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Tech Industry

The software contrarian

Sybase CEO John Chen on why total cost of ownership is a farce, why industry consolidation is not inevitable, and why Larry Ellison is not everyone's idea of the software messiah.

John Chen knows how to speak his mind, particularly when he feels optimistic about the future.

Despite a drop in sales and profit, the chief executive of database software maker Sybase saw his company beat analyst estimates for second-quarter revenue and earnings. And as he revels in Sybase's prospects, Chen is getting equal enjoyment watching the latest antics of his chief rival in the database market, Oracle, and its mercurial CEO, Larry Ellison.

During the course of a CNET News.com editorial roundtable, Chen weighed in on a variety of topics from Oracle's hostile bid for PeopleSoft--a partner and supplier of business applications to Sybase--to the day when database vendors eventually give away core database engines and focus on selling ancillary products such as collaboration software, data warehousing tools and security software.

What's more, Chen offered a contrarian view on the IT industry's love affair with the "total cost of ownership." He asserted that the concept is totally misplaced. He also argued against the conventional wisdom that midsize providers like Sybase will inevitably get squeezed by industry titans in a wave of unstoppable consolidation.

But to survive long term, Sybase needs revenue growth. Chen, who arrived at the company in 1997 when the once-mighty Sybase was in a tailspin, has constructed a strategy that he asserts will bring Sybase to a full recovery--and long-term viability. He has reduced expenses and focused the company on a few areas, including its industry-specific database applications, wireless software and mobile databases, and integration software.

Q: What do you think of Oracle's hostile bid for PeopleSoft?
A: We have 400 customers jointly around the world. We are relying on (PeopleSoft) as our application platform vehicle, so when our customers say, "Hey, I want ERP (enterprise resource planning), I want financial packages, and what do you have?" We say: PeopleSoft. We are also running most of our business on PeopleSoft. I think it's a bad idea to have Oracle for our applications. I would hate to write a check to Oracle for maintenance. That won't happen, by the way.

I think, in general, for the industry, mergers and consolidations have to happen, but not at this level. Not at a level where you limit the choice...I'm against it from my company's perspective. I'm against it from an industry perspective.

I would hate to write a check to Oracle for maintenance. That won't happen, by the way.

If Larry Ellison manages to buy PeopleSoft, would you jump to SAP or what would you do?
We would look for alternatives. Again, like customers in the market, I would have one less choice. There are three potential solutions. We could go to a more niche player like Siebel Systems, or we could go to the large companies like SAP or IBM. The third possibility is we could use some of the next-generation, unwired enterprise methodology to deal with my applications needs.

You would not consider Oracle then?
I doubt very much I would. I have to run my business on Sybase. And how can I sell (Oracle-PeopleSoft applications) to my customers and then turn to them and have them use someone else's infrastructure? That makes no sense. Larry could call me one day and say, "I'll put all my applications on Sybase"--and on his nickel! I might consider that.

If Oracle is successful and it acquires PeopleSoft, what will this do to the database landscape?
It would have very little impact on me...Who typically buys database software from Sybase? They are the people who want to develop code. They believe that applications they build up or integrate together give them strategic values for their business. FedEx, AOL Time Warner, Goldman Sachs don't buy off-the-shelf things and then integrate them. They don't have any packaged applications. They need to go (through) the process of building their infrastructure, i.e., databases.

Do you think there will be more consolidation in the database market?
There are only four companies that do databases. I doubt very much that Microsoft and IBM will give up their database businesses, and I don't think Oracle could afford it, since that is where most of their profits come from. I make good money from my database business and don't feel the need to consolidate.

John Chen

Do you feel that open source is happening on the database side?
We are moving from a data-storage management system to a data management platform. The differences are the surfaces around it. The core engine could potentially be open source...It may be a good thing to open it up for everyone to develop. The question is whether there are other elements to that: security features and edge computing. All of these could be added to the system.

How do you turn around the software business, since everything is dropping in terms of dollars, cents and revenue?
Innovation. You can't sell the same stuff for the same price to the same people all over again. Other than Oracle putting an "i" at the back of their version and selling it to you all over again--you can't do that because there is no value. Customers aren't that stupid. You've got to sell them things that are innovative and new. I know we all talk about the total cost of ownership, but I think that is misleading.

When I run a business and you come to me and say, "Give me $5 million and I'll replace all your phones, and in three years you'll make money out of it," I won't listen to you for more than 10 minutes. But if you come to me and say, "Buy this thing and it will help you to roll out your products faster, or in a new space," then that's interesting. In order for you to have customers spend money, you have to help them make money.

The industry has been beating the total-cost-of-ownership drum for the last 15 years, and it was interesting to hear one of your peers yesterday talking up all these points that you have pooh-poohed.
For the technology market to expand, you must add new value. Total cost of ownership is not the way to jump-start IT spending.