Wall St. and Business Wednesdays: Charles Phillips Leads Effort At Oracle To Woo Its Own Users by Vauhini Vara

In January 2005, days after software giant Oracle Corp. completed its hostile takeover of rival PeopleSoft Inc., Oracle Co-President Charles Phillips met with customers to pitch them on the deal's many benefits. But much of the reaction was negative.

At the event, Mr. Phillips met privately with chief information officers, and they expressed doubts about Oracle's ability to pull its new parts together. Some PeopleSoft customers complained that Oracle CEO Larry Ellison seemed ready to phase out the software products he had just acquired, forcing companies to move to Oracle software against their will. Others questioned whether Oracle would lose focus on its core business.

Mr. Phillips, Mr. Ellison's right-hand man, heard similar gripes as Oracle continued a $20 billion acquisition spree that also included snapping up Siebel Systems Inc., Retek Inc. and nearly 20 smaller companies.

It was the beginning of one of Mr. Phillips's biggest management jobs: winning over Oracle's own customers. "To me, that was the No. 1 thing we had to nail -- delivering for customers quickly," he says. "We were going to make more acquisitions, and we didn't want to go through this every time."

The 47-year-old quickly embarked on a world tour to meet face to face with users and put in place new technology for surveying customers about what they liked and didn't like. This past April, Mr. Phillips launched a program promising customers of acquired companies that Oracle would keep building new versions of their existing software rather than forcing them to switch to Oracle products before they were ready.

Such moves may be paying off. When Oracle reports its fiscal-first-quarter results Tuesday, analysts expect a jump in revenue, indicating Oracle may be taking market share from rival SAP AG. This follows strong earnings in June, when Oracle's revenue beat Wall Street expectations. The company's stock price, up 34 percent so far this year, is at its highest point in four years.

Mr. Phillips "has played a significant role in fixing the relationship" Oracle has with its customers, says Barry Libenson, chief information officer at industrial-products company Ingersoll-Rand Co. He says Oracle used to have a "horrific" reputation for aggressively selling software and then ignoring the customers who bought it. Five years ago, when Mr. Libenson was struggling to use $18 million of Oracle software, he called Mr. Ellison's office daily but couldn't get through. Oracle helped him resolve his problems only months later.

Now Oracle representatives telephone Mr. Libenson as often as once a month to talk about how the software is working. Oracle has even tapped Mr. Libenson for advice on how to integrate some of its newly acquired technology. And at a recent Oracle meeting, Mr. Libenson got a detailed look at the company's technology plans and spent two hours chatting with Mr. Ellison. "I was really sort of stunned," says Mr. Libenson, who recently spent another $13 million on new Oracle software.

In the old days, Oracle didn't seem to need to cater to customers. As software sales soared in the 1980s and 1990s, Oracle salesmen joked that they could simply sit back and take orders. But in recent years, spending on Oracle's bread-and-butter database software, which acts as a virtual filing cabinet, has slowed. It tried to boost its efforts in the market for business applications, which help with tasks in areas like human resources and accounting, but struggled to gain traction when it was building such software internally. That led Mr. Ellison, in 2003, to start snapping up companies that specialized in business applications. Part of his goal was to acquire the companies' customers in the hope that they would pay for the maintenance of their existing software for years to come.

Oracle tapped Mr. Phillips -- who holds a computer science degree, as well as an M.B.A. and law degree -- for a top marketing position in May 2003. The former Marine Corps captain, who spent seven years as an analyst at Morgan Stanley & Co., had long connections with companies' information chiefs, regularly giving them his cellphone number. Eight months after his arrival at Oracle, he was promoted to the No. 2 spot, which he now shares with the chief financial officer, Safra Catz.

Unlike earlier No. 2s at Oracle, who left or were pushed out after expressing ambitions to run the company, Mr. Phillips has publicly said he is happy with his lower-key position. Some software-industry insiders dismiss him as a glorified public spokesman, saying Mr. Ellison and Ms. Catz make all the significant business decisions and then leave it to Mr. Phillips to explain them to customers. But customers say Mr. Phillips has played a big role in improving their view of Oracle, and an Oracle spokesman says, "Charles is involved in every key business, sales, management and M&A decision the company makes."

Mr. Phillips's efforts to improve customer relations date back to his early days at Oracle. When some internal emails suggesting Oracle planned to drop the PeopleSoft product line surfaced at a trial in 2003, Mr. Phillips quickly sought to reassure PeopleSoft customers that Oracle would keep supporting them. He also reached out to customers by tapping some top information officers to join a group that would regularly advise Oracle on strategy.

Still, some customers were worried after Oracle closed the PeopleSoft deal last year. "I didn't know what was going to happen," says John Matelski, deputy chief information officer for Orlando. The Florida city used some PeopleSoft software, and when he was considering buying more, Oracle salespeople urged him to buy Oracle products instead, saying the future of the PeopleSoft products was uncertain. He heard similar stories from members of an Oracle users group he heads.

Other Oracle executives didn't do much to help. In early 2005, they started touting a new project called Fusion, an ambitious effort to build a new set of products based on Oracle's own software as well as the new technology it had acquired. Some customers believed Fusion meant that Oracle might cut off their existing products. Indeed, Oracle offered so few details about the project that rival SAP dubbed it Project Confusion.

Mr. Phillips soon toned down his talk about Fusion and brainstormed ways to persuade customers that their existing software was safe. This year, at a conference in Nashville, Tenn., he promised that Oracle would keep developing new versions of the software it had acquired through a new program called Applications Unlimited.

That opened a gusher of spending by customers that had been holding back. Mr. Matelski says the Applications Unlimited announcement is one reason his relations with Oracle are now much improved.

Ray Barnard, chief information officer of the engineering and construction company Fluor Corp., says he is considering increasing his business with Oracle because of the changes it has made. Last fall, several Oracle representatives visited him at his Aliso Viejo, Calif., office. They had noticed he was spending less on Oracle products and wanted to know why. He told them, "I don't ever see you unless you want to sell me something." Then he handed them a long list of complaints, including that he found Oracle's method of charging him for software too confusing.

Four weeks later, Mr. Barnard says, the executives updated him on how they were addressing the issues he had raised. For example, Oracle was simplifying the way it tracks how many people at Fluor use Oracle software, making it easier for Mr. Barnard to understand what he's being charged for. Now, Oracle representatives meet with Mr. Barnard at least quarterly for a progress report. "They've followed through on just about everything," he says. "It's a huge shift."

This article appears in The Wall Street Journal

Vauhini Vara

Wednesday, September 20, 2006

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