For a private man who rarely gives one-to-one interviews, Mark Hurd has a curious ability to find himself in the spotlight.
His latest stint in the headlines came courtesy of Carly Fiorina, the former HP CEO who is now running for the Republican nomination in the 2016 US presidential election.
In a leadership race that has been dominated by controversy surrounding another prominent businessperson, Donald Trump, Fiorina has been presented as somewhat of a dark-horse candidate, mainly because of the dignified way she responded to a typically unsavoury Trump comment on her appearance.
But it is scrutiny of her business record – something she is trying to use in her favour – that has brought Hurd into the fray.
During the five and a half years that Fiorina spent leading HP, the company’s stock dropped in value by 65%, and she was widely blamed for the poor execution of the controversial merger with Compaq, which at the time was the biggest high-tech merger to date.
She was forced by the board to resign in 2004 and replaced with Hurd, who during 25 years at NCR had risen from an entry-level salesperson to CEO. Fiorina has attempted to promote her business credibility by claiming credit for HP’s reinvigoration, but plaudits have instead been directed towards Hurd.
Ringing the changes
While relatively unknown prior to his HP appointment, he came with a strong reputation from the success he had achieved during two years at the top of NCR – and he didn’t waste time in making his mark. Shortly after his arrival in 2005, he laid off 10% of the workforce, consolidated HP’s 85 data centres into just six, and introduced various other cost-cutting measures.
By HP’s 2009 financial year, Hurd had increased revenue to $114.6 billion – a massive jump from the $80 billion he had inherited five years previously – and the Compaq merger had been salvaged. Under his tenure, profits increased for 22 straight quarters and the stock price more than doubled.
But despite his success, Hurd’s time at HP came to an abrupt end in August 2010 when he was forced to resign following allegations of sexual harassment by a female contractor. An investigation by the company cleared him of violating its harassment policy, but deemed his behaviour inappropriate. The headlines were relentless. Hurd has denied any misbehaviour.
Although they served a similar amount of time as CEO of HP – and both were forced to resign in unceremonious circumstances in their early 50s – the similarities between Hurd and Fiorina end there. While Hurd is known as a numbers guy fiercely committed to results, execution and closing deals, Fiorina is considered a lady of strategy, boldness and charisma.
Perhaps it’s not surprising, then, that Fiorina has avoided a full-time business role since departing from HP, instead committing much of her time to politics: working for Republican senator John McCain’s unsuccessful presidential campaign; losing the 2010 Senate election for California; and announcing her entry into the 2016 presidential race.
Hurd has no ambitions to follow in her footsteps. ‘I have a job,’ he tells Information Age with a smirk. It’s unclear if this is meant as a dig – in contrast to Fiorina, Hurd bounced straight back into a high-profile job upon leaving HP, as president of software giant Oracle. In September last year, along with Oracle veteran Safra Catz, he was promoted to CEO – a role that was held by Larry Ellison, the fifth-richest man in the world, since he founded the company in 1977.
Ellison, unconcerned with the controversy surrounding Hurd – Oracle’s previous president, Charles Phillips, had his infidelity splashed over New York billboards by his former mistress – was delighted with the talent he had acquired through the drama at HP.
Behind the cloud
At Oracle, Hurd found himself with an altogether different challenge. While HP desperately required consolidation, streamlining and refocusing around existing product lines, Oracle needed to completely change the way it designed and sold software for the cloud.
Like many of its traditional competitors, Oracle found itself behind the curve as customers increasingly turned to native cloud service providers for enterprise applications they previously bought on-premise, such as customer relationship management (CRM), human capital management (HCM) and enterprise resource planning (ERP). The subscription model of software-as-a-service (SaaS) solutions gives end-users far more flexibility and affordability.
So a year into Hurd’s job, the strategy was clear: Oracle had to build out its cloud business. Ever the master of execution, he took charge of sales and marketing, while Catz continued to oversee finance and HR. Hurd has since doubled Oracle’s sales force and trained it for the new cloud products, but it hasn’t been an easy ride.
‘Every time you look back, you can say, “Gosh, now that I know this, I would have done this,”’ says Hurd. ‘I do think that as much as I don’t want to do it again, it was important to go through the process.
‘It’s a bit like many things in life: now that you know all that you do, could you have gone through school a lot quicker? Sure. But I think sometimes the process is as important as how much you’ve learned. We went through the school of hard knocks.’
Ellison, who now fills the roles of executive chairman and chief technology officer, has called this past three-and-a-half-year period the ‘start-up phase’ of Oracle’s cloud business, building out the physical infrastructure to support such growth.
The term ‘start-up’ could insinuate that the capabilities were developed organically – and while some, including the infrastructure itself, certainly were, Oracle also went about acquiring a range of companies to boost its SaaS skills.
‘Each of them approached SaaS a little differently,’ says Hurd, ‘so we got to see some different business models, experiences and ways of doing things. And we hired people from various companies that had experience.
As for approaching it like a start-up, Hurd agrees with the sentiment. ‘We’ve got into the SaaS business knowing a lot about software, but we’ve learned a lot about many things: delivering a service; selling; what a renewal is all about; how to operate data centres; and the customer satisfaction relationships that are required as they relate to a services business, which frankly is different from what we’ve known before.
‘So it’s a confluence of a set of things, and I’m not sure I’d want to go and trade it at this point because we’ve learned a lot and our business models have matured. A year and a half ago I had this huge pipeline, and mid-last year it started turning into bookings.
‘It’s continued to both perform and grow, and the fundamentals of our SaaS business now behave thoughtfully. We can now predict our business with, I wouldn’t say certainty, but a relatively high probability.’
Dethroning the king
In Oracle’s recently announced Q1 earnings results, its overall cloud revenues were up 29% year-on-year to $611 million – with 34% growth in SaaS and platform-as-a-service (PaaS) sales to $451 million, and 16% growth in infrastructure-as-a-service (IaaS) sales to $160 million. Billings for SaaS and PaaS were up 70% on 2014, and subscription licence revenue is by far the biggest area of growth for Oracle in the coming years.
The company is forecasting SaaS and PaaS revenues in Q4 to be up more than 60% over 2014, and around 50% for the full 2016 financial year – with profit margins on cloud products growing from 40% to 80% in two years. This, says Hurd, is in ‘sharp contrast’ to its biggest cloud competitor, Salesforce, whose revenue growth rates are on the way down.
That’s not surprising, however, given the enormous growth that Salesforce has enjoyed over the past 15 years. Founded in 1999 by Marc Benioff – who was previously Oracle’s youngest ever VP – following encouragement (and $2 million of funding) by Ellison, Salesforce pioneered the idea of software in the cloud, and quickly exploded.
By the time of its official launch party in February 2000, Salesforce already had 200 customers for its CRM software, but Benioff and Ellison fell out shortly after when Oracle launched a directly competing product. Benioff subsequently kicked his former boss and mentor off Salesforce’s board.
Revenue grew from $5 million in 2000 to $52 million in 2002. In 2004, it launched its IPO on the New York Stock Exchange, raising $110 million and introducing most of the world to cloud software in the process. Its full-year revenue for the 2015 financial year was $5.4 billion, up 32% on 2014.
Ellison still owns a sizeable stake today, but the couple never miss an opportunity to criticise the other’s company. Salesforce has recruited heavily from Oracle over the years, and Oracle has now set its sights firmly on dethroning Salesforce as the number one cloud software company in the world.
‘I think there is a pretty good chance that we will sell more than them this fiscal year,’ says Hurd. ‘If you listen to their numbers, they describe that they’re on not quite $5 billion in revenue and will grow 20%. If you take those bookings numbers and compare them with ours, we’ve booked about $1 billion in the past four quarters.
‘Then when you forecast out, which would include the quarter we just announced plus the next year, we’ve said we will do more than $1.5 billion. So that would make us, from a booking perspective, the biggest cloud company in the world.’
Oracle’s strategy in beating Salesforce relates to having each discrete application different and best of breed, but able to work together in a suite – and being the only SaaS company that also does PaaS. This allows users to write incremental code and modules, connected with an API, to extend an application without changing it.
‘Just showing up and saying “we’ve got a less expensive sales funnel than Salesforce” is not what people have been waiting for,’ says Hurd. ‘I think the fact that we now line up a marketing solution with a sales automation solution and a configure price quote solution gives us a suite of customer experience solutions that Salesforce doesn’t have.’
But with Salesforce dominating the CRM market and plenty of competition in HCM (Workday) and marketing software (Adobe and Marketo), the biggest SaaS opportunity lies with the largest segment of application, ERP.
According to Ellison, the number one ERP provider is by default the leading applications vendor. In the last generation, that was SAP, traditionally Oracle’s biggest competitor.
However, ‘SAP hasn’t really rewritten its software for the cloud and done the work to create a modern application suite’, claims Hurd.
And despite the disruption of cloud, he believes that ERP, along with database, will continue to be Oracle’s most important software category – as they both have been for the past 20 years.
‘We believe that ERP is extremely strategic,’ he says. ‘It tends to pull with it many other modules, so being a leader in it is, we think, very important – particularly since SAP didn’t release and build a new cloud product, so we get an opportunity with their base as well as ours, plus greenfield customers.’
Oracle has closed deals with 1,350 cloud ERP customers in the past five quarters. Hurd tells Information Age the number of on-premise ERP products it has sold in the past 24 years but asks for it to be kept off the record. Clue: if Oracle continues selling at the same pace, it will be far sooner than 24 years before it reaches that number in the cloud.
‘The speed is amazing,’ Hurd says, back on the record, ‘and it will accelerate as more and more features and references come in. It’s an incredibly exciting category, and we don’t really have a great competitor in it yet.’
The growing cloud sales have undoubtedly been impressive, but Hurd’s job will now be to ensure that they outpace the ongoing decline in Oracle’s bread and butter for revenues, on-premise software.
This is by far its largest segment, but decreased by 4% year-on-year in Q1 to $5.8 billion, while new software licences were down 16% to $1.2 billion.
Along with smaller dips across its hardware and services lines, these figures resulted in a 2% year-on-year decline in total revenues for Q1 – and Oracle has now missed sales expectations in six of its past seven quarters.
However, the Hurd effect has been clear to see. When he joined Oracle in September 2010 its stock was trading at around $23. It hit a high in December 2014 of around $46, and has since decreased back to just below $40.
With the hard work now done in setting up its cloud business, Hurd will no doubt be back in the headlines again – and for all the right reasons.