The ‘Elephant in the Room’ Question

I was a fortunate recipient of an invitation to attend the formal announcement of Oracle’s acquisition of Sun Microsystems at her Redwood Shores, Calif., Headquarters on January 27.

It was a historic event in the IT world, as it was the first time a major software company was buying a contemporary in the hardware sector; strange even by Silicon Valley standards. Even though acquisitions are hardly virgin territory to Mr. Larry Ellison, the highly competitive and very successful Founder/CEO of Oracle, having acquired over 50 companies including well established names such as PeopleSoft, Siebel and BEA Systems, this particular one posed an entirely different challenge given the concerns that regulators, especially in the European Union had expressed regarding possible breach of antitrust laws.

It will be recalled that Sun Microsystems was one of the major beneficiaries of the Dot.Com boom when many start-ups were kitting up with computer and networking gear as if they were going out of fashion. Companies like Sun and Cisco were receiving orders much faster than they could produce them; and smiling all the way to the bank. It was not surprising that after the Dot.Com bust, Sun was left in the lurch. While Cisco recovered through tenacity and business astuteness, Sun relied more on technology leadership, albeit without a clear business articulation of how their innovative products such as Java, Solaris and Sparc were going to be converted into cash at the bank. Sun nevertheless soldiered on until they were acquired by Oracle.

Listening to the fluent and rather good looking African-American Co-President of Oracle, Mr. Charles Phillips, itemising the immense benefits of the acquisition, including end-to-end solutions across the stack and a comprehensive storage management system, the Exadata, rumoured to be the iPhone of the Enterprise, I could not help feeling a deep sense of agreement that the acquisition shall provide a greater combined value to customers and partners alike.

Finally came the climax of the event, an address by the legendary Mr. Larry Ellison who had supervised the successful execution of this great feat. Everybody listened with rapt attention while he delivered his message. He enumerated increasing R&D to $4.3bn, hiring more engineers than he was letting go, returning Sun to profitability within 12 months and strongly emphasised ‘keeping it all’, in response to sceptics’ fear that he would break up Sun, keep the innovative software products and sell off the hardware remnant.

I was quite alarmed when Larry alluded to Oracle engaging directly with the top 4000 global customers and consigning partners to work only with the pile below this stratum. My concern was borne out of the fact that our company had partnered with a fledgling African GSM company, which had now grown to become one of the major global companies. It would undoubtedly be classified as a Direct Account for Oracle, thereby robbing us of the pipeline we have established with this customer over the 10 odd years that we have partnered with them in their technology strategy.

Mine was one of the first hands to shoot up into the air when it was time for questions from the floor.

I guess I was given the opportunity of the microphone because I stood out conspicuously with my distinct features, being one of the very few Africans at the event. I politely pointed out to Larry that the strategy of excluding partners from the top tier Accounts will backfire in the long run because it will adversely impact the partners’ businesses and greatly erode the much needed partner loyalty upon which Oracle had grown to her lofty heights. Little did I know that this concern was shared by many of the partners in the room and the global audience watching the event on the live webcast.

It turned out that Larry had good intentions to ensure that Oracle’s top customers received the best services from the company, and he had genuinely believed this to be the best approach. He graciously conceded that some partners really did add a good deal of value to Oracle’s business with the customers and should be retained to complement Oracle in those Accounts; he however reiterated his resolve to rid the channel of opportunists who made no investments nor added value but tried to make a quick buck by just shifting Oracle licences.

Mr. Judson Althoff, Senior Vice President, Worldwide Alliances & Channels was the first person to refer to the question as the ‘elephant in the room question’ during the breakout session. In retrospect, it is indeed an issue that deserves utmost attention, especially in our part of the world where many enterprises have not matured to the level of having their own intellectual property upon which they can build a business. The typical business model of many start-ups involves taking up franchises or operating as Value Added Resellers (VAR) to globally established companies.

While some of these local companies do not make the necessary investments in their businesses to take it to the next level, many more have built thriving businesses on the VAR model. How are such businesses protected from the challenge of the Original Equipment Manufacturer (OEM) or vendor venturing directly into their markets and snatching the rug from under their feet, after having developed the market for the vendors’ products? Is there a way in which both the vendor and the VAR can be encouraged to operate jointly in the market and mutually complement each other to serve the customer? What are the strong competences that the VAR can be encouraged to develop that will be of intrinsic value in the supply chain?

I can think of many local companies that have literally being wiped out as a result of a vendor making a direct presence in the market. This is very detrimental to the local economy as it erodes jobs and decimates the middle class that are the very engine of economic growth.

The Oil and Gas sector seems to have taken an early initiative to protect local industry by instituting a local content bill that ensures that the percentage of local input in the industry is progressively increased by creating the needed local capacity. Despite that, the contribution of local content is largely insignificant, with policy, products and personnel all being shipped in directly from overseas headquarters of the oil majors to execute turnkey projects here. The National Office for Technology Acquisition (NOTAP) has also done a lot to protect local industry by requiring that foreign companies partner local counterparts to develop skills and capacity as a complement in providing services to customers. Perhaps NOTAP has been relatively more successful in their quest because beyond mere moral suasion, they have the instrument of sanction through the restriction of forex approvals where foreign companies have rushed to engage directly with Nigerian customers without local partners.

I believe that what we need is a structured way in which we can support local industries by encouraging them to focus on areas where they can best add value so that they will not be viewed as irritants by foreign contemporaries, but as indispensible partners in the ilk of China being recognised as the indisputable manufacturing capital of the world, and India becoming the outsourcing capital.

This is precisely what the Computer Warehouse Group has laboured hard to achieve. Computer Warehouse is the foremost Systems Integration Company in West Africa, providing Core Banking Application for 11 out of the 24 banks in Nigeria, as well as Network communication facilities for 21 out of the 24 banks. The Group has offices in Lagos, Abuja, Port Harcourt, Ghana and Uganda, and is a partner to many of the global IT majors.

With the acquisition of Sun Microsystems by Oracle, Computer Warehouse Group is now one of the significant partners of Oracle in sub-Saharan Africa by scale and revenue. As a legacy Oracle and Sun Partner, CWG has won numerous awards from both companies, including OPN Award for Business Excellence and Sun Microsystems Best Systems Partner for Sub Saharan Africa.

As always, our best is yet to come.