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On the night of May 6, a screenshot of an email from Executive Vice President Don Johnson was thrown around the Oracle staff group, informing them of an all-staff meeting scheduled for the morning of May 7. Li Lin, who used to work for Oracle, was taken aback in the group. She had never seen anything like it before.
The meeting was short and heavy, with the head of human resources for Asia Pacific outlining the layoff plan and no questions. Oracle’s China R&D Center (CDC) was the first to confirm more than 900 layoffs, with more than 500 in Its Beijing r&d center. Unguarded, engineers who once thought they had prestigious JOBS and salaries in the IT industry descended on the Beijing headquarters, unearthing banners in both Chinese and English that plaintively urged: “We need to work and our children need to eat.”
This is not the end. “Now [compensation] is talking about Beijing, I don’t know when to shenzhen.” Li Lin said. Pessimism continues to ferment in the Oracle staff, the entire China R&D center may face “one pot”, including the core database team. Three decades into the Chinese market, database has been Oracle’s cash cow. Since 2002, Oracle has set up research and development centers in Shenzhen, Shanghai, Beijing and other places, with 1600 employees.
Larry Ellison, Oracle’s flamboyant founder, was a close friend of Jobs’s. The larger-than-life Company, based in California, has a lot of halo: the world’s second-largest software company, after Microsoft; Absolute oligopoly in database market… At the turn of spring and summer 2019, it slammed on the brakes in China.
A thousand mile dam is broken by a swarm of ants. In Li Lin’s view, the crisis of the giant did not suddenly appear today, in the past three or four years, or even 10 years ago.
Li Lin graduated with a master’s degree in the summer of 2008, a golden age for foreign giants, as well as Oracle. “The Oracle offer is the best offer a graduate can get.” China’s Internet is in the ascendant, but BAT is still obscure. Li used salary comparisons to illustrate the problem. “Tencent and Alibaba are nowhere near as big as Oracle.”
Two years later, Oracle’s global market share was more than 50 percent. Around the same time, however, the Chinese market has shown signs of decline. Starting in 2009, as Li recalls it, bonuses got smaller and salary increases became harder to come by, and some of the early founding teams started to leave.
On September 10 of that year, Ali Cloud announced its establishment under the “deception” of Ali’s famous “Doctor” Wang Jian. After the Chinese New Year in 2009, in an unheated office in Beijing, Aliyun engineers wrote the first line of feitian code and raised the flag to go to IOE.
Less well known is that Alibaba was Oracle’s largest customer in the Asia-pacific region at the time, with the largest Oracle cluster in the world. At that time, Alibaba’s Oracle cluster reached 20 nodes, compared to amazon USA’s 17 nodes.
In May 2013, Alipay’s last IBM minicomputer went offline, and in July 2013, Oracle’s database was “kicked out” of Taobao’s core advertising system.
“Going to IOE” allowed Chinese enterprises to see the samples. For a short time, ali’s engineer team became the reception department, and all kinds of government and enterprises came to visit and learn from “going to IOE”. In the stock market, there are “de-IOE” concept stocks, which have been rising with the EMC acquisition and the decline of IBM China.
Then sporadic layoffs began, with some unimportant sales departments being axed. Internally, Oracle is rapidly hollowing out. When times change, employees vote with their feet. A large number of key staff left, many to Ali. Some of those who stayed were retired and some were newly recruited. Li Lin also left Oracle in 2013, and all the people who joined her in 2008 have left.
The big lay-offs in early May were just the culmination of a decade of crisis. Interestingly, because of the “hollowing out” of Oracle, after the announcement of layoffs, young people cried “conscience” for THE compensation of N+6, while some older employees were full of frustration and helplessness.
In the US, Oracle is known as the “Red Giant” and its logo is the bright red familiar to Chinese people. Why did it fail in the promising Chinese market?
A review of Oracle’s 30 years in China shows that it is a thoroughly American company, lacking in localization.
In Oracle’s China area, few senior executives are from mainland China. Even if there are Chinese, most are from Taiwan, Hong Kong and Singapore. According to Li Lin, the head of the Shenzhen R&D center was a Frenchman when it was first established. Her own team reports directly to her bosses in the US. These professional managers are very strange to the mainland market and customers, and they almost completely copy the management mode of the United States, Singapore and other places in China.
As early as around 2004, Oracle (China) had a series of “internal turmoil”, China general manager Lu Chunchu and vice general manager Zhang Shuhuan quit successively. If you count those who came before, at least 20 midlevel executives have “abandoned” Oracle in the past two years, in frustration and resentment. Zhang even fell out with Oracle, publicly accusing the company of having problems with its strategy in China. “They are too far away from customers and the market, even out of touch,” zhang said.
These contradictions and conflicts seem to be caused by differences, hardline, distrust and personal interests, but behind them, they reflect the irreconcilable and discord between the global strategy and the Chinese market of a multinational company that has been in China for more than 10 years.
The problem of personnel and management, when it comes to the business level, is a rigid strategy that does not conform to the actual situation of the market.
Like the service charge policy. ORACLE’s global sales practice is that customers pay a 22% annual service fee for software system maintenance and upgrades. However, the Chinese market is not mature and customers are very confused about paying service fees. Oracle takes a hard line, and if there is a problem, it immediately “cuts power”.
Later, although the service rate was adjusted, Oracle was still engaged in see-saw negotiations with China Unicom until 2008, trying to punish China Unicom by making it pay a one-time fee of 60 million yuan. As a saying goes, “Chinese enterprises have been suffering from Oracle for a long time”, it is almost inevitable to abandon “O” when a new replacement comes out.
In addition to the personnel system, former Oracle executives are more vexed by the issue of access. For example, Engineers in China can’t see the core code of Oracle databases, Mr. Li said. That means Chinese programmers can only do marginal optimizations, not iterations at all.
Rigid, old-fashioned and detached from specific business scenarios, Oracle has struggled to keep up with the ever-changing Chinese market, and a slow step means a slow step.
Around 2016, Oracle, which missed out on cloud computing, made up for the loss by announcing a high-profile marriage with Tencent. “This is probably the most ‘Chinese’ thing Oracle could do,” he said. “After all, in the US, Larry would never work with any cloud computing company if he hated Amazon every day.” Li Lin said.
However, despite the noise in the pr press, three years on, there seems to be little real progress.
The elimination of Oracle’s China R&D center may also send a new signal that China’s enterprise IT systems are coming out of the O era.
“The database business is still a profitable department, but the headquarters has made a decision to eliminate the core R&D positions in China, which shows that they are not optimistic about the future of the business.”
This is related to the profound changes facing the database industry itself.
Databases have been at the heart of enterprise IT systems since IBM launched its first database, DB1, in 1968. For decades, the market has been dominated by a handful of companies, including Oracle, Microsoft, IBM and SAP, because of the high barriers to entry.
However, after 2000, the Internet and cloud computing technology changes, open source, distributed and cloud computing dominated the new database era gradually came.
With the rapid development of mobile Internet and Internet of Things technology and massive data eruption, different demands are put forward for database. In this new era, commercial database is challenged due to its high cost, high operation and maintenance difficulty, low scalability and availability.
Alibaba’s own experience represents Oracle’s limit as a commercial database in the Internet age.
According to Caixin, starting in 2006 and 2007, alibaba’s fast-growing business began to face a world-class problem — its database was too big. In 2008, Alibaba became the largest database user in Asia. With the technology of the time, it was almost impossible to scale up such a large database. “If you invite the most famous and top DBA (database administrator) in China to our company, no company including IBM and Microsoft can provide us with a complete set of technical services.” Participants at the time recalled.
Service providers like Oracle were unable to respond to the simultaneous data demands of the Internet age. At the end of 2009, Ali internally proposed a technical route to eliminate IOE: “Low-cost, linear controllable, decentralized (distributed) : to replace IBM and PC Sever minicomneeds; Go to Oracle, use MySQL instead; Go EMC, use mid – and low-end storage. In the second year, MySQL+ self-developed database was further proposed to replace Oracle, and high-end storage was no longer used.
IOE is essentially a user revolt against previous enterprise IT solutions. New data era requires new solutions. When Ali called out the IOE, everyone was skeptical. A common view, and this was true as the push progressed, was that IBM’s minicomputers and EMC’s storage devices were not hard to solve, but the database.
“I believe I and E are no more than one. Why does O continue to exist? Because switching and moving apps is not a one-day process, the bar is very high.” Oracle senior vice president and China managing director Li Hanzhang once told the media.
Oracle’s assertiveness has hit a snag over the peculiarities of the Chinese market.
In the past decade, the willingness of Chinese enterprises to go cloud has increased from 3% to 84%, and the progress of internetization of Chinese government and enterprise market is also very high, outpacing other regions. Taking Ant Financial as an example, more than 442 cities have moved government services onto the Alipay platform. The market, which covers traditional industries such as finance and healthcare, was once the preserve of Oracle, but is now the scene of a dogfight between domestic cloud computing vendors such as BAT and Huawei.
In addition, there is a view in the industry that the IOE represents a composite ecosystem of enterprise IT solutions in the software age that support each other. “When you drop the I and E, the O loses its roots,” says one veteran of the data industry. In recent years, the mainframe, which IBM represents, has given way to x86, and the enterprise IT world has largely retreated, enterprise operating systems have shifted from Unix to Linux, and the software era is giving way to the cloud computing era.
“The closure of China has very strong node significance,” said the former Oracle employee, which may be a distant echo of Ali’s proposal to go to IOE five years ago. The decay of giants takes time. One shoe fell to the ground five years ago and is now waiting for another.
Oracle, a giant in the traditional software era, is likely to suffer the common fate of all giants in the change of technology and times. “What makes you strong will bury you.”
In the era of cloud computing, IOE is a product of the era of “buying physical machines” and “buying computing services.” Cloud computing is not just about lowering costs and improving computing performance. It is a radical change in the way we think. The essence of cloud computing is to use the Internet.
Someone once said that Oracle’s predicament today is the same as that of Kodak in the era of digital cameras — the existing database business is a cash cow, but its development prospects are gradually dimming; But to jump into cloud computing is to risk your life.
In the wave of the Internet, Oracle, once the innovation leader, even took the opposite position of new technology. Ellison has always played the role of a cloud enthusiast. A popular meme in the tech world is that Today’s meeting saw Ellison detest Bezos. “XXX is fake cloud computing.” “Amazon is like a semi-automatic car. You get into it and you die.”
But reality was not what he expected. According to Gartner’s analysis, the commercial database market, which was around $30 billion in 2014 and will decline to around $22 billion by 2021, is being overtaken by open source and cloud native databases. Oracle, which has more than 50% of the market in commercial databases, is hardly immune.
The red line indicates commercial databases that need to purchase licenses. The blue line indicates open source databases and cloud native databases
In the face of the cloud computing conquest, Larry Ellison is finally in a hurry. After missing the window, Oracle was hesitant to move forward. In the United States, AWS executives have been able to disavow Oracle publicly — after all, Oracle is basically a second-rate player compared to AWS.
“Now he sees it, and it’s too late. The cloud is not a database solution.” One longtime employee is not optimistic about the outcome, but she is not sentimental. “Oracle has had a great past, and it will have its own place in the future, but it will not be the king of the past.”
“Each generation has a mission.” Li Lin was thinking of the Oracle DBA in the past, when the community culture was developed and people were proud of their Oracle DBA status. “Veterans never die, but they just grow old.”
Behind Oracle is the vast Internet tide in China. IT is easy to understand that the decline of IOE in China is just a reflection of Chinese Internet enterprises’ subversion of traditional IT manufacturers in the Internet era.
So, who will be next?
Extended reading:
Oracle R&d Center in China has decided to lay off 900 employees for N+6 compensation
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