Ray Lane: Only one person might debate it.
Laurie Wilson: One person might debate it, he's not here so we won't worry about that and it is apparently the second largest software company in the world. Now Ray, like Scott McNeily who was our guest here not all that long ago, is of course a prophet of network computing. That's one of the things, no doubt, he's going to be talking about today. I'd like you to welcome our guest, Ray Lane.
Ray Lane: Thank you very much Laurie. I'm already known as the warmup act for other Americans and I've only been in Australia for a few days. I just flew in from Brisbane this morning where I was the warmup act for Michael Jackson and I guess here I'm the warmup act for Bill Clinton. It must be pretty difficult for you to kind of sort all this out because I have a hard time telling the two apart, I don't know whether Bill's the guy with the girlfriends or Michael's the guy with the mask - you know, I just can't quite get it straight although what I would have preferred doing is being the warmup act for Tiger Woods since he is also in the country, so it's quite an interesting week, this week for Australia and the barrage of Americans that have come in.
I'm going to spend a little bit of time as Laurie said talking about network computing, but let me start in a little bit of a different place. I spent 12 years of my life as a management consultant with Booze Allan and I guess I always feel like technology has been a tool and it is nothing more than a tool and I think enterprises, governments and the public at large get much too excited about technology and overhype what it can do and it is merely a tool that can be applied to different types of applications in business and government and of course to society in general. I tend to take that point of view about our technology and others' technology - I don't think it is a major cultural event when a new operating system is invented. I don't think it's a major thing - network computing is only important in that it might be the first thing I've seen that holds the promise of bringing about a true information age because I certainly don't feel like we have one today.
We are in interesting times. Our world is changing very very rapidly, where we now feel part of a growing global economy and localisation especially local villages are becoming even more and more important in that global economy. There certainly is a question now that technology breaks down a number of barriers and disintermediates a number of businesses. As to where the nation state is placed in all of this... but I'm not here to address it. We are seeing a major change that is I believe a seachange that we've been preparing for for some time. The seachange is both in business dynamics and in technology. If you look at the changes that are going on, or that should be going on in, in government and business today they are changes that we have not addressed for probably, going on, 50 to 60 years depending upon what nation or what economy and how mature the economy is. Certainly in the United States, it's not since the Great Depression in the 30s have we visited issues like we're visiting now in terms of the fundamental way to run a public commercial company enterprise on a worldwide basis, and I think it's no different in Asia and in Europe, it might just be a different time scale. So this preparation has been going on for some time. We've called it business process re-engineering, but it is all wrapped around the desire to change business processes in order to compete or in government to offer more services at a lower cost.
The IT world, especially the infrastructure that brings about IT solutions, is going through the same kind of seachange. The personal computer is now about 16 years old and it certainly, we don't believe, is the last computer ever to be invented. In fact the purpose of the personal computer was really to move mainframe computing onto the desk top, and take advantage of many of the aspects that timesharing gave but move persistent storage, the ability to access that information onto the desktop and free up users of information to have their own resources. And that worked quite well, depending upon your own evaluation of what well means. We don't have a huge penetration - Australia's is about the same penetration as the United States, about 30 per cent of Australian households and US households, or less than that, are using personal computers today. That's not certainly the penetration rate of telephones or televisions, but on its way, and I'd like to talk a little more about that in a second.
So if you look at what's happening in the last decade you find companies and governments, higher education, just about every industry going through massive business process re-engineering and you find that a lot of money has been spent on IT solutions and the result of all this if you look at most of the surveys is that business process re-engineering has not delivered. It is in terms of satisfying expectations less than 20 per cent of companies that re-engineer are satisfied with the results. Some of the IT solutions that have been invented have not reduced cost, they have actually increased cost and they have actually made the computing environment more complex not less complex. If you are or know any MIS senior management and just ask them whether client server computing where you have these huge desk top computers trying to communicate with large servers and mainframes they will tell you that the cost of their help desks, the cost of managing the environment and the complexity of managing that environment has just gone through the roof. So there has been a pent up demand, a desire to change things, but yet we haven't really accomplished that.
So I think the last decade has all been about preparing for a new order. It's not unlike other times in this century where we've seen new orders of things change things. It's kind of like the pressure builds up over a long period of time and we invent methodologies to try and accomplish incremental change and that's what business process re-engineering was all about. That's what client server computing was all about, until you finally get to a point that somebody that is brilliant or unique in every industry decides that they will have a breakthrough idea and start doing things a different way, and then a new order is created. Whether it's mass production - if you don't think that in the automobile industry there was business process re-engineering going on before mass production was invented - you know that's wrong. I mean there was certainly a lot of thinking about how we could incrementally improve the automobile industry. Same thing was true before vertical integration became popular or before globalisation became popular and so we think there is going to be a new order of things and that new order we call networking.
Now to me networking doesn't mean - you don't start with modems and telephone lines. You start with the definition of networking being to tie together core competencies or business processes and focus on what you do well and outsource or partner with others that can do things better than you can to produce a more competitive situation.
We've been talking about now the information age depending on what book you read first about it. We've been talking about an information age for probably 20 years. We don't have an information age. That's not what we're in. We're very much an industrial age. Certainly there is the promise of knowledge or information becoming much more important in terms of leadership and competitive dynamics in the world but today with the adoption rate of computers being as low as it is, as I said in the largest economy in the world, less than 30 per cent and the adoption rate is slowing in the PC world. In most other mature economies probably less than 20 per cent, the rest of the world less than one per cent so there is really less than 10 per cent of the world now online or using computers to access information and to use it day to day for either something as simple as sending messages, time deferral or for electronic commerce. These are some very sophisticated applications. So we certainly don't have an information age - we certainly have an age of telephony. We have an age of television. There's no question about that because the penetration rate is over 90 per cent but until we get a lower cost, easier to use intuitive device for communicating and move the complexity back into a network like every other network we have whether it is telephones or broadcasting or it is water or waste removal. I mean the best user interface I know of today, the best example, is the toilet. Everybody can use one of these things and the complexity that sits behind that device is quite complex, is quite dramatic and so it is not a question of whether, it is a question of how long, how much time it will take for the computing world to basically build networking the complexity of the backbone into networking and provide lower cost intuitive devices for us all to use.
So business process re-engineering, IT as a competitive advantage, have largely failed. Business process re-engineering as I have already mentioned has not satisfied most companies - less than 20 per cent think that it's a success. IT as a competitive lever is a lever for governments, if you look at how many applications truly address the core competency of those institutions or those businesses, actually create topline growth, actually provide services to consumers and taxpayers, it's precious few. What we're using IT for is to make, is to essentially improve efficacy of current operations, incremental gains and we spend far too much on it to do that.
So as we look at the new order, and this new order becoming what I call networking, we find more and more companies and institutions focusing on their core competency. What do you do well? Do you market things, do you design things, do you build things, do you serve things - what do you do well? And everything else is supportive to that core competency and if it's supportive you have to call it into question as to whether you should own it.
How many companies could compete with Federal Express or TNT or DHL in logistics and transportation? If you allowed Federal Express to outsource all of your logistics and transportation you'd improve your customer service and lower your cost automatically so you immediately have visibility, your customers have visibility into the shipment of goods and more and more we're seeing this happen where others are developing systems and processes that are much more efficient and a higher service than companies that have vertically integrated operations, or vertical integration will break down and as vertical integration breaks down there must be technology there to support it. So we'll shed a lot of infrastructure.
Competitors today that do not have the infrastructure burden that companies grew up with in the 20s and the 30s and the 40s and the 50s are greatly advantaged because they can take advantage of technology now to essentially replace or avoid the infrastructure, the physical infrastructure. This is a process that has become known as disintermediation, where you can avoid a lot of the process structure.
A good example is Walmart in the United States. Walmart did not exist about 30 years ago and Sears was the largest retailer in the world - number four in the Fortune 500 list. Just inside of 30 years by changing the rules of supply chain, Walmart has not only grown past Sears, knocked them out of the top ten, it has become three times their size - a $90 billion company and Sears is about a $30 billion company. They avoided a lot of the infrastructure that Sears dealt with for so many years, and that's an example of someone changing the rules of the game.
A better example is a company called L.L. Bean. Now I don't know if L.L. Bean sells in Australia - have you heard of the company? Wonderful company - provides casual clothing, outdoor clothing, camping equipment, things like that - yet L.L. Bean doesn't manufacture anything, they don't ship anything, they're purely a marketeer, and they provide catalogue marketing, and of course when they have enough customers online they'll be doing that electronically and they can provide an entire value added system virtually. So someone else manufactures the products but you think it's L.L. Bean. Someone else ships you the products but you think it's L.L. Bean. It is the highest quality customer experience you've ever had and you credit it all to L.L. Bean. Yet they have a very low cost high service delivery system that depends on others and they tie it all together.
Another great example is Levis. We are all familiar with Levis jeans yet for years many studies have proven that when you sell jeans to women, that about 27 per cent of the customers that buy jeans, even though women go into stores, try them on, look at them, spend $50 to buy them but they are not happy with the way they fit when they get them home. So what do you do about it? Well what Levis has done is they've essentially put up a web page in their stores that allows their customers to come in, and if they, in the privacy, if you believe in the privacy of the Internet, can provide specifications about measurements and custom fit Levis will have these jeans made by their manufacturing process here in Asia where they integrate the sewers and the stitchers and the cutters and everybody who has to be involved in the supply chain and deliver a guaranteed fit on a pair of jeans delivered to your home for about $10 more than you pay in the store.
So the world is changing rapidly to one of networking a supply chain, delivering value added, focusing on core competency and it is all about the infrastructure that will support that new order, as opposed to whether it's a new operating system or not.
What has really changed everything and is going to support this virtual corporation concept has really become the Internet. The Internet has been around a long time but in the last several years helped by obviously the leadership of Netscape, by bringing Mosaic out to the public at large and allowing us all, no matter what computer we have to participate in a low cost, standards based worldwide communication system.
Now you can all complain about the Internet as a commercial vehicle for electronic commerce. It doesn't - it's not fast enough, it's not secure enough - but these problems will go away. Remember when we talked in 1988 - excuse me 1978 - about the PC being a toy and how MIS managers of large corporations and large governments would, five years into the process, when Steve Jobs invented - or took from Xerox PARC [Palo Alto Research Center] the - no I don't mean that - basically brought an easy to use user interface and IBM did its gloriously disaster deal with Bill, today what is an $80 billion mistake, and sold him an operating system, or let him take the operating system - it wasn't anything to do about selling it - let him take the operating system. From that day we 're still talking about this being a toy and not having a great deal of commercial purpose and in Internet years or days we have moved light years ahead, much faster than the PC development has and you see now electronic commerce applications coming into real being.
The first stage of this phenomena was all about publishing - was all about putting information into static page and being able to move it across a network because you could ignore the operating system that your users had, so whether you had a Macintosh or a Sun workstation or a Windows 95 or Windows 3.1 or whatever client whatever computer you had on your desktop it could read it and then moved into much more of a dynamic market, we could move dynamic information around in HTML and now we are just entering a stage where there are real electronic commerce data based applications that are being developed on the Internet.
You walk into book stores today and you go to the computer section and look at what young people are reading. It's all about JAVA. It's all about building independent systems and applications that are independent of an operating system because they can develop them fast and they don't have to care about the dependent UI that everybody has in their desktop today. So you can make these applications ubiquitous. You can make them work for anybody on the Internet.
Well pretty soon you'll see applications that can handle consumers walking into a storefront or electronically entering a storefront and creating simultaneous transactions like a bank card debit or an inventory transaction or a purchase order, all that have to take place because the consumer bought something, and this is all basically a traditional application that we'd write if we were in the data base world or in the client server world. It just uses a different distribution system call the Internet.
So today's world, if you look at gaining all this advantage, tying together virtual corporations producing electronic commerce, all of these things with today's technology it is impossible to do, it can't be done. We have a proprietary world so there are operating systems on the desk top, there are operating systems on servers and mainframes that prevent us from having ubiquitous access unless there's only one company that does it. Okay if there is one company and certainly in the desktop there only is one company that counts, it is a monopoly so if NT or Windows 95 is on every desktop and on every server then there's only one plumber in town and that will provide ubiquity. It won't be at a low price but it will be ubiquity.
So we've got somewhat of a monopoly starting to build on the desktop and certainly if we were the monopoly that would be a good thing, but we're not, so I think it's a bad thing. But it will produce high cost and high complexity. The whole strategy, and I am certainly not here to bash Microsoft, that's not what I'm talking about, but the whole strategy is to put an operating system called NT on the desktop.
Now NT is a core development platform for Oracle. We believe in it as an operating system for servers. When you put it on the desktop you've just put an operating system that has more lines of code than IBM's largest mainframe operating system on your desktop. That cannot be easy and so it's, I don't think, a very good situation. It certainly would not allow everybody to participate in the information age. I don't think my mother wants to operate an NT desktop. That's not how she wants to change her life.
So we introduced and we have just come down from Brisbane to talk about a show we call Oracle Open World. We have introduced an architecture called the Network Computing Architecture and the Network Computing Architecture is the first architecture that has all the components necessary that are built totally on industry standard characteristics. So there is nothing in this architecture that doesn't exist today as a standard produced by a standards body or used by everybody. The difference is this is totally open so that if you're a programmer, and this is what it's about, and we are all in the hands of young kids developing applications, you have to look what these young kids are doing.
They may be developing an application using a language called C++ or JAVA or PL SQL - we don't care. This architecture will handle any of those. It could be something called CORBA-compliant, I know these terms may not mean much to you but a standards body or Microsoft's Active X, these all standards for developing applications, doesn't matter So any client, doesn't matter what that desktop has, Windows 95, Windows NT, Macintosh, Sun, Solaris - it could be a network computer with no operating system - it doesn't matter, it works on the architecture. It could be any application written in any language or could be any data format fitting in any data base. We call all these components cartridges, and these cartridges speak to each other through an intercartridge exchange written totally from standards that anybody can create. It is that Oracle is going to operate on time to market. We're going to create it before anybody else does but anybody can create it. Sun can create it, Microsoft can create it but Microsoft would have to provide very open standards and they would have to allow anybody to participate so anybody could participate in their message exchange system, in their desktop operating system and of course that is not the case.
So it's about applications. It's about what we do with all this stuff and I think the applications are the potential of having a low cost easy to use desktop or in the home computer with powerful servers that can serve up information on a powerful network leads us to think new ways. Now we start thinking about every child having a computer. And I don't know whether any government in Australia has set a goal for every child having a computer.
Certainly in the United States we don't. We have a real crisis in the United States in education and there is a lot of obviously political baggage that we have to deal with but certainly the goal of having a computer in every child's hand is not there, if every child has to pay $2,000 or $3,000 to maintain them and wire the schools and everything. With a network computer you can get that cost way down and kids now have a chance to learn in a different way. Learn by seeing, learn by looking at something and getting it. If you can look at the Pythagorean theorem and use examples and play with itself at your own speed and you get it, it means something much different to you than some teacher reading it out of a book.
Government , lower cost, I don't know of many taxpayers that are happy with their governments these days. Lower taxes, higher service is what it's all about and producing higher service through network based operations allowing participation by everybody in government, providing services online, is what it's all about. In commerce providing worldwide electronic commerce , allowing companies to put their manufacturing in Asia, put marketing all over the world, avoid warehouses, ship directly to the consumer by disintermediating physical structures and allowing that to go directly to consumers. So the world can change a great deal with the adoption rate of network computing.
Now what's Oracle's role in all of this? Well if you think about the phases we've been through so far, there was a mainframe phase. I mean that was what we were all doing, or some of us were doing in the 60s. I was only doing it, I want you to know, for only one or two years in the 60s, but it was all about mainframe computing. IBM had a brilliant idea and that was to standardise the operating principles around mainframe computing and they were quite successful at it, built a 70 per cent market share, there is no question they were the leader, not to be challenged.
And then in 1978, 79 and the early 80s the PC was invented and created a second phase of computing, and that second phase has now lasted 16 years or so and that essentially moved some of the aspects of mainframe computing onto the desktop, gave us persistent storage, allowed us to do things that were individual in nature.
We think the third phase is all about network computing and the third phase is taking advantage of the first two phases. It's a three tier architecture where you have massive database servers because information today is being digitised at its source and put into large databases so we need larger and larger servers and mainframes for managing databases. We then need distributed application servers for special purpose. You want to do an electronic commerce application, build a cartridge or an object that will allow you to do that and simply put it in the architecture. Or you want to do local area network for a classroom of 10 year olds - write an application, put it into the architecture. And then all of the access on the desktop is by low cost easy to use devices called network computers that are as easy to use as a telephone. Out of the box experience, intuitive, on and off. You know, imagine that. You don't open it up, you don't replace what's inside, you don't upgrade it, you don't put all sorts of features on it, you don't have a PCMCIA card, you don't have any of this stuff, CD roms. You basically just turn it on and off. Okay. On the Internet, off the Internet. Basically download your information, you have RAM storage where you could save some of your information, or boot up to the Network and it works very very effectively.
So it's all about open exchange. It's about having an open, standards based network. Allow everybody in this industry to compete and provide best of breed software in an open architecture. If there is one plumber, it won't work. It'll be very high priced, it'll be very complex. But if there are multiple plumbers basically all that understand that the faucets and the plumbing and the network are basically the same thing then we can all design devices or software that fits into that world.
We've introduced a number of tools for this. We make databases, that's what we're pretty well known for, we give it a fancy term, we call it universal servers. Universals servers is all about managing multimedia information - managing text, managing video, stream video on an NC on 28.8 modems, managing relational information and object information - we manage just about every type of data structure there is in the world today having powerful messaging software for exchanging documents and moving that type of information, whether it is relational or text or video information online and moving it to anybody that can read it and then having powerful applications and NCs that are able to take advantage of what's out there today in powerful servers.
So our view of the NC, of the network computer, is that it is a telephone. It's a television, it's toilet - that's what it is. It's a universal interface that is low cost, easy use, it allows you to go in it. Maybe you don't even take it with you. You know, you don't take your telephone with you, you don't take your television with you, and I hope you don't take your toilet with you. But you may be able to take a smart card with you and plug in to any NC that might be in hotel rooms or be in corporations or even somebody else's home. And that smart card gives you access to this network. It knows your - it brings up your home page, your personal profile for news, you know, each of us is different. It enables the world of mass customisation, that all of us could have our own personal newspaper, our own personal news fed to us from different news sources that we want and each of you is of course dealing with this kind of thing in your own business today. It is very intuitive, it is very standards based and again provides ubiquitous access.
It is not and I am afraid that everybody is starting to get - one year ago we introduced the network computer - Scott claims it came out three or four years ago. He calls it the zero administration client. This kind of rolls of the tongue. Consumers will just run out and buy the zero administration client. The network computer should be like a telephone - is a telephone a consumer device, or is it a commercial device. And of course the answer is neither. It is a tool that allows access - it allows communications, and that's what the NC should be. IBM defines the network computer as a dumb terminal replacement. That is no question a good commercial idea because those will be the first things that go, and IBM has a lot of dumb terminals out there hanging off of mainframes that they should replace and they make a lot of money out of, but that's not a network computer. That's only one application of a network computer. It's not for special purpose like customer service or dumb terminal replacement, it's about getting everybody online. We've established, we've taken a year to establish strategic intent that we've wrapped all 30,000 employees of Oracle around and that is to establish or create the information age through network computing. How do we know we 're there? It's when we have a network society. The best goal I know of in my lifetime that was ever set was by John F Kennedy who said "Put a man on the moon by the end of the decade". It wasn't "Get one there almost and get him around the moon and kind of look down and come back", it was , "When his foot hits the planet, okay, when his foot is on the surface, everybody succeeds" and that crystallised NASA and everyone else that had to be in that program, they didn't ask "How are we going to get the budget for this? How are we going to do this?" It was basically a crystallised goal. When we have 90 per cent of the world communicating electronically we're there, that's a network society, not 30 per cent not 5 per cent but 90 per cent and we'll be there. So it is all about everybody communicating electronically. It is about creating a network society that puts us all online whether it is for a local village or is for a global village, and when we're there then Oracle can hopefully take some credit for leading the network society. Thank you.
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