then, Hurd will have created the same internal animosity that he engendered at HP, although (because Oracle’s culture isn’t as collaborative as HP) the effect won’t be as severe.  Oracle will have some significant stumbles and Hurd will receive (and deserve) some of the blame.

Hurd knows how to run a hardware business and, more importantly for Oracle, a combined hardware / software / services behemoth.  He did it with brutal efficiency at HP, driving costs down and profits up.  After Oracle’s acquisition of Sun, their structure includes that same hardware / software / services mix.  As Larry Ellison has pointed out, Oracle will benefit from Hurd’s experience.  Ellison clearly believes Hurd is the missing piece that will help Oracle confront (and beat) IBM.

In the end, though, two things will eventually make it go sour.  First is the departure of Phillips.

Ellison over-reacted to a Phillips misstatement back in July of this year.  In a speech at the Fortune Brainstorm Tech Conference in Aspen, Colorado, Phillips stated that “If you look forward for the next five years, we’ll probably double what we’ve spent on acquisitions in the last five years.”  The press interpreted that to mean that Oracle had a $70 billion acquisition budget.  Within a week, there was a very public (and, for Phillips, humiliating) “clarification” that implied that Phillips had made it all up.  From that day forward, Phillips’ days at Oracle were numbered.

Oracle will miss Phillips.  He’s been instrumental in the execution of Oracle’s “acquire everyone” strategy over the past five years.  He facilitated the integration of those acquisitions, helped to define the product roadmap, and nimbly managed the expectations of existing customers of all the acquired companies.  The software product groups will suffer without his leadership.  Neither Hurd nor Catz has the expertise to lead those groups.  If Ellison steps in, his presence will be disruptive and distracting at best.

The second (bigger) reason the Hurd hiring will backfire is Hurd himself.  He succeeded at HP with a simple formula – impose efficiencies to drive costs down and profits up.  It worked, but with consequences.

As I wrote last month, Hurd’s style alienated much of the HP work force, completing the destruction of the HP Way that Carly Fiorina had started.  In a recent Glassdoor survey, Hurd had the lowest rating of any major technology CEO.  An internal HP survey from earlier this year purportedly discovered that “more than two-thirds of HP’s employees would quit if they could get an equivalent job somewhere else.”  That’s devastatingly bad.  People don’t like him and don’t like to work for him.

Hurd will certainly take a similar approach at Oracle.  He’ll eliminate positions, forcing efficiency across the corporation.  In truth, many of those positions probably should be eliminated anyway, as a company the size of Oracle usually contains a great deal of waste and redundancy.  Still, Hurd’s history shows that he’s likely to make changes aggressively and bluntly and, in the process, is likely to alienate huge groups of remaining employees.  However, Oracle isn’t HP.  There’s no legendary “Oracle Way” of motivating and retaining employees.  If anything, Oracle’s existing culture matches Hurd’s approach: survival of the fittest, with ruthless culling of the rest.  So, the alienation will take longer, but it will still happen.

It will be interesting to watch.  Here are my predictions:

  1. For most (and possibly all) of 2011, Hurd will be hailed as a great addition and Ellison will be praised for hiring him.
  2. Integration of Sun will proceed smoothly and Oracle will expand its hardware presence with other high profile acquisitions.
  3. Oracle will broaden its Exadata approach, delivering more integrated hardware / software appliances.  Some of these new appliances will be announced this month at Oracle OpenWorld.  [Here’s where Hurd will get credit for stuff that’s already in the works.]
  4. Efficiencies (and, therefore, profitability) will improve through 2011.  Oracle will make progress competing against IBM (and HP).
  5. In the second half of 2011, Oracle will begin to stumble in its core software businesses.  That stumbling will continue into 2012.  Oracle’s Fusion Applications will be fraught with problems and won’t be adopted.  SAP, IBM, and Microsoft will achieve some major competitive successes against Oracle.
  6. By early 2012, internal bickering at Oracle, incited largely by Hurd’s style, will be widespread.

For now…I’ll leave you with this thought:

Executives don’t change when they take new jobs.  Hurd at Oracle will be just like Hurd at HP – for better and for worse.

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