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00009
15

   Could you state your full name for the record,
16

please.
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   A. Lawrence Joseph Ellison.
18

   Q. And what is your current work address,   
19

Mr. Ellison?
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  A. 500 Oracle Parkway, Redwood Shores, California.
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MR. SCOTT: Q. Before we get into the document,

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let me just nail down a couple of pieces of terminology
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 you used in some of your earlier questions.
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   In talking about PeopleSoft you said that they
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 had obviously an H.R. product; right?
11

  

A. Yes.

12

   Q. And that they had a financial management
13

 product?
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   A. Yes.
15

   Q. And then you indicated they also had a business,
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an ERP suites business?

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   A. Yes.
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   Q. Could you tell me - I'm not sure we had you
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 define what that term means yet, what "ERP suite
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business" is.

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   A. ERP means enterprise resource planning, but
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 that's not terribly illuminating, that title. It's the
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back office portion of the business. It's accounting,

2

 human resources, payroll, manufacturing, planning,
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 purchasing, your supply chain, which is just basically a
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 chain of all of the suppliers you might need if you're a
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 manufacturer.
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   It's all the things that happen in the back
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 office of a company as opposed to the front office, which
8

 might be usually characterized as sales, marketing and
9

 service. So the front office is called CRM, customer
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 relationship management, the back office is called ERP.
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 All of the products that automate the back office are
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 called an ERP suite.
13

   Q. Your business solutions product, that's an ERP
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 suite product?
15

   A. E-business suite?
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   Q. Yes, sir.
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   A. It is both an ERP suite and a CRM suite.
18

   Q. Has both in there, depending upon what -
19

   A. The union of those two, yes.
20

   Q. Do you sell financial services - I'm sorry,
21

 financial management software and H.R. software in a
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 combination in any other context other than your
Ellison 01-20-04 3
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 E-business suite?
2

   A. Not a combination, we sell them separately. You
3

 buy H.R. separately and buy financials separately or you
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 can buy E-business suite, which includes them both and
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 many other components, as well.
6

   Q. The E-business suite, when did that product
7

 first become available through Oracle?
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   A. Again, it's an estimate, four years ago.
9

   Q. Was there a reason you started offering the
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 products combined like that?
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   A. We tried to be the first company ~ I
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 mentioned -- you asked if we had been leap-frogged
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 before. SAP leaped-frogged us by getting all the back
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 office modules working on top of a single data base and
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 SAP really invented the term "ERP." They were the first
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 ERP suite.
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   We, in turn, were trying to leapfrog them by
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 having the first suite of products working on one data
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 base that included all the front office modules, all the
20

 CRM products as well as all the back office ERP products.
21

   Q. I'm going to hazard a guess, but when you were
22

 trying to market this product, you'd tell customers there
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 are advantages of having it brought together in one
2

 package; correct?
3

   A. Yes.
4

   Q. What are those advantages?
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   A. Lower cost, better information.
6

   Q. How does having the product sold, the ERP suite,
7

 result in lower cost and better information?
8

   A, If you -- cither if you buy discreet components,
9

 you buy your H.R. from PeopleSoft, you buy your sales
10

 force automation from Siebel, or your call center from
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 Siebel and your sales force automation from
12

 Salesforce.com and your accounting from SAP, and your
13

 H.R. from PeopleSoft, if you buy a lot of separate
14

 pieces, you're going to have to do what's called software
15

 integration or systems integration.
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   You're going to have to connect these pieces
17

 that were never engineered to fit together. You, as a
18

 customer, are going to have to use your own labor or hire
19

 a consultant to fit these pieces together. And what we
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 wanted ~ what our offer -- the contrasting aspect of our
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 offer is we've engineered these pieces to fit together.
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 You don't have to do any software integration.
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   So it's much lower cost. It's much less labor
2

 involved in putting in our suite than what's called best
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 of breed components, a lot of separate components from
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 separate suppliers. So there is less labor associated
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 with it, gives you a much less cost of ownership.
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   The other thing is, because of all of our
7

 applications are engineered around a single data base,
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 all your information is in one place, therefore, everyone
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 knows where to look to find the information. So you get
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 a much higher quality of information.
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   The worst problem facing companies, government
12

 agencies, information problem, is that their data is
13

 fragmented; it's stored in lots and lots of different
14

 places and people have a very hard time finding what
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 they're looking for, they don't even know where to look.
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   Companies, government agencies, have lots and
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 lots of separate data bases. If you build your
18

 application around a single, unified data base, it's much
19

 easier to get accurate, up-to-date information about your
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 business.
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   Q. Did you -- does PeopleSoft have something that
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 you consider an integrated FRP product?
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   A. Yes.
2

   Q. What does that consist of?
3

   A. Well, you can argue about the degree of
4

 integration, but it means that the pieces are at least
5

 partially engineered to fit together. We'd argue that
6

 ours really were, again, conceived around this common
7

 data model.
8

   We would say the PeopleSoft H.R. isn't even
9

 integrated with their financials, they operate on
10

 separate data bases. So -- so we think we're more
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 integrated. But it's not an all or nothing thing. There
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 are advantages. There are connections between PeopleSoft
13

 H.R. and PeopleSoft financials, though they don't use a
14

 common data base. Our big pitch is we store everything
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 in one data base. SAP doesn't do that and PeopleSoft
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 doesn't do that.
17

   Q. You used a term a bit ago, a best of breed; what
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 is that?
19

   A. That's the notion of-- it's an industry term,
20

 meaning rather than trying to find the best suite
21

 supplier, you go out and find individual vendors who
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 offer the best marketing package, the best sales package,
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the best service package, the best financial package, the

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 best H.R. package, the best payroll package, you find the
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 best suppliers and you buy from the best suppliers,
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 ignoring the integration issues, you just get the best
5

 parts.
6

  

And I actually have a bit of a satire

7

 presentation I make. What a wonderful way to buy a car.
8

 Maybe Porsche makes the best fuel injection, maybe
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 Mercedes makes the best transmission, Cadillac makes the
10

 best air-conditioning, and the best catalytic converter
11

 comes from Ford, but these pieces were never designed to
12

 fit together. And they might be the very best components
13

 but the best components don't assemble into the best
14

 system.
15

   But it was the normal -- it was conventional for
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 a lot of companies to go ahead and buy, you know, the
17

 best components, then those companies took on the burden
18

 of assembling those components into a working system.
19

   Q. In addition to assembling best of breed
20

 components into a working system, are you likely to have
21

 problems in making them to continue to work together over
22

 time?
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1

  

A. Systems integration is a gift that keeps on

2

giving.

3

  

Q. Meaning what?

4

  

A. Every time -- let's say SAP upgrades their

5

 accounting, so you have to unplug the SAP accounting from
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your H.R. -- your Siebel sales and your PeopleSoft H.R,

7

 and plug in the new version.
8

  

So this is an ongoing cost as you do upgrades.

9

 These vendors use different technologies, they have
10

 different upgrade cycles, all of the labor associated
11

 with connecting SAP to PeopleSoft 7, you have to do it
12

again. Now you connect SAP to PeopleSoft 8.

13

  

Q. So any upgrade you did to any piece of it,

14

 you're going to have to go back and reconfigure the
15

 entire system?
16

   A. It's the gift that keeps on giving.
17

   Q. To the people who actually do the work for you?
18

   A. Absolutely. That's why the biggest recommenders
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 of best of breed are the IBM's and Accentures, who
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 provide the labor for gluing it all together.
21

   Q. The best - you indicated -- again, I'm not
22

 trying to misstate you. so correct me if I got this
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wrong -- I thought you'd said something fee best of breed

2

approach was the norm at one point in time.

3

  

A. Very recently -- there was a huge debate in the

4

A. Very recently -- there was a huge debate in the

5

 early, there was a huge controversy inside of Oracle and
6

we were considered mad by some because we were the first

7

 company to move to the Internet. We were also the first
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company to say that the best of breed is -- only works at

9

 dog shows and it's really the gift that keeps on giving.
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 It's unbelievably expensive for companies to talk to best
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 of breed strategy.
12

  

No one buys car parts and takes those parts and

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assembles them into cars. What you should do is buy a

14

 complete and integrated suite where the pieces are
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 designed to work together. You should look to suite
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 suppliers and the suite suppliers arc going to win and
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 the best of breed companies are going to lose.
18

   Q. When you say the suite suppliers are going to
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 win and best of breed companies are going to lose, what
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 do you mean by that?
21

   A. That means if you arc a specialist -- let's say
22

 all you do is supply chain, company like i2, but you had
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the best supply chain software in the world, and mayt

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still have the best supply chain software in the world,

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the cost of installing it, the cost of connecting it to

4

Oracle or to Oracle manufacturing or SAP manufacturing

5

 and purchasing, all of those different pieces, the cost
6

of connecting it was so high, that you're much better off

7

 if you buy your financials and manufacturing from SAP.
8

You should probably get your supply chain software from

9

 SAP, as well.
10

  

If you buy your manufacturing and purchasing

11

 software from Oracle, you probably should buy your supply
12

chain software from Oracle, as well. It's much, much

13

cheaper than trying to put in that -- glue in that i2

14

 problem.
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