Business & Technology Nexus

Wow. Here's the pre-release. Good applications & technology numbers from Oracle. You can always count on Oracle for a great Q4 – and they've certainly delivered in '06.

One detailed point – Larry's been offering selective disclosure on Oracle's database business by combining it with his middleware business. This has effectively cloaked the health of the database business, though I'm certainly not suggesting it's intentional. But it is true Oracle's middleware business, led by Thomas Kurian, has been performing extremely well, seemingly taking share from everyone. So don't assume the "technology" growth numbers are database growth numbers – they're not.

On the applications front, this certainly puts Oracle back in the game against SAP. 56% for organic growth is very respectable indeed. And off of a '05 Q4 license of ~350MM, the 83% increase means Oracle pulled down ~640MM. Congratulations to all you Oracle employee readers! I can't wait to see how Bill McDermott, the often caustic North American SAP head, will spin Oracle's numbers.

Enterprise applications are back, that's for sure. At least in Redwood Shores.

Wikipedia attributes the coining of the phrase 'knowledge worker' to management visionary Peter Drucker way back in 1959. Quite simply, knowledge workers develop and use knowledge as their primary activity.

The knowledge worker performs within an enterprise, to be sure, but also within virtual "knowledge networks." These networks aren't necessarily structured & are often invisible to management. They typically form & grow within your organizations (but sometimes form across your supply chain too).

Many believe, including me, that supporting the knowledge worker and these knowledge networks can be very important to your sustained success.

Knowledge workers are a tricky bunch however. They generally are not satisfied by top-down edicts unless they can understand the reasoning behind them. And further, as their knowledge grows they expect more autonomy in their activities – they need to make decisions & feel empowered.

Wikipedia also cites a book entitled 5th Generation Management (link to Amazon.com) by Charles Savage circa 1996. Savage makes several claims regarding the negative effects of staunchly hierarchical management structures – one of which is lack of collaboration, either between employees or departments. The book claims that looking at an organizational structure of 3: a boss and two direct reports, the most important relationship is between the two employees.

Of course many enterprises may not agree, and most are not set up in a way that fosters virtual knowledge networks at all. And finally, and this is the fine point of it, enterprise systems need to adapt to serve the needs of knowledge workers far better than they have to date.

In Procurement in particular, Center-led concepts come closest to recognizing the needs of knowledge workers throughout the enterprise. But there's a lot more to do…

For those interested in technology and its relationship with entrepreneurship, I'd recommend reading Paul Graham's 2001 article called Beating the Averages. It talks about Paul's experiences starting up a firm that in the end became Yahoo! Stores. He explains why he and his co-founder chose LISP, a programming language that no one uses, and why he viewed that choice as the source of ViaWeb's competitive advantage.

Doug Hudgeon pointed his readers to a blog post that fascinated me on a key Toyota manufacturing innovation called SMED (Single Minute Exchange of Dies). The post follows the logic and rationale behind optimizing manufacturing processes against market requirements. Here is a direct link.

I love lessons like these where false choices are exposed. Toyota seems to have proven you can dramatically lower manufacturing overhead costs & at the same time provide more consumer options.

The post is by Bill Waddell at EvolvingExcellence, and he is clearly a demand-driven JIT supply chain guy.

I see a growing link between "Long Tail" thinking which I've posted about previously (excelling in variety vs. going for the homogenous blockbuster) & demand-driven supply chains. Perhaps one of my fellow Procurement bloggers will take the time to tie these 2 threads together.

This post returns Procurement Central to the Procurement topic & offers an historical perspective on the U.S. Defense Logistics Agency, otherwise known as the DLA. I find the history of this agency fascinating, as it offers over the span of almost 60 years a glimpse into how the pursuit of incremental efficiency gains can result in massive centralization in large, complex organizations.

But first some facts and figures. The DLA is a gigantic procurement & logistics management organization consisting of over 21,000 employees. In the government fiscal year 2005, DLA provided nearly "$32B in goods and services to all military services worldwide." It manages the majority of U.S. Defense contracts. It is responsible for not only acquisition of goods and services but in many cases storage and transport. It also acts as a central liquidation center.

The DLA primarily handles food, clothing, medical supplies, and weapon systems repair parts (See DLA at a Glance). It manages 5.2MM items, processes 54,000 requisitions per day, and holds an inventory of around $90B.

The DLA was established in 1961 by then Secretary of Defense Robert McNamara. But its roots go back much further, to 1947. And lucky for us, the DLA itself has a few historical web pages chronicling its growth from idea to behemoth.

DLA's vision could very well work for most central Procurement groups I've come across – "Right Item, Right Time, Right Price, Every Time."

I think there's a lot to be learned from the DLA's evolution as an organization. I've captured a graphical summary for your perusal (click on it for a large, readable version). And I encourage those with the time and interest to read a more complete historical account straight from the DLA website here and here.

Procurement people like competitive markets. And I think the database market definitely qualifies with open source alternatives like MySQL continuing to chip away at their closed source competitors.

The eCommerceTimes issued a nice article recently (Open Source Impacts Overall Database Software Market) summarizing the recent market share analyses from IDC and Gartner. Open source alternatives posted an impressive 47% growth, whereas Microsoft, the cheapest of the closed source vendors, posted 17%.

I'll quickly add that open source database revenue is paltry compared to market giants like Oracle, IBM, and Microsoft. But still, it seems likely open source will force these giants to adapt how they develop and sell their software. With Oracle buying SleepyCat (BerkeleyDB) and InnoDB (the ONLY MySQL table type supporting transaction integrity), open source is already, and quite seriously, on their radar.

Open source database alternatives offer much lower upfront costs (down to 0 license of course), and typically cost less to support & run. So using revenue as a barometer of market share & of how successful open source databases are becoming can be misleading. A more interesting "share" measure to watch will be the % of total production installations. What happens when open source databases are also the most common?

Here are a few more articles worth skimming:

"Open Source Soaks Database Market", TheStreet.com

"Open source software storms database charts", vnunet.com

"Open source shapes up as rival to Oracle", CNet News.com

For me, one person & one presentation seemed to capture the arc of progress of the open source movement better than any other.

The person's name is Larry Augustin, and the presentation was at the Open Source Business Conference held April 5th, 2005 in San Francisco. Here's a link straight to the pdf. Enjoy!

In June 2006 we announced Coupa, a startup venture I co-founded with Noah Eisner. Here is the text of that announcement (with minor commentary added)

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Today, June 6th 2006, I’m announcing what many of you have been anticipating for some time – my new venture. It’s called “Coupa“, and it’s been operating in stealth mode for a few months now. Our small crew comes from the Oracle Advanced Procurement team. It would be fair to say as a group we’ve designed & built quite a few Procurement products over the years. And we’ve come away with some pretty interesting beliefs that we now intend to test in the market.

At Coupa, we believe open source will form the components for the future of enterprise software. To that end, we intend to introduce best-in-class Procurement products at absolute rock bottom TCO based entirely on an open source technology stack. Our first product, a new take on eProcurement, will be available this July.

Why eProcurement and how is it different? I’ll delay answering these rather important questions for now. Suffice it to say those we’ve shared it with are saying things like “now why didn’t I think of that?!”

On the technology front, the Coupa team knows all too well today’s enterprise software is overly complicated, heavyweight, and yawn-inspiring. Our open source alternative aims to be the antithesis – lightweight, easy to deploy, and fun.

We expect to offer the software via traditional download and via SaaS.

I encourage you to register on the Coupa website to receive our latest news. And here’s a new email address you can reach me at: dave at coupa dot com. We’d love to hear from parties interested in joining our open source projects. In addition, we have a few openings for early adopter customers who can engage with us in an advisory role. Finally, we’d love to connect with SI’s specializing in either open source or Procurement.

I am planning to continue to operate Procurement Central (which later became the Business & Technology Nexus) as a separate blogging conversation from Coupa. It will afford me the opportunity to continue to recount my Oracle experiences, as well as touch upon the current trends I’m seeing in Procurement. And now I can add news on the start-up & also be able to share the technology and functionality choices we’re making.

I’m grateful to so many of my former customers & colleagues (as well as my new friends) for your support and wise counsel. Thanks for your help and encouragement – now it’s time to see what we can do!