How Detrimental Can a 2nd-In-Charge’s Departure Be?

How Detrimental Can a 2nd-In-Charge's Departure Be?
P.J. Jakovljevic - August 10, 2000

Event Summary

In an unusually terse press release on June 30, Oracle Corporation, one of the largest providers of software for e-business, announced that Ray Lane was leaving his post as Oracle's President and Chief Operating Officer. Lane remains on the Oracle board of directors.

Oracle Chairman and CEO, Larry Ellison, thanked Ray for his contributions to Oracle during his eight years with the company. "I am grateful to Ray for all of his efforts. He will be missed. We wish him nothing but the best."

Market Impact

It was a surprisingly small gesture of thankfulness for the man regarded by many as the true brains and the 'gray eminence' of Oracle Corporation. Lane has managed the company's day-to-day operations since 1992, a critical time in Oracle's history. At the time of his appointment, Oracle's reputation was suffering because of its hyper-aggressive sales force, financial mismanagement, and the repeated delivery delays of its flagship products. During Lane's eight-year tenure, Oracle's database business began to dominate the market, while its application business captured the No. 2 spot, gaining more and more ground on market leader SAP.

While Oracle's CEO and Chairman Larry Ellison is seen as the visionary, Lane was regarded by Wall Street and many industry analysts as Oracle's ballast, the one who translates the vision into execution. While Ellison's name is often associated with terms like 'flamboyant', 'aggressive' and 'ruthless', Lane's, on the other hand, has often been mentioned in the context of the company's 'moral compass', professionalism, and customer relationship nurturing. Therefore, it is no wonder that his resignation has sent a shockwave and prompted some financial analysts to dramatically downgrade Oracle's stock, calling Lane's departure "extremely negative news." This, bundled with a dismal performance from Oracle's database business and recent catch-up e-business maneuvers by PeopleSoft and SAP, seriously questions the company's seemingly apparent invincibility of the recent times.

Lane's departure may disturb users and the market in general, and in the short term affect the company's operations; however, Oracle remains a behemoth of a company that should be able to overcome the short term bumps in the long term. There were some indications that Lane's departure was not completely unexpected within Oracle's top brass. Nevertheless, the choice of Lane's successor may be one of the most critical decisions Oracle will have to make.

Whoever is chosen, the transition needs to be as smooth as possible. The stability and counterbalance to Ellison's visionary leadership will have to be preserved. The market will closely observe the company's future moves, fearing the possibility of it reverting to business practices that alienated a number customers and partners during the early 1990s.

User Recommendations

While Oracle's customers should not be overly concerned about possible ramifications of the departure, they are advised to be alert. We recommend monitoring Oracle's operations and overall strategic direction over the next few quarters. Existing and potential users currently evaluating Oracle products should consider both the maturity and the functionality of the product in their evaluations and make thorough comparisons to competitive offerings. Any organization evaluating Oracle Applications should only consider existing proven functionality.

Customers should vigorously insist on a contractual timeframe for delivery of a solution and future upgrades, and seek reference sites (preferably in their vertical market space), which have been successful with the product suite. Each eBusiness component should be put through its paces using a well-documented set of requirements, scripted scenario demonstrations, and rigorous reference checking.

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