Arik Hesseldahl

Recent Posts by Arik Hesseldahl

What’s Behind the Marc Benioff-Larry Ellison Feud?

Clearly the relationship between Oracle CEO Larry Ellison and Salesforce.com CEO Marc Benioff is a complicated one. Benioff, it appears, has something to prove against his onetime boss and founding investor, and Ellison is having none of it.

How else to explain the weird kerfuffle that exploded like a firecracker last night at Oracle’s OpenWorld conference in San Francisco? Benioff has delivered keynotes at OpenWorld before, in 2009 and 2010 and probably earlier than that, though I didn’t conduct an exhaustive search.

As we all know, Ellison ordered Benioff yanked from the OpenWorld speaker’s roster yesterday. Officially, his talk was moved from 10:30 am today to 8:30 am Thursday, the final day of the conference, when no one but the stragglers are likely to be in attendance.

“At 3:30 today [Tuesday] we were notified we were cancelled,” Benioff told me by email last night. “Then we were told we were moved to Thursday morning when there are no other presentations. We view this as a cancellation.”

His response was to schedule a speech at an alternative venue, the Ame restaurant inside San Francisco’s St. Regis hotel, for the same time slot. (See the press release here.)

So what’s the wrangle really about? On the surface, it’s a difference of vision, a geeky technical debate. What exactly is cloud computing? To Benioff, the cloud is something that can’t be delivered to the customer on a forklift because it’s a service delivered via the pipes of the Internet. Everything that makes it go lives in one or more remote data centers that the customer never touches and rarely, if ever, thinks about. Just like Salesforce.com, where the customer needs nothing more than a browser running on an Internet-connected computer or iPad or smartphone to get started. Or Amazon Web Services. Or Google Apps. Customers pay for what they use, have nothing to manage, install, maintain or upgrade, and stop using it when they no longer need it. Easy, economical, cheap and accessible to everyone.

To Ellison, the cloud can be a hybrid. Certain customers — like the many large companies that are Oracle’s stock in trade — fundamentally distrust the notion of handing their data off to a third party. They run software applications on hardware that’s installed on their own property, or in combination with hardware that Oracle runs for them. On this side of the debate you’ll find not only Oracle, but also other companies with established IT hardware businesses, IBM and Hewlett-Packard among them. Expensive and time-consuming it may be, but real companies doing real things traditionally own their own assets, the argument goes.

As Benioff tells it, this is the “false cloud.” He’s been using that phrase incessantly for some time, and he seems in recent weeks to have deliberately stoked the controversy. At a follow-up panel to his OpenWorld keynote in 2010, he was more direct. Hardware of the type that Oracle sells can be eliminated entirely in the age of the cloud. Fighting word for Oracle, especially when uttered in front of Oracle customers.

And Benioff isn’t the only one throwing punches. In 2009, Ellison described Salesforce as an “itty bitty application” that happens to run on Oracle databases.

But as is always the case with public grudges, it’s more complicated than it seems. There is a personal element to it all. Before starting Salesforce in 1999, Benioff was Oracle’s star employee. He spent 13 years at Oracle. At 23 he was named the company’s Rookie of the Year, and at 26 was the youngest person promoted into the VP ranks. He was in many ways Ellison’s star student. Charles Babcock, writing in Information Week, remembers an Oracle event where Ellison tapped Benioff to address a customer question, and he commanded the stage in a manner one could describe as Ellison-esque.

When Benioff left to start Salesforce, Ellison was an early investor and sat on the Salesforce board until a falling out — spurred largely by Ellison’s backing of Netsuite, another cloud outfit started by two other Oracle alums, Evan Goldberg and Zach Nelson, whose offerings overlap competitively with those of Salesforce.

Obviously Benioff learned well from the master. A classic tactic from the Ellison business playbook is to prod or cajole your quarry into a public PR fight. Look at all the times where Ellison has been brazenly outspoken: Defending, then hiring Mark Hurd after his sudden resignation from HP last year; publicly chasing Hurd’s replacement Léo Apotheker out of his office on his first official day on the job by attempting to serve him with a subpoena; squabbling with Autonomy CEO Mike Lynch.

So who won this round? The conventional wisdom has to give this one to Benioff. With the cancellation of his speaking gig, he’s attracted more attention than he would have otherwise saying whatever he wanted from Oracle’s stage, a fact about which Benioff crowed to the New York Times last night, calling it the “best possible outcome.” It does look like Benioff planned for this result.

However, this long-simmering feud, now that it has boiled over so publicly, is far from over.


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