General Motors' CIO Speaks Out On Oracle's Acquisition Strategy

General Motors spends billions of dollars annually on IT and considers Oracle one of its top vendors. Information Week editor-at-large Mary Hayes Weier sat down with GM CIO Ralph Szygenda recently and asked what he thinks about Oracle's aggressive acquisition strategy, and his opinion of president Charles Phillips, who serves as Oracle's customer advocate and acquisition executor and has emerged as a potential successor to CEO Larry Ellison.

InformationWeek: What's your impression of Oracle's acquisition strategy?

Szygenda: Acquisitions are not always successful for the end customer. I like to see competition; I don't want a monopoly situation. Given that, I like companies doing acquisitions [if it means better integration of software]. If they don't do integration in the GM model, I pay systems integrators to do the work, and it costs money.

In the earlier days of Oracle buying PeopleSoft, there was a lot of consternation [among] CIOs. Some in this town [Detroit] were writing letters not supporting Oracle. I refused to do this. I believe I was right in this result. I have been unbelievably impressed by Oracle's acquisition strategy. I've been thrilled by the benefits I've received because of it.

InformationWeek: What do you think of Charles Phillips' performance as president of Oracle?

Szygenda: I think Charles has brought tremendous customer sensitivity to the company. I remember his history on Wall Street. [Larry Ellison's hiring of Phillips] was a little bit of a surprise because Charles traditionally had not been in the business of supporting customer bases. At least in my relationship, Charles is one of the most customer-sensitive individuals in the IT industry. He listens. He addresses problems. And he still makes [Oracle] money.

Oracle has been known to be difficult negotiators, especially on terms and conditions. We've had difficult times with Oracle, and Charles Phillips has basically smoothed those over from prior history. I thought very highly of him prior to Oracle, but he didn't run a major corporation. So Larry Ellison made one of the best moves in the IT industry.

InformationWeek: What do you think of Oracle's decision to continue to support multiple versions of acquired ERP software?

Szygenda: I sat down with [Phillips] early on and told him, "Don't immediately tell me I have to move to a new platform and change the world." They didn't mesh all these [acquired] companies overnight to get cost reductions; who came up with the idea not to do that, I'm not sure, but someone made some really good decisions. That says if I'm using PeopleSoft, Siebel ,or Hyperion, that No. 1, I will not be disadvantaged by an acquisition; and No. 2, they would extend [the acquired software] and make it better. I don't have a history of saying how wonderful IT companies are all the time, but I say every one of those products has gotten better for General Motors. You would think they would lose focus, but they didn't.

InformationWeek: Do you think Phillips will have Ellison's job one day?

Szygenda: I would not be surprised of anything Charles can do. I've worked with a lot of analysts on Wall Street, but I wouldn't expect them to go be president of company, and be a customer advocate, and he's done an amazing job. I would not sell Charles Phillips short of anything. His discipline must come from his background as a Marine, and he's brought a lot of discipline to Oracle. And it's not the discipline of a dictator, it's more of [discipline] of process. It's a much easier company to work with than 10 years ago.

InformationWeek: What's your biggest concern about Oracle's acquisition strategy?
Szygenda: Whether there is continuity to this vision. All of a sudden, a few quarters Oracle doesn't meet numbers, which puts high pressure on cost containment, and then someone says, "This strategy isn't working and needs to change." So, is there continuity to this strategy? That's my question. It feels good, but will it feel good two years from now? I'm watching, and I will be all over Larry, [CFO and co-president] Safra [Catz], and Charles on continuity. I meet with them several times a year, and one day a year visit the headquarters. In those reviews I will be watching continuity. Are they sticking to their strategy, is it delivering what they want?

I have the same [requirements] for SAP(SAP) and Microsoft. I look for continuity. If I'm trying to put in a two, three, or five year plan at GM, [I need a] commitment of products to do that.

...The other concern is that Oracle doesn't close me in. I have to have competition [among vendors].
InformationWeek: Couldn't Oracle's rapid acquisition rate become a distraction for that company?

Szygenda: They've told me they have a very lean acquisition strategy. Companies [can] send in an army and destroy a company by bringing in too much corporate help. Oracle doesn't put tons of people on an acquisition, and they leverage the organization that's been acquired.

InformationWeek: So if you had to sum up Oracle's acquisition strategy in a word or two, what would you say?

Szygenda: Unbelievably encouraging. A year and a half ago, it felt OK.

Author: Mary Haeys Weier @ InformationWeek