When my daughter, Rita was younger, she was a chess fanatic and good enough to be ranked number 1 among Florida girls. She wrote a column about chess and technology for me 12 years ago here.
I take no credit for her talent, other than I chaperoned her to countless tournaments around the country. I remember she was particularly fond of the pre-tournament activities where kids could play blitz, bughouse and other modern day variants of the game. Quite often there would be a treat where a grandmaster would play a “simul” – walk around a room and simultaneously play against 20 to 30 kids over a couple of hours. While supposedly in fun, kids would be highly motivated to beat their handicapped competitor, who in turn certainly did not want to lose face by being checkmated on too many of those boards. Indeed, the great Bobby Fischer included one of his simul games in his classic, My 60 Memorable Games.
I have watched Oracle play a game of “simul” when it comes to vertical investments. It makes a move in an industry, then moves on to another. Its most recent move is to acquire the healthcare vendor, Cerner for $28 billion. While it has long been acquisitive, this will be its biggest ever purchase. Vendors play all kinds of games when they talk commitment to industries so one of the “Vinnie Vertical’s” filters is how many operational users and practitioners, not just back office users touch a piece of supposedly vertical software. That would include shop floor workers in manufacturing, claims adjusters in insurance etc. Cerner clears that filter. Its electronic health records are used by many doctors and nurses and it has emergency room and other clinical coverage.
I must admit I still don’t see the end game on this chess board. Maybe because I have not seen the end game for other industries even after decades. At Gartner in the late 90s, I witnessed how Oracle put together a promising consortium for the CPG industry. That included IMI for order processing, Manugistics for demand forecasting, Indus for asset management and Datalogix for Process Manufacturing. Individually, the components were impressive. As an integrated ERP offering however, as one client put it. “it looked like they had just met in the lobby and put slides together in the elevator up to see us”. Likely unfair to Oracle, but to me SAP, Intentia (now part of Infor) had far better integrated offerings for that vertical.
Starting in 2004, Oracle went deeper than partnerships. It garnered an applications foothold in several industries through acquisitions like Retek in retail, JD Edwards (via PeopleSoft) for manufacturing, i-Flex in commercial banking, Portal in media and telco, SPL Worldgroup in utilities, Primavera for project oriented industries and MICROS for hospitality and other point of sale settings among others. However, again we have not seen a “land and expand” across the application landscape in these verticals. Or tight integration with its Fusion back office applications. In fact, I wonder, to use a grocery industry metaphor, if they are just loss-leaders to allow Oracle to sell its database, tools and infrastructure to those sectors.
Oracle’s NetSuite acquisition in 2016 promised more contemporary industry functionality in the cloud especially with its services and retail capabilities. But, best as I can tell, the functionality has not spread. It continues to sell PSA functionality to project based businesses when the recent excitement is around field services in asset intensive markets and the trend towards servitization in many industrial sectors. In retail, the pandemic taught us eCommerce is necessary but not sufficient. Automated warehouses, last mile delivery and micro-fulfillment are even more important. NetSuite could have sold that functionality like hotcakes. Instead, tens of thousands of merchants have gone with services from Amazon and Spotify for their scale in fulfillment.
So will Cerner be the launching pad for a much bigger healthcare presence for Oracle or is it a yet another one-time foray? In the US, healthcare is definitely poised for massive change. It costs a whopping fifth of our GDP and our outcomes are not that impressive. COVID has shown starkly the underlying health of many Americans is pretty poor. Worse, the COVID politics have reduced trust in the medical community. There is growing impatience with the massive inefficiency in the sector. And yet, there are several positive signs. The speed at which the vaccines were developed and distributed through the cold chain was impressive. We learned to accelerate clinical trials and health systems learned to expand critical care capacity and make staff mobile across states. We have finally embraced telemedicine after decades of trying. Our trackers and new digital clinics are allowing us to collect tons more health data. The competitive landscape keeps evolving with every major tech vendor dabbling with digital health initiatives.
In fairness, Oracle appears happy with its vertical investments. At an event I attended in 2014, late CEO Mark Hurd presented impressive industry metrics– 21,000 employees, 10% of total R&D, 26 industry specific acquisitions in the previous 5 years. And the payback – in the past 3 1/2 years, Oracle’s industry specific revenues had tripled, though he did not break out how the industry specific applications business had grown.
It’s hard to tell where Oracle has evolved sector by sector. It loves to mostly highlight its financial and hr applications. As I have written before “Larry Ellison (uses) the ERP moniker in earnings calls and event keynotes, but never really discusses any operational functionality.” Larry has had other vertical opportunities, at least at a personal level. He has supercharged one of his passions, sailing with innovative technology as this article describes. His friend Steve Jobs, gave him a front row seat as Apple launched its wildly successful retail store imitative. Not sure if Oracle has mined that advantage in the sports/entertainment and retail worlds.
May be that is part of the strategy. Walk around the room playing at multiple industry chessboards. Smile a lot, say all the right things about "vertical clouds", but don’t disclose much. When you write a whopping big check for $28 billion, you get to write many of the rules.
So maybe, just maybe they are playing Go while everyone else is playing chess. Sun Tzu would surely approve.
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