$142.5B 2015 U.S. ad spending for 200 LNA
On a sunny September day at his sprawling Woodside, Calif., property, Larry Ellison was ready to talk marketing.
Just a few years ago, the thought of Mr. Ellison having such a conversation would have seemed nearly impossible. After all, he's the man who built Oracle into the world's second-largest software company by selling primarily to IT professionals. But over the past two-and-a-half years, Oracle has spent a reported $3 billion dollars buying up marketing-technology companies, a big bet on the direction of things to come.
"The CMO's role is going to be more important next year than it is this year, and more important the year after that," Mr. Ellison said.
Clad in a familiar black V-neck, Mr. Ellison was all smiles as sunlight reflected off a pond abutting the house and into the room through his home's floor-to-ceiling windows. But, as he began talking about his competition and how he planned to beat them, the atmosphere grew more intense.
Oracle is locked in a battle with fellow tech heavyweights IBM, Adobe, SAP and Salesforce, among others, for supremacy in the "marketing cloud" -- a set of software tools that let marketers interact with customers and prospects in a smarter way. And the stakes are changing as companies like Oracle increasingly market to marketers.
As guardians of the customer experience, chief marketing officers are not only expected to purchase more of their own technology, but to influence tech purchases across other departments. By 2017, research firm Gartner predicts marketers will spend more on technology than IT will. In 2013, the market for customer-relationship management tools alone reached over $20 billion, according to Gartner.
Pivotal Research Group analyst Brian Wieser said the market these tech giants are going after could be far bigger. "This is not a multi-billion dollar opportunity, it's a multi-trillion dollar [one]. It is about all the things we do that we call marketing, which go way above and beyond what we call advertising," he said. "There's so little that has been touched by technology today."
None of this is lost on Mr. Ellison. "It's pretty important that I'm sitting here."
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Founded by Mr. Ellison in 1977, Oracle Corp. has a market capitalization of more than $180 billion today, but its business could use a boost. In its fiscal year ended May 31, revenue rose 3% to $38.3 billion from a year earlier, but sales stalled in the second half. Net income was essentially flat for the full fiscal year (though still a whopping $11 billion).
Among the challenges facing Oracle is the fact that IT professionals, its traditional buyers, have been disempowered when it comes to technology decisions, with more responsibility being placed in the hands of individual departments.
The shift of budgets away from IT is occurring for two reasons. First, software is moving from on-premise (installed on computers) to the cloud, where applications can be accessed from anywhere with an internet connection. Without having to rely on IT to install and maintain software, business units within companies are now free to purchase their own technology, evaluating decisions on performance and cost. According to Gartner, 80% of marketers today have their own capital budget.
"We're a great believer that we need specialized salesforces that understand in depth technology that we're offering to the CMO."
The second reason is the growing importance of the customer experience, which is more nuanced but has even greater implications.
To start, digital media has given customers more information and options for their purchase decisions than ever before. Instead of turning to salespeople, consumers have review sites, social media, online forums and the seller's own website, to name a few. Within all those interactions, there is rich data about the consumer decision-making process. When accessed and passed effectively between marketing, sales, customer service, finance and even human resources (think: LinkedIn), the data can help a company build a process that wins more business.
That's the real scope of customer experience. Laura McLellan, the Gartner analyst who published the report on CMO spending, said her research shows that in two years 90% of companies expect to compete almost entirely on the basis of customer experience, up from 36% two years ago.
"Just think about the shift that's going on there," she said. "Customer experience is becoming the major competitive angle."
Technology will be at the heart of that experience -- for marketing, sales, customer service and finance. And as the first line of interaction with customers, marketing will often lead those purchase decisions.
"I believe that we're getting ready to say that marketers will move from responsibility for marketing software to customer-focused software across functions," said Ms. McLellan.
Putting it all together
Companies like Oracle believe -- or, more accurately, know -- that's all going to come together in the cloud. There's been a veritable arms race among Oracle, IBM, SAP and Adobe to buy up companies that work with marketers. And while many of them have very nice individual offerings, integration is still a work in progress. That's where Mr. Ellison expects to win: by leveraging Oracle's size and its considerable financial resources to make a seamless offering.
"Putting all of those pieces together is our strategy," Mr. Ellison said.
Right now, Oracle's marketing cloud is made up of Eloqua and Responsys, two marketing-automation platforms; the data-management platform BlueKai; content-marketing discovery engine Compendium; and social-listening and publishing platforms Vitrue and Collective Intellect.
Some pieces already fit well together -- Compendium, for instance, suggests content to send to prospects in the Eloqua and Responsys systems. But others face obstacles. BlueKai, for example, can give Oracle customers a better understanding of prospects via third-party data sources and allow them to manage their own data, but it remains to be seen how much information can be pulled in while still respecting privacy. Mr. Ellison compared his vision of the marketing cloud to Enterprise Resource Planning, umbrella software that brought technology for accounts payable, accounts receivable, supply chain, general ledger and more under one roof.
The CMO is just part of the equation. "Our whole strategy is to have this suite that spans marketing, sales, service, all the customer engagements," Mr. Ellison said.
Of course, integrating software is never easy, a truth recently acknowledged by Oracle President Mark Hurd.
"The fact that everything ever works perfectly together, anybody who tells you that is pulling your leg," he said at an Oracle event in April. "There will never be a day where the depth of integration, unless it was all built from the bottom ground up, will be integrated as any of us would like."
Responsys customer Parvez Patel, VP-e-commerce marketing and merchandising at Grainger, estimates it will take Oracle at least a year to put all the pieces together. "From my perspective, it's difficult to say how great Oracle's marketing cloud is," he said. "I think it's a bit premature."
Making a company best known for its database prowess a sexy option for marketers is no small task either.
"We're aware that we have to improve our awareness amongst CMOs," Mr. Ellison said. "They have to understand that we think marketing is very important."
Oracle will need to win over people like Eloqua customer Mike Ballard, a demand-generation strategy and operations manager at Lenovo. When asked about his perception of Oracle, Mr. Ballard said, "I still have a picture in my mind, the Sun Microsystems, big gigantic database, servers in the background kind of old school-type mentality."
Mr. Ballard said Lenovo's marketing organization has significant input into the selection of the CRM tool used by sales. But while Oracle might dream of having Lenovo on its CRM system Lenovo is using Salesforce.
"Salesforce right now really has a dominant position on [CRM]," said Mr. Ballard. Salesforce "comes along with this entrepreneurial, startup energy, and they still have it to this day."
Grainger's Mr. Patel, on the other hand, said his perception of Oracle has changed over the past six months. Recent acquisitions, he said, have turned Oracle into a tier-one marketing player in his mind.
One of the ways Oracle is attempting to improve its perception is by building dedicated sales teams for different types of buyers, including CMOs. If you're going to invest in all the engineering to build the product, you better be able to communicate what the product does, Mr. Ellison said. "We're a great believer that we need separate, specialized salesforces that understand in depth our technology that we're offering to the CMO."
Oracle's acquisition strategy alone hasn't filled that need. In a recent report, research and advisory group SiriusDecisions listed "talent retention" under its "Challenges" section for Oracle. "After the acquisition of Eloqua by Oracle, many of the former Eloqua executive team -- and many other longtime employees -- have left," the report said. "This could impact company culture, customer support and the Eloqua user community."
Mr. Ellison acknowledged the losses but downplayed their significance. "Sometimes the salespeople in Silicon Valley want to join a startup, want to get to go public or get bought, cash in their options and move to the next," he said. "And that's just their routine. And God bless them, that's their right."
Mr. Ellison's fierce competitiveness shows when talking about his rivals. IBM? "They hardly have any applications whatsoever. They're in the database space." SAP? It missed the boat on the cloud. "I just don't understand how they get there. It's too late." And Salesforce? Little more than a b-to-b sales-automation platform. "That's their product. That's almost all of their sales."
But Salesforce has a special connection to Mr. Ellison and is, somewhat ironically, perhaps his primary challenger in the battle for marketer dollars.
Marc Benioff, Salesforce's founder and CEO, was Mr. Ellison's star disciple when he decided to leave Oracle and start his own company in 1999. Not only did he leave with Mr. Ellison's blessing, but with his money, too. Mr. Ellison was an early investor in Salesforce, putting in a reported $2 million to help get it off the ground.
Today, Salesforce leads the CRM market, commanding a 16.1% market share vs. Oracle's 10%, according to Gartner. Over the past few years, Mr. Benioff has made his own high-profile acquisitions, spending $2.5 billion on marketing-automation platform ExactTarget and over $700 million on social-media marketing company Buddy Media.
The rivalry between the two has served up its fair share of drama. After Mr. Benioff's keynote at Oracle's 2011 Open World conference was rescheduled, Mr. Benioff, who had called Oracle a "false cloud," held a well-publicized rogue keynote at a nearby restaurant. Mr. Ellison later said Salesforce was "the roach motel of clouds."
Still, Mr. Ellison clearly has Salesforce in his sights and plans to use Oracle's legacy business -- and accompanying data -- as the key differentiator.
"You can't do what they do a little bit better than they do it," said Mr. Ellison when asked how his company would compete with Salesforce. "We have all the service data, we have all the accounting data, we know what they bought, we know what they use. We have all the third-party data we collect from BlueKai. So we have this profile of the customer they don't have."
Advertising has long been a passion of Mr. Ellison's, who for years designed all of Oracle's ads. "Drove our ad people crazy," he said.
He described a test he often puts Oracle's employees through when the company considers running an ad. Mr. Ellison said he shows the ad for a moment and then pulls it away, looking to find out whether the person can remember anything from it. "It's got to make some kind of impression. At least they've got to know it's an Oracle ad. Right away," he said.
Today, there's a different test: whether Oracle can sell the marketer.