"Spending remains tough; and customers are choosy on what they are going to invest in"

It is not easy to impress Larry Ellison, the maverick CEO of Oracle Corp., the world's second largest software company with revenues of $10.16 billion, but for Charles E. Phillips Jr., it took just eight months to do precisely that. When Ellison decided to broadbase Oracle's management in January 2004, CFO Jeff Henley was made Chairman, and Executive VP Safra Catz, and Phillips, who had joined in May 2003 as Executive VP, were made co-Presidents.

It wasn't much of a surprise, though. The forty-five-year-old Phillips had been with Morgan Stanley for nine years before joining Oracle, and was one of the foremost enterprise software industry analysts in the US. With emerging markets like China and India increasingly becoming the main drivers of growth and the US going into consolidation mode, Phillips has turned out to be the right man in the right place at the right time. On a tour of the Asia Pacific, he spoke to BT's Venkatesha Babu on India, China, and Oracle's hostile takeover attempt of PeopleSoft. Excerpts:

You are coming here after visiting China. What do you feel about these two markets?

Lots of energy and enormous opportunity. In markets like the US and Europe, it has been some time since we saw this kind of energy. Whereas (here) people are getting hired, construction is booming, and there is a lot of action. It feels good.

What is the outlook on global tech spending? Is the tech recovery sagging, especially in the light of warnings given by leading players like Intel, Veritas and BMC?

We never thought that there would be a tremendous upsurge in tech spending. So spending remains tight; customers are sceptical in making lots of additional investment, and have become choosy on what they are going to invest in. Luckily for Oracle, given our strong technology and customer focus, we have been able to do better than others. Our last three quarters have been good. We have been shipping record licences, and we have been gaining customers and marketshare. There is plenty of competition out there.

Yes, but you are trying to reduce at least one competitor (read: PeopleSoft).

(Laughs). Yes. We are working on it. Hopefully, we will be able to do it.

Why is Oracle desperate to get PeopleSoft to the extent of taking on the US Department of Justice?

I don't know if "desperate" is the right word. We feel that there is a lot of synergy and we saw an opportunity. We thought it would add value to our customers as well as to PeopleSoft's customers. We felt that everybody, including the customers and the stakeholders, would be better served with this move. PeopleSoft would have anyway been bought over somewhere down the line. Every quarter, we have been adding customers while PeopleSoft has been losing its. So we had to decide: What is the best way for customers going forward? If customers are going to migrate anyway, we would like that they rather migrate to Oracle than to our competitors. We will get a big chunk of them (customers) one way or the other. All we are talking about is timing: whether this will happen in a single stroke, immediately, or whether it will be an elaborate affair. There is no desperation, only value addition to everybody concerned.

What will happen to JD Edwards offerings in the marketplace if you do succeed in your PeopleSoft bid?

We have not made any decisions down the line on what will happen. All I can say at this moment is that they will be treated exactly as PeopleSoft's customers would be. If they want to migrate to Oracle platform and services, we will welcome that.

But why is there this feeling among some customers that choice will be reduced if you succeed in your PeopleSoft takeover bid?

That is because PeopleSoft has been telling them that. Basically, they have been trying to scare the customers. That is their defence and their whole strategy. That is all there is to it. Initially some customers might have had apprehensions, but we came in, explained to them that Oracle would look after their interests, explained our strategy and now that they have heard our case, they do not feel so any more.

The DoJ in its anti-trust trial has been quoting your own remarks, made as an analyst at Morgan Stanley, that this was an oligopolistic market and there should be more players...

I didn't say any of that. It is just your commentary. Remember too that this was three years ago. Microsoft since then has pumped in $2 billion (Rs 9,000 crore) into this segment. There have been a number of other factors, which have fundamentally changed the market dynamics. The market has undergone lots of changes. If the justice department was that desperate to get an analyst's three-year-old report, well...

"India is a great place for technical talent. I am amazed at the kind of work being done here"

Isn't it surprising that you are using Microsoft's investments in the sector to advance your case for the takeover of PeopleSoft...

What is so surprising? As I already said, Microsoft has made $2 billion worth of investments in terms of acquisitions, in getting customers, they were talking to SAP...

You feel vindicated by that?

It does not matter what I think or you think. It is what the judge thinks that matters. All we are saying is that there is plenty of competition and that Oracle must be allowed to do whatever is in the interest of the customers and the company.

Would you look at an acquisition in the middleware space like, say, BEA Systems, as has been speculated?

We have already gotten a lot stronger in middleware than we were; we have gained marketshare; we have gained in the number of units sold; we regularly scan the marketplace. I cannot say anything more than that.

How much revenue does Asia Pacific provide?

Last year, APAC accounted for 19 per cent of all shipped licences and nearly 14 per cent of the revenues (around $244 million, or Rs 1,098 crore). Japan and South Korea were the number one and the number two markets for us.

How do you see the Indian market evolving vis-à-vis China?

Both of them are huge opportunities for Oracle. Originally we had looked at China as a marketing place, with probably some customisation for the local market. India was also initially seen as a development centre, which would then export to Oracle customers worldwide. Those views have, however, changed. There are other opportunities available now in both these markets.

India is a great place for technical talent. Since many of our multinational customers are present here, we have had a research and development (R&D) facility functioning here. I am amazed at the kind of work being done out of here. In Mumbai, I had also announced that we would be hiring at the rate of 250 people per month for the foreseeable months.

What will they be working on?

Oracle has multiple lines of business. They will be deployed in software development, support and other functional areas.

Why is there this perception that your offerings are for large enterprise customers and not aimed at SMEs (small and medium enterprises)?

Not at all. Nearly a third of Oracle India's revenues come from that segment. We have adapted our offerings to meet the needs and requirements of this very important segment.

Are you happy with what has been achieved by your operation in India over the past couple of years?

I am particularly pleased at the progress we have made here. Two years back, India was at the tenth place in terms of revenues from APAC but it has moved up to the fifth since. But then, we are never pleased 100 per cent. We are going to ask Shekhar (Shekhar Dasgupta, the Managing Director of Oracle India) and his team for more. India is becoming a pretty big market opportunity. Right now it is the fifth, we want that to move up to the third.