Under his watch, Mark Hurd, president of Oracle, has seen various developments take hold, including the promise of Fusion finally becoming a reality; Oracle's entrance into social media; its rise of a roughly $1 billion SaaS revenue stream; and the birth of multichannel customer service and support—all of which has culminated in a new focus on improving customer experiences. This summer, Hurd revealed Oracle's new focus at The Experience Revolution Special Event in New York. The next day, Associate Editor Kelly Liyakasa and Editorial Director David Myron met Hurd at his New York office for an exclusive interview. Excerpts of the interview, in which he spoke about the new customer demands, how companies must respond, Oracle's new strategies, and his role as the president, appear here.
Myron: What's happening right now that's having the biggest impact on customer relationships?
Hurd: There's a lot going on. One, you've got a much more sophisticated customer out there today. We talked last night [at the Experience Revolution Special Event] about these people that are digital natives. They've grown up with technology their entire life. They expect to be able to get any answer to any question they've got, any time they want it, wherever they may be in the world. You've got this whole drive toward mobility that's got people moving around more, so whether it's domestically or internationally, they expect wherever they are to be connected 100 percent of the time to anybody that they're getting services from. So, more sophisticated customers moving globally. And I think the expectations are just higher.
There's been a traditional marketing view that if I build a great product and then I just go out and tell people about it, customers will find it. Now it's more complicated. You have more noise in the market consumer to consumer than you do brand to consumer. So, it's very important for every brand, as you launch a product, to understand not just what you're pushing in the market but what's being said about your product.
It's important to be able to work that aggregated ecosystem. And that world has changed. Add to it the secular things we've already talked about, you've got a big change in the marketplace.
Myron: Do you think this change in customer behavior is largely happening because of social media? Are there any other forces?
Hurd: You've got to add to it "globality," mobility, the evolution of the buyer and the consumer, the technological capabilities. I gave an example of a big-box retailer last night and the fact that you can now cause huge ripples and rumbles inside traditional ecosystems. The fact that I can go on the Web right now and go find a TV; I probably won't procure it, because I can't tell if the picture is right or not. It's not going to give me a view of the sharpness of the picture, but I want to look at it. I can go down to a big-box retailer, touch it, look at it, and play with the channel changer. I can then go on my iPhone, I can buy it on the Web, and I could probably get it for 50 or 60 dollars off.
Myron: How does a big-box retailer compete in that scenario?
Hurd: Well, I don't think the only answer is, "Hey, buy some software from Oracle…." But I do think that you're going to have to think through what's the ability to build a relationship with that customer when they come into the showroom that's far beyond the showroom. Now it's going to be about the aggregation of services and the value-add that I can deliver.
Let's face it, if you have to put the money in brick and mortar, you have to have people in the brick and mortar, and you're going to hold inventory at every brick and mortar, you're going to have a higher cost structure than a guy who's got one warehouse and a Web site. You'll have to add a series of capabilities that bring loyalty. For [someone] to want to buy from me, even though I know my price is higher, my service will have to be better. It shows in data that if you perceive you get better service, you'll pay up to a 30 percent premium for that incremental service. The big-box retailer will have to show a service level and a customer experience that says, "Hey, I just had a great experience. I'm willing to pay more."
Myron: What about other businesses? How should they respond to today's changing business environment?
Hurd: The first thing you've got to do is connect. You have to be able to connect with me. And, by the way, you can't connect the way you want to connect; you've got to connect the way I want to connect. So bad news for you if you're a brand. I'm going to be in China. I'm going to be in Russia. I'm going to be operating on time zones that are my time zones when I'm awake, when I'm working. You have to find a way to connect through whatever device, whatever operating system I'm on, or whatever mechanisms I want to communicate on. So [the] point is, I have to connect to them.
Second, if I show up at a given time, even though the interval of connection may be short, the interaction that we have has to be thoughtful and meaningful to me. So, when I get there, you better know something about me. If you're in the hospitality business, and you're trying to sell me an aggregated set of capabilities, you better know what my last three or four vacations were like. You better know what I liked, what I didn't like, how I behaved, how I didn't, things I wanted to do so you can better suggest, recommend, and consult to me what to use. So, analytics, having a large scope of information specifically about the buyer, becomes important.
Third, if I like the pitch you gave me, you've got to be able to execute it. And you've got to be able to do it simply. I don't want to have to go find somewhere where I have to scan a credit card. I want to find a way where I can easily say, "I accept. I'm in." So those are the dimensions you've got to get done. All of this is doable. All of this stuff we can help do right now.
Myron: When you think about some of the new technologies, including social, mobile, analytics, the cloud, multichannel capabilities, and e-commerce, what excites you the most?
Hurd: Well, all the problems that you brought up are tough problems. The multichannel problem is a big one—the fact that all these channels have grown up independently.
I think it gets back to the fact that customers want choice. There are times I want a human interaction. There are times it makes sense for me to go on the Web. By the way, I'd really like those experiences to be seamless. I still go to an ATM. There's a bunch of cash still left in this country. People like to use cash. I'd like the experience at the ATM to be like the Web. I'd like the Web to be like the branch. There may be times I call the call center—I want that experience to be the same. All of those experiences were developed ground up, independently. Nobody bought an ATM thinking about the call center. Nobody built a solution on the Web thinking about the ATM and then thinking about how to [integrate] it with the call center, let alone technology. So this whole cross-channel thing is a big opportunity.
I'd still tell you, even if I can get cross-channel, I don't want to minimize the other points you brought up. The commerce server-type approach—being able to get that singular consistent experience into the Web—it's a big deal. So I wouldn't minimize any parts of it. The brands that are going to win long run are the ones that can give you that aggregate experience.
Myron: How many more opportunities does having ATG now give you when you go to your clients and prospects?
Hurd: When we bought ATG, ATG had really started by being the software of choice for retail Web sites. They've done a great job with it. More than 50 percent of their business was in retail. We got it. We integrated it and we started bringing it across industry. Our view was any place that had a physical location, anybody who had a Web site that's doing commerce, was a prospect.
One dimension of it was ATG. We then bought two other solutions—one was Endeca. There were two pieces of Endeca, but the in-front piece of Endeca was integrating with ATG. We bought a solution called FatWire and we've basically been integrating Endeca into ATG, FatWire into Endeca and ATG to create an aggregated commerce solution. In addition to that, we had been integrating that solution on top of Exalogic. Our view is to create an engineered system stack that can run customers' commerce sites five times faster at the same time as you're bringing these best-of-breed solutions together into an integrated product. So ATG was a core building block integrated with other building blocks, then integrated with Exalogic.
Myron: What percentage of Oracle's revenue currently comes from cloud offerings?
Hurd: Let me separate two terms, because I get the question about cloud a lot. I want to differentiate cloud from SaaS. So, for cloud, I don't have a number, it's got to be big. When you look at all the clouds that are running our database, running our middleware, running Exadata, running the Sun Server, the cloud revenue is very hard [to determine]. When we talk cloud we're specifically really talking much more about SaaS, software as a service. As we said in our earnings last week, software as a service revenue is roughly $1 billion, which makes us the second largest SaaS provider in the world.
Hurd [smiling]: Some other guy. Nobody's told me who it is, so once I find out, I'll let you know [laughing].
To be honest with you, we just started. So this is really with [the acquisition of] Taleo, RightNow, some of our first initiatives. We will be the only one in the industry with a suite of products that are SaaS-ready—I'm talking about a whole portfolio by the end of the calendar year. So by the time we get started our plan is to be number one; we're going to be number one in the world of SaaS.
Liyakasa: Do you foresee your SaaS revenue surpassing your hardware revenue?
Hurd: No. Our hardware revenue is materially bigger, but, yeah, we'd love to see our SaaS revenue surpass our hardware revenue as long as our hardware revenue does well. We're going very hard after SaaS and we're very aggressive in building our SaaS sales force. We have high expectations.
Myron: Now that the RightNow Technologies acquisition has been finalized, what have you learned from this group of customers?
Hurd: RightNow has done a great job in the contact center. At the core of RightNow are modules to help automate a contact center traditionally in B2C. It's been historically a B2C solution. We're now moving it to a B2B solution in addition to B2C. Now, importantly for us, is that we want to integrate this into a common experience across the enterprise and not just sell RightNow, but sell a portfolio of products.
Liyakasa: After your acquisitions of Vitrue and Collective Intellect, are you planning to invest more in social analytics?
Hurd: We've got $32 billion in cash. We produced last year roughly $14 billion in cash flow, we haven't really gone on a big spending spree. With that said, our view of this social marketing stuff…you've got a lot of information that we think can potentially be valuable information for our customers about their brands out in the market that's broader than the traditional mechanisms and the traditional listening posts, so our view is to give our customers incremental listening posts for updates on their brands. That's where some of these acquisitions you're describing fit in.
Myron: In what ways is Oracle eating its own dog food? In what ways is Oracle incorporating yesterday's messages about connecting, about knowing your customers, about integrating channels into its own sales processes?
Hurd: Yeah. Well, we use our stuff. We actually moved everybody to Fusion Sales now. And we carefully evaluated Salesforce.com and rejected it out of hand as not a very good product. I'm making this up [laughing]. We use all our own stuff. So we have one of the largest sales organizations in the industry and all of it now runs on Fusion Sales. So as we start moving all of our customer experience stuff, we eat our own dog food. That's what we do. [Plus], we're moving, not in CRM, but in HCM [Human Capital Management], we're moving all our HR stuff to HCM SaaS.
Myron: Have you noticed a big improvement as a result?
Hurd: In all fairness, we just installed. Our fiscal year just started June 1, so we've been loading everything up. This was the cutoff, from a fiscal year perspective, so we're just now there.
Myron: You came to Oracle from HP, where you served as chairman, CEO, and president. Has the role of the president changed over the past five to 10 years as a result of the new way businesses interact with customers?
Hurd: The CEO stuff is tough stuff. What CEOs work on are typically three things: Get the strategy right. Get the operating model around the strategy right. Get the people right. If you get those three things right, typically good things will happen.
What's happened in the past decade is that the cycle has sped up incredibly, because of all of the things we discussed. Everything is now running 24/7. People are blogging. People are opining every minute. So you've got this mass acceleration when things are great, they're sort of extra great. When things are bad, they're sort of extra bad. And I think it's making jobs tough. Everything is extremely transparent. Everything moves at incredible light speed. Even rumors go at light speed, before you can even catch them. It's a more difficult environment. I'm not trying to say it's bad or good, it's just different, and it's causing people to have to do their work differently.