Chief executive officer, Oracle Corporation
Nationality: American.
Born: August 17, 1944, in New York, New York.
Education: Attended University of Illinois, 1962–1964; attended University of Chicago, 1964–1966.
Family: Son of Louis (accountant) and Lillian (maiden name unknown; bookkeeper) Ellison; biological son of Florence Spellman (biological father unknown); married (first two wives' names unknown; divorced); married Barbara Boothe (divorced); married Melanie Craft (writer), 2003; children: five (third marriage, two; fourth marriage, three).
Career: Precision Instruments, 1976–1977, vice president, research and development; Software Development Laboratories (Oracle Corporation), 1977–, chief executive officer; Oracle Corporation, 1978–1996, president; 1990–1992, 1995–2004, chairman.
Awards: Entrepreneur of the Year, Harvard Business School, 1990; Science Applications International Corporation Information Technology Leadership Award, Smithsonian Institution, 1994.
Address: Oracle Corporation, 500 Oracle Parkway, Redwood Shores, California 94065; http://www.oracle.com.
Lawrence (Larry) Joseph Ellison was regarded one of the most visionary leaders in the information technology industry. In 1977, with two colleagues, he founded a company that created the world's first commercially viable relational database. This technology revolutionized the way businesses were able to access and use data. Owing to Larry Ellison's drive and competitive spirit, Oracle databases eventually dominated the market, and Oracle grew to become the second largest independent software company in the world. With a personal fortune estimated at $18.7 billion in 2004, Ellison became one of the world's richest people. Ellison's remarkable foresight and willingness to take risks were demonstrated in his early recognition of the significance of the Internet. Ellison's interests outside the software business, such as his love of yacht racing and his profound interest in Japanese culture, also attracted a great deal of attention from the news media. His lavish lifestyle contributed to an image of Ellison as a flamboyant and charismatic personality.
Ellison also faced harsh criticism for his management style. His arrogance and recklessness at times put the company and his personal fortune in jeopardy and drove many talented executives out of the company. Oracle gained a reputation for having a ruthless and unethical corporate culture. In addition, Ellison's credibility was often damaged by his tendency to exaggerate the performance of Oracle and its products. Many observers believed Ellison's involvement in other projects, such as the Oracle America's Cup campaign in 2002, were serious distractions that were detrimental to his business. One of America's most controversial business leaders, Ellison excited strong emotions—ranging from loyalty and admiration to bitter hatred—from those who worked with him.
Early Life
Ellison was born in New York to a single mother, who gave him up for adoption to her aunt and uncle. Raised in Chicago in a lower-middle-class Jewish family, Ellison had a difficult relationship with his adoptive father. Ellison later cited his father's lack of faith in his son's abilities as an important factor in his own desire for recognition and success. However, the drive and ambition for which Ellison was to become notorious did not appear until he was well into adulthood. After graduation from South Shore High School in 1962, Ellison enrolled in courses at the University of Illinois but left without completing his degree when his mother died of cancer. He then enrolled as a physics and mathematics major at the University of Chicago but again left without graduating. Ellison later blamed his failure to complete his college education on his short attention span, lack of discipline, and lack of respect for authority.
Ellison's experience at college was valuable in one respect. As part of a course in physics, he taught himself computer programming. He started doing contract programming and discovered a work culture that suited his temperament and his lifestyle. In Softwar, Matthew Symonds quoted Ellison as saying, "My short attention span didn't work against me because I could get programs written very quickly. I ended up making quite a lot of money, and I only had to work a few days a week. It was fun and it was easy. And nobody cared if you were a Ph.D. from MIT or had never finished high school." In 1966 Ellison left Chicago and headed for California. For most of the next decade, Ellison moved from company to company as a programmer. His main motivation was earning enough money to finance hiking and rock-climbing trips in the Yosemite Valley.
Software Development Laboratories
In 1976 Ellison worked for a small company called Precision Instruments, which changed its name to Omex. The company was working on a mass storage concept, and Ellison was hired as vice president of research and development. His experience at Omex led Ellison to believe that he could do a better job of running a technology company than most of the managers he observed around him. The independence of being his own boss also was appealing to Ellison's nonconformist temperament. When Omex needed software for the project, Ellison persuaded two friends, Edward A. Oates and Robert N. Miner, to join him in establishing a company to successfully bid for the contract. In 1977 Software Development Laboratories was founded with $2000, and Ellison, as architect of the idea, held majority ownership.
The company was conceived as a consultancy business. However, the three men soon decided to go into the fledgling software business instead. As computer hardware technology developed, business demand was growing for prepackaged software programs that were ready to use. The three men needed to develop a useful program that could be sold repeatedly to different companies. The key would be coming up with the right product.
Relational Databases
In 1970 an IBM researcher named Edgar H. Codd published a paper on relational databases. His paper was highly theoretical and not widely understood, but it conceived of a new way of organizing large amounts of data so that information could be accessed easily. The potential in Codd's theory was enormous, because it meant that companies could manage and retrieve data in ways that had never been previously possible. However, with the current state of technology, the relational database, as Codd's model was known, would be very slow. It was widely accepted that the idea had no immediate commercial viability. In the mid-1970s IBM Research built a prototype relational database and developed a special programming language called SQL, which allowed easier interaction with the database.
For a variety of reasons, IBM was slow to move on the progress it had made with the database. It was up to a young upstart company with nothing to lose in the way of reputation or market share to take the technology and turn it into a viable product. Ellison was one of many who had read the papers that were published on IBM's work with the relational database. However, he was one of few willing to risk everything in making the effort to produce the world's first commercially viable relational database. Over the next two years Software Development Laboratories changed its name to Relational Software Inc. and developed the technology. The U.S. Central Intelligence Agency (CIA) had been interested in the concept of relational databases for several years and provided the company with money to help get the software ready for commercial release. When Oracle Version 2 was launched for the market in 1979, the CIA was one of the first customers, along with several other government intelligence agencies. The small company had snatched the technology out from under the noses of IBM and put the first relational database, albeit one that did not work very reliably, on the market.
Building Oracle
In 1983 with the launch of Oracle Version 3, the company changed its name to Oracle. In establishing his company, Ellison exhibited the fanatical determination and aggression that were to make him legendary in the industry. His task was not only to get customers to buy Oracle databases but also to persuade them that relational databases in general were the way of the future. To overcome customers' initial reservations, Ellison was required to exercise all his powers of persuasion to captivate and dazzle his audience. According to Symonds in Softwar, Donald L. Lucas, a company director, described Ellison as "like a spiritual leader, an evangelist for the relational data base model." In the early days of the company Ellison developed one of his key skills—his ability to communicate his vision for the future of the information technology industry to those around him.
Completely focused on gaining market share for the product, Ellison became notorious for his wildly exaggerated claims about what the software could do. In the race to gain market share before rivals in the industry could launch their own versions, Ellison was willing to take incredible risks. The first versions of Oracle were notorious for their unreliable performance, and customers complained of late deliveries and broken promises. But the aggressive sales strategy seemed to work. In 1986, one day before Microsoft did, Oracle went public at $15 a share, closing the day at $20.75 a share, a market value of $270 million. Ellison's 39 percent stake was valued at $93 million. In 1987 Oracle posted revenue of $131 million, and Ellison predicted it was going to become the largest software company in the world.
Determined to maintain the company's growth, Ellison developed a reputation for pushing his employees extremely hard. In 1985 he declared that the company would double its revenue every year. For a couple of years his boast seemed to be coming true. Ironically, however, Ellison's arrogance and recklessness, which partly accounted for the company's success, resulted in business practices that nearly led to the downfall of the company. In 1988, facing intense competition from companies with superior products, Ellison decided to release Oracle Version 6 before it had been properly tested. The ensuing problems were disastrous for Oracle's reputation and its credibility with customers.
The decrease in revenue resulting from the problems with Version 6 was exacerbated by Oracle's aggressive sales force. Spurred by the demands of their ambitious CEO, Oracle sales-people were willing to offer almost anything to close a deal, including huge discounts, and were selling to companies that did not have the money to pay. Because of these problems as well as a chaotic accounting system, by 1990 Oracle had lost control of its finances and faced a serious cash-flow crisis. In 1991 Oracle announced losses from the previous year of nearly $36 million, which severely affected the company's share price and nearly led to its demise.
Maturity
While many of the company's problems could be traced to Ellison's own shortcomings as a CEO, it was also apparent that the company's future depended on Ellison's visionary brilliance and drive. However, the entrepreneurial spirit that had launched the company and driven it through the early years needed to be tempered with more solid and professional business practices. Jeffrey O. Henley and Raymond J. Lane were brought into the company, taking on the roles of chief financial officer and chief operating officer, respectively. Ellison himself refocused and paid more attention to the details of running the company in a professional manner, aspects he had previously ignored. With the positive impact of the new management team and the launch of a new product, Version 7, which was superior to anything else on the market, Oracle was able to return to profit. By 1994 Oracle had clearly triumphed over its competitors and was dominating the database market.
The Internet Revolution
Despite its success Oracle was still a small player in the technology industry and was far from achieving Ellison's goal of being the largest software company in the world. To his chagrin Ellison was far short of the wealth and influence wielded by the Microsoft cofounder William Henry (Bill) Gates III. Considerable foresight and vision on Ellison's part were needed to propel Oracle into the forefront of the industry. In 1995, while the rest of the world was dazzled by the launch of Microsoft Windows 95, Ellison was predicting the eventual decline of the personal computer, which was the basis of Microsoft's computing concept. Although most experts dismissed Ellison's comments as ludicrous, few could have predicted the impact that the rise of the Internet would have on the information technology industry.
From the mid-1990s Ellison focused his business strategy on the Internet. Because of Ellison's foresight Oracle was ideally positioned to take advantage of the dot-com boom. By contrast, Microsoft, among others, was slow to recognize the significance of what was taking place in the business world. Oracle's powerful databases became an essential platform of business on the Internet, transforming Oracle into one of Silicon Valley's most powerful companies. In 2000 Ellison even briefly overtook Gates as the world's richest person. This position was mainly achieved through the force of Ellison's visionary leadership. As David J. Roux, a former manager at Oracle, explained to Andy Serwer, Julia Boorstin, and Jessica Sungin of Fortune, "Is he a great technologist? No, there are 100 guys in the Valley as good as he is. Is he a great manager? No, but he's been smart enough to get them. What he is is a great leader. His great strength is to make exceptional employees do the impossible."
Despite success Ellison's dedication to the vision of computing via the Internet was a high-risk strategy for the company. Ellison was convinced that the old client-server paradigm of computing, whereby the software was shared between the desktop personal computer and the server computer, was a technological dead-end. Therefore he announced in 1997 that all the company's software would be written for the new Internet environment. This move was dangerous, because it risked alienating customers who were not prepared to make such a dramatic change to their business software platforms. Ellison also wanted to change the company's core business. Because of the limited growth potential in Oracle's traditional database market, Ellison looked to Internet applications as the way of the future for Oracle. This software was used to carry out a company's major business operations, such as sales, finance, and customer relations management. Most software companies focused on developing applications for one area of business, an approach known as "best of breed." Ellison's ambitious strategy was to develop a completely integrated ebusiness package, which he believed would dominate the industry the way Microsoft Windows had dominated the world of operating systems.
Ellison launched a massive shake-up of Oracle with the aim of transforming it into an e-business. This internal restructuring was intended to serve as an advertisement for what Oracle technology could do to improve business efficiency. While the strategy saved the company approximately $1 billion, it also had a severe impact on the management team at Oracle. The e-business restructuring centralized control in Ellison's hands, often at the expense of his senior executives. Lane, the chief operating officer who had been generally regarded as Ellison's second in command and eventual successor, was forced out of the company.
Downturn
The departure of Lane in 2000 and of several other executives in the following years left analysts worried about the stability of Oracle. It was feared that Ellison's apparent unwillingness to share power with his executive team was creating a management vacuum. In addition, problems occurred with the e-business suite launched in 2000. The product was intended to establish Oracle's dominance in the Internet applications software market, but the software fell short of the expectations Ellison had created, and his strategy looked shaky. Then the collapse of the dot-com and telecommunication industries, economic recession, and the September 11, 2001, terrorist attacks reduced technology spending. As a result, Oracle's growth was severely curtailed. Ellison's personal fortune dropped from $58 billion in 2000 to $18.7 billion in 2004. In 2002, when his leadership was most needed, Ellison spent months at a time away from the company, focused instead on the America's Cup race in Auckland, New Zealand. Business analysts pointed to declining revenue—$10.9 billion in 2001 to $9.5 billion in 2003—as a sign of a company in trouble.
Ellison remained dedicated to his vision of shifting Oracle's focus onto the Internet applications market. Oracle caused a furor in the industry in 2003 by launching a hostile $7.7 million bid for the takeover of the application software company PeopleSoft. The CEO of PeopleSoft, Craig Conway, a former Oracle employee, accused Ellison of trying to ruin his company. Others claimed the bid was just another Ellison ploy to gain attention. The U.S. Department of Justice investigated the proposed takeover and filed a lawsuit to block the deal for being anticompetitive. The Department of Justice claimed that only three companies—PeopleSoft, SAP, and Oracle—operated in this market and that merging two of the companies would reduce the chance for competition. In its defense Oracle claimed that the Department of Justice's definition of the market was too narrow and that many other firms were producing different types of software and could provide adequate competition. In addition, Oracle pointed to the likelihood of Microsoft's entering the market, which was part of the reason Oracle wanted to consolidate by purchasing PeopleSoft.
As of 2004 analysts continued to express doubts about Ellison's egocentric management style and about his long-term commitment to the company. As Ellison approached his 60th birthday, there were suggestions that he might leave Oracle to pursue his interest in the biotechnology industry. However, in mid-2004 Ellison remained firmly ensconced in the role of CEO, focusing on the legal battle over the PeopleSoft bid and the task of extending Oracle's market share in the Internet application software industry.
Sources for Further Information
Hamm, Steve, Jay Greene, and David Rocks, "Oracle: Why It's Cool Again," BusinessWeek, May 8, 2000, pp. 114–122.
"Larry Ups the Ante: Why Oracle Wants PeopleSoft," The Economist, February 7, 2004, pp. 59–60.
Serwer, Andy, Julia Boorstin, and Jessica Sung, "The Next Richest Man in the World," Fortune, November 13, 2000, pp. 98–110.
Symonds, Matthew, Softwar: An Intimate Portrait of Larry Ellison and Oracle, New York: Simon and Schuster, 2003.
Wilson, Mike, The Difference Between God and Larry Ellison: Inside Oracle Corporation, New York: Harper Business, 1997.
—Katrina Ford
