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Oracle Industry Connect 2015 Keynote

Oracle CEO Mark Hurd: Market Turmoil Represents Opportunity

Oracle CEO Mark Hurd:
Market Turmoil
Represents Opportunity

By Michael Hickins

 

At Oracle Industry Connect, Oracle CEO Mark Hurd says companies can seize opportunities by engaging with customers in ways they demand.

WASHINGTON DC—Companies that are quickest to adapt are poised to win share in a market that is changing at an unprecedented pace, Oracle CEO Mark Hurd said March 25 during the opening keynote address at the Oracle Industry Connect conference here.

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Hurd noted that the millennial generation now entering the workforce—and beginning to represent a significant chunk of the consumer market—exhibits less brand loyalty and is more impatient and willing to post negative comments about companies that serve them than any other generation in US history.

While that represents a challenge for established companies that are unwilling to change, it’s an opportunity for the more flexible companies that are willing to engage their customers in ways they increasingly demand.

Part of the challenge is that CEOs don’t get a chance to pause and retool because their bottom line is that they’re expected to drive earnings growth. “Meanwhile around you is an incredible amount of turmoil, an incredible amount of dynamism, and an incredible amount of change. You have to somehow 'Rubik’s Cube' this into financial growth,” Hurd said.

Adapt or Die

“You have a chance to thrive. You also have a chance to go away if you don’t adapt,” he said, adding that “those who have the ability to communicate, talk, sell to, nurture, and evolve the relationship with the customer will win.” Cloud computing will have a “dramatic impact” on all these factors, Hurd said.

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Why? The challenge faced by most companies is that adapting to new rapid change often requires a significant technology lift. That’s something many companies can’t afford as long as they continue buying, maintaining, and upgrading their own technology. Hurd noted that average companies spend 82 percent of their IT budgets keeping their existing investments working, while only 18 percent of their budgets are dedicated to finding new ways of using technology to help them innovate and communicate with their existing and future customers.

Inertia, he said, is the enemy for big companies used to doing the same things over and over. “If you think 18 percent of spending on innovation is going to do it, I hate to break it to you, but it’s not going to work,” he added. Continuing to spend so much on maintenance is going to prevent companies from “keeping up with the dynamism in the market.”

The fact that cloud companies take over the responsibility for maintaining and upgrading hardware and software is the main reason companies should shift to cloud computing. “The benefit of cloud is not CapEx turning into OpEx; the benefit of cloud is somebody else does the work,” Hurd said. “Somebody else glues an operating system to a server... What is the economic value add of [companies] gluing an operating system to a server?” he asked. “Let somebody else do that for you.”

In addition, cloud vendors upgrade applications for free, allowing their customers to benefit from that level of innovation without having to pay more for it. Cloud computing represents a turning point in industry because it transfers IT work “from one part of the industry to another,” he said.

Oracle’s Industry Focus

Oracle CEO Mark Hurd

Oracle employs 22,000 people developing industry applications and has invested $3.5 billion over 5 years on applications tailored to various industries.

—Oracle CEO Mark Hurd

Hurd noted that Oracle employs 22,000 people developing industry applications and has invested US$3.5 billion over five years on applications tailored to various industries—a number that doesn’t include the R&D spending by companies acquired by Oracle during the same period. “No one else in IT spends this kind of money,” Oracle CEO Mark Hurd said. “We’re the only scale technology company that actually runs independent businesses focused on industry.”

Hurd used a number of statistics to bolster his claim that the workforce and consumer market are changing rapidly:

  • 50 percent of companies listed in the Fortune 500 in 2000 have gone out of business
  • 40 percent of working Americans can leave the workforce in the next three years
  • 50 percent of the workforce in 2020 will be millennials
  • 56 percent of millennials choose flexibility over more pay, and 60 percent say they plan to leave their job in fewer than three years

“These are the ones you need to sell to and motivate and keep loyal,” said Hurd.

Today, so-called advocate-customers (customers who recommend a company to their friends) spend twice as much, and generate 5 times more value over their lifetimes, than regular customers do. But even today, 77 percent of consumers claim no particular brand loyalty. That number will grow as more millennials join the workforce.

Today, those millennials will leave their jobs more quickly than preceding generations of employees, will switch brands more easily—and moreover, will use social media to broadcast their unhappiness with companies they feel give them short shrift. “The leverage has turned to the customer,” said Hurd.

“Our challenge is turn those challenges into opportunity.”


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