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To hell with culture
June 30, 2005
Larry Ellison just put another nail into the coffin of software sentimentality. A mere six months after Oracle's rancor-filled takeover of PeopleSoft, Ellison's company yesterday delivered strikingly strong financial results, not just in its database business but in applications as well. The numbers undercut the popular notion that mergers of software firms are horribly difficult, if not inherently doomed.
Because the value of software makers lies in the creativity of their "human assets," the old thinking went, you couldn't apply tough management discipline in quickly consolidating two organizations and ripping out redundancy. Cultural friction would get in the way; sensitive knowledge-workers would walk. Here's how IBM's Joe Marasco put it last year: "The largest single reason for failure when two software companies combine is cultural incompatibility. Even if the two cultures are similar, merging them can be difficult for a vast variety of technical reasons. Plus, if the two companies are located some distance from one another, there is insularity because of the separation. Whatever the root cause, in the face of fundamental incompatibility, most software mergers fail, plain and simple."
Ellison's approach flew in the face of the conventional wisdom. As he tells BusinessWeek, he applied GE's hard-nosed, to-hell-with-culture acquisition philosophy to combining the two big software houses: "We had a clear plan. A lot of things were done in 30 days, including integrating the two salesforces. The secret to these mergers is to make the hard decisions and move quickly. The problem with a lot of mergers in the tech industry is they're not real mergers. People don't eliminate duplication of effort. We wanted to get the economies immediately." It's the rip-mix-burn method, and it seems to have worked.
As we move to a more industrial approach to making business software (look at the Bangalore factories), we're also moving to a more industrial approach to software company management. The software business is maturing, and sentimentalism about creativity is being squeezed out. Here's Ellison again: "I think of this as the GE operational-excellence phase. Alfred Sloan was the consolidator in the auto industry. Ford had been the early winner, but General Motors got bigger. History repeats itself. It happened in railroads and cars. Now it's happening in software. And there, we're the consolidator. The magic in the software industry is called scale."
Don't get me wrong: There will always be an important place in software for entrepreneurship and innovation. They're just not the forces driving the business anymore.
Comments
ITS REALLY KNOWLOGABLE
Posted by: suraj srivastava at October 16, 2005 07:13 AM
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