[DWO PROJECT GROUP -3 , SEC-A] December 15, 2013 Report A research study on Oracle Corporation and its strategic

acquisitions

Designing Work Organizations Project

Executive summary: This report provides an analysis of impacts on organizational design due to some major acquisitions made by Oracle Corporation in recent years. For this context we have included acquisition of Sun Systems, RightNow Technologies, iFlex Technologies, Siebel and 360commerce in our study. Findings show that acquisitions had considerable impact on structure, culture and technological capabilities of both acquired and the acquirer. There were structural and cultural differences to cope up with but on the positive side, these acquisitions resulted in synergies on the technological and business front. The report finds that these acquisitions have provided strategic capabilities to Oracle in IT and software product development which increased its overall profitability. The acquired companies were largely benefitted from the extensive marketing and sales channels of Oracle and attained higher growth rate. There were some cultural differences issues immediately after acquisitions which were addressed by integration initiatives. Our study concludes that cultural differences play a vital role in strengthening overall synergies of the merged firms. If these issues arent taken into consideration then the merger/acquisition can result into a failure. Few important recommendation made are: 1. The structure of the acquired firm shouldnt be tampered with much if it is innovation oriented and largely organic. 2. Promotion and remuneration of the employees of the acquired firms should be in sync with the existing ones. The limitation associated with the study are: 1. We interviewed the employees of all of the aforementioned firms and we have generalized their responses. Because of the smaller sample size there might be chances that it is not representative enough. 2. Exact increase/decrease in remuneration because of acquisition couldnt be found out as this information arent into public domain. Introduction

[DWO PROJECT GROUP -3 , SEC-A] December 15, 2013 Oracle Corporation is an American multinational computer technology corporation headquartered in Redwood City, California, United States. For more than three and a half decades, Oracle has been the leader in database software. And as it has further developed technologies and acquired best-in-class companies over the years, that leadership has expanded to the entire technology stack, from servers and storage, to database and middleware, through applications and into the cloud. But, what forms an interesting case study is that apart from Database most of its foray into other products have started with one or the other acquisition. Over the years, this strategy have paid rich dividends to the company in strengthening its position as a giant software firm.

Objective The broad objective of the research is to study about the strategic acquisition prevalent in the changing global environment. The report studies how merger and acquisition affect organizational design, culture and environment. It further delves into challenges faced by an organization in integration of technology, products, finance and human resources. We have analyzed the situation before and after the acquisition. We have chosen the organization Oracle Corporation for study.

Why we chose Oracle Corporation as our research object? Over the years Oracle Corporation has acquired over 200 companies successfully. So, this can act as a very good sample to study the reasoning behind acquisitions by the organizations in general.

Parameters under study 1) Organizational Hierarchy (authority) (differentiation) 2) Product portfolio 3) Organizational culture, value and norms 4) Attrition Rate 5) Compensation and Benefits Background: Oracle follows the following hierarchical structure in general CEO

President

Executive Vice President

Vice President

Chief Corporate Architect

Director, Sustaining Engineering

Product Senior Director Application Senior Director Software Director, Development Software Development SustainingEngineering Software SVP Development EVP Engineering Manager Sustaining Development Director VP Engineering

Oracle 9iAS Development Senior VP Manager

Senior Customer Escalations Manager

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Why did Oracle, the worlds biggest database firm decided to go with such a diverse portfolio of acquisitions under the leadership of Larry Ellison. What were the motivations behind these acquisitions and how did the change management happen after these successful acquisitions? It has been found out that Oracle seeks to strengthen its product offerings, accelerate innovation, meet customer demand more rapidly and expand partner opportunities. An integral part of Oracle's Mergers and Acquisitions philosophy is a consistent commitment to customer service and product support while achieving their financial return objectives and creating value for their shareholders. Given below is a snapshot of some major acquisitions Oracle had in past and the motivations of the Oracle management behind the same. We try to find out the changes which a lakh strong workforce experienced in the work culture. Sun - Hardware (April 2009) Unlike common apprehensions, Oracle did not buy Sun to strengthen its hardware business. It acquired Sun for primarily two reasons 1. To gain control over Java 2. To vertically integrate its stack and compete with the likes of IBM and EMC/VMware Java is the worlds most popular programming language and Oracle writes its Fusion apps in Java. Owning Sun kept Java out of the hands of a competitor (e.g. IBM who was also interested in buying Sun) and, along with its database community, further increased Oracles influence over developers.

[DWO PROJECT GROUP -3 , SEC-A] December 15, 2013 And secondly, vertical integration throughout the stack was a total flip for Oracle. Prior to Sun, it was unthinkable that Oracle would sell the hardware. Post Sun, Oracle had no interest in co engineering with other hardware companies. Rather it wants to own and optimize for its exclusive benefit the end-to-end protocols by which hardware and software communicate with each other. I-flex Financial Services (August 2005) According to the VP, financial services industry strategy and marketing, Oracle, although enjoys a strong presence in financial services when it comes to databases and horizontal applications, there was not much spend on the application side and they believed they needed to make some strong moves on that end. Oracle acquired Mumbai based i-flex solutions for $593 million. Financial services is a market in which Oracle intends to develop market leadership and this move was to facilitate the vertical integration they have been aspiring for. For i-flex, the benefit of Oracle's investment is that it will have a big company to power its strategy for future growth and additional sales. Right Now Cloud Services (October 2011) On October 24, 2011, Oracle announced that it has entered into an agreement to acquire Right Now Technologies Inc., a leading provider of cloud-based customer service. The move was a result of Oracle trying to move aggressively to offer customers a full range of Cloud Solutions including sales force automation, human resources, social networking, databases and Java as part of the Oracle Public Cloud. Together, Oracle and Right Now enabled a superior customer experience at every contact and across every channel. Siebel CRM (January 2006) Acquiring Siebel was Oracle's step in its bid to remake itself as a global business applications powerhouse. This deal came after the failed acquisition of PeopleSoft. Unlike its hostile PeopleSofts takeover, Siebels management is behind the deal. Buying Siebel made Oracle surpass SAP as the world's largest vendor of customer relationship management (CRM) software. Oracle brought in 4,000 customers and 3.4 million individual CRM software seats with this acquisition. It is the customers of Oracle who gave birth to the idea of this acquisition. Customers wanted to form a single strategic relationship for all of their major enterprise applications and they wanted consistency with pricing terms and upgrade policies. Customers also said they'd like

[DWO PROJECT GROUP -3 , SEC-A] December 15, 2013 to be able to access a single consulting organization for consistent information about implementing a full suite of applications. The Siebel acquisition helped Oracle to respond to those demands. 360Commerce Retail (January 2006) Oracle bought 360Commerce to bring together the best merchandising, supply chain, and optimization solutions, from the enterprise to the store. The combination with Oracle's leading database infrastructure and ERP applications provides a highly integrated solution for the customer insight-driven retail enterprise. After this acquisition a larger base of Oracles customers i.e. the retailers could view the data on the inventory and pricing down to individual stores, providing a greater ability to assure that they keep the best-selling products in front of customer. Charles Boyd, who came out of retirement to run 360Commerce, did not join Oracle after acquisition by Oracle. Most of 360Commerce's employees remained with Oracle, with a handful of finance and accounting employees let go.

Methodologies adopted for Research 1. Secondary Research : We went through lot of research work related to the Oracle India and its acquisition in particular. The Oracle published reports have been particularly useful to extract relevant information. Internet has been major source of information under this section to form an opinion and come to relevant findings. We did secondary research in order to find out the parameters of study and come up with a relevant questionnaire in order to get specific insights post acquisition. 2. Personal Interviews : We have been studied and interviewed around 10 employees to constantly study and understand the Oracle Corporation design, culture etc. and gain insight about the implication of merger and acquisition on the organization as a whole. We have kept sample size diverse by keeping mix of senior, middle management and work force. The sample distribution are as follows. Total Sample: 10 Oracle Employee: 5 Employee who were retained after acquisition: 3 Employee who left the organization after acquisition: 2

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3. Qualitative Data Analysis: Interview questions and answers of the employees were analyzed subjectively

Findings and Results Oracle can be grouped into two departments, product department and the administration department. It is a product based company with huge investment in R&D for development of any product. There are large number of new and unexpected situations and to cope up with these huge amount of research is required and there is no advanced programming. Oracle involves high task variability and low task analyzability. So, according to Charles Perrow Theory we can put Oracle into Non Routine Type of technology. Also the product development department has flat structure with decentralized authority. Administration department on the other hand has low task variability and high task analyzability and hence can be put into routine type technology. Also it has a tall structure with centralized decision making.

Secondary Research Findings Sun Acquisition Insights: Compensation plan: Employees of sun were dissatisfied as Oracle copied the base salary of employees which they were getting from Sun and also wanted those to take huge pay cut for the privilege of working with Oracle. This increased attrition rate post acquisition. Position of authority: Oracle significantly brought down the grade level of employees of Sun after promising an equivalent position which led to dissonance and higher attrition rate. Micromanaged/centralized authority: After owning what Sun had created, it took complete power of control and did not give any authority to Sun employees in decision making. Attrition rate: It increased due to the above mentioned reasons. Product portfolio: It forayed into hardware and gained control over Java.

360 Commerce Acquisition Insights:

[DWO PROJECT GROUP -3 , SEC-A] December 15, 2013 Oracle Corporation acquired a privately held provider of open store and multi-channel solutions software. This acquisition helped oracle to provide merchandising, supply chain, and optimization solutions, from the enterprise to the store. Product Portfolio: This acquisition provided a definitive store system with a more point of scale application (POS). Privately held 360Commerce was a retail management software company which was folded into Oracle's global retail business unit. During acquisition period retail marketing was growing incrementally by almost $3bn, third of which was POS-related software. 360Commerce before acquisition was led by President and CEO Charles Boyd with 220 employee. Charles did not join the oracle but most of the 360Commerses employees were retained by oracle. The acquired company already shared a number of common customers with Oracle, including US-based Home Depot and Circuit City. Siebel CRM Acquisition Insights: Siebel CRM Systems, Inc. was a software company principally engaged in the design, development, marketing, and support of customer relationship management (CRM) applications. Post-acquisition Siebel brought in great success to Oracle. Oracle plans to continue to enhance and support Oracle and Siebel CRM products. In parallel, Oracle and Siebel development teams are working to develop next generation CRM applications based on open standards and a service-oriented architecture. Under the plans, eligible employees will receive certain severance benefits during the period that begins three months before a change of control and ends one year following a change of control.

Right Now Acquisition Insights: With the acquisition of Right Now Technologies Oracle acquired some strategic capabilities which include: SaaS-based call centre automation, Sales force automation (SFA) and

[DWO PROJECT GROUP -3 , SEC-A] December 15, 2013 Customer relationship management (CRM) services. This acquisition strengthened the cloud computing credibility of Oracle. In return Right Now got the Oracles marketing, professional services and sales reach to grow beyond its current run rate. There was a mismatch between cultures of two companies. Oracles approach to sales and how it treats customers is 180 degrees the opposite to Right Nows ethos of client-centricity, and flexibility. Many employees feel that the entrepreneurial culture has been compromised by the acquisition. Some attrition happened because of demotions and cultural differences.

I-Flex Acquisition Insights: Organizational Hierarchy: Chaitanya M Kamat was appointd as an MD and CEO of Oracle Financial Services Limited. It also joined Board of Directors.. The company has flat structure and management is easily approachable. Product Portfolio: FLEXCUBE is the major product of i-flex. Acquisition increased the companys offerings which include retail, corporate and investment banking, funds, cash management, trade, treasury, payments, lending etc. Attrition Rate: Oracle is in early discussion to with potential buyers to sale i-flex. This has led to uncertainty in the environment. Attrition rate has been as high as 10%. Many employees on contract are asked to leave. The employment at the service unit has gone down to 5000 from about 8000 in 2005. Compensation & Benefits: Most of the employees feel they are underpaid. The salary hike is not given much compared to the experience of the employees. Promotions are not given periodically. Organization culture, values and norms: Employees enjoy flexible timings. Open-door policy makes the management more approachable. Though working hours are long. Even on Saturday the work goes on.

Insights based on qualitative research: a) Employees are aware of the acquisition in case it affects them or the acquisition by Oracle is the major one. Small one goes unnoticed by most of the employees.

[DWO PROJECT GROUP -3 , SEC-A] December 15, 2013 b) Even after the acquisition, Oracle maintains its hierarchical structure which is vertical in nature. c) The decision making remains centralized, though R&D team have slight authority to take decisions. d) Most of the acquisition by the organization have been made to strengthen its product portfolio. Though few have been made to nullify the competition. e) Oracle culture is being transmitted to the new employees. The process is a formal one. They are being helped by Oracle employees to accustom to their culture. f) Cross training is given to the employees after the acquisition. g) Designation of the employee remains the same after the acquisition but they are fitted into Oracle organizational hierarchy on the similar position.

Recommendations: 1. Retention benefit plan: As it is evident from many acquisitions like Sun Microsystems and Iflex that they resulted in higher attrition rate resulting in losing valuable human resource to competitors. The company should develop a Retention benefit plan where they treat acquired company employees as partners so that they have a sense of ownership in decision making and can realize their importance in the company. For instance, Oracle developed such a system in CRM acquisition which turned out to be very fruitful. 2. Pre-determined and industry par compensation plan: In most of the acquisition, the employees of acquired company felt cheated as they thought they were grossly underpaid which hindered in reaping out synergy benefits through acquisition. Oracle should predetermine compensation which should be at par in the industry and ensure that it has been communicated to all employees of acquired company. 3. Organizational Culture induction: In some acquisitions, Oracle was unable to induct its entrepreneurial culture to the employees of acquired company resulting in compromise of organizational culture. It should develop an individualized socialization tactic to induct acquired company employees and should retain only those employees which fit into its entrepreneurial organizational structure. 4. Decentralized and Organic organizational hierarchy:

[DWO PROJECT GROUP -3 , SEC-A] December 15, 2013 As the organization focusses highly on Research and Development, the company should induct acquired employees in decentralized structure and give them authority to make decisions. This would also reduce dissatisfaction among acquired company employees due to lack of authority post acquisition. 5. Diversified product portfolio: As the company has diversified its businesses through more than 200 acquisitions and it has benefitted them to a great extent in hedging their risk by being into multi businesses and markets. It should continue to diversify its businesses but should not compromise on its core competencies like database where it is a market leader.

References:a) http://www.eweek.com/c/a/Application-Development/Java-Creator-James-Gosling-Why-IQuit-Oracle-813517/

b) www.oracle.com c) http://en.wikipedia.org/wiki/Oracle_Corporation d) http://en.wikipedia.org/wiki/Oracle_Financial_Services_Software e) http://en.wikipedia.org/wiki/Siebel_Systems f) http://en.wikipedia.org/wiki/RightNow_Technologies

Appendix a) Questionnaire 1. Are you aware of the acquisition? If yes, what changes do you observe and experience? 2. Are there any changes in employment policies post acquisition? Have your hierarchy restructured after the changes? 3. What have been your experience with the changes? Have been they bad or good? 4. How does the acquisition have affected Oracle? Have the changes helped it in a positive manner or has it harmed its outlook? 5. Have your role changed after you have been shifted to the new organization (Oracle) from your previous employer. 6. Do you feel the cultural change between the two organizations? How did you adapt to the new culture.

[DWO PROJECT GROUP -3 , SEC-A] December 15, 2013 7. Did the change affected your hierarchical structure in the new organization? Did the span of control changed? 8. Was there any change in terminal and instrumental values of the organization in your knowledge? 9. Is there any change in authority, designation of the employee? 10. Have you observed or gone through any conflicts of interest between employees due to acquisition. b) Employees who were studied and interviewed: Secondary study: James Gosling (Java founder, Sun Microsystems) Kohsuke Kawaguchi (Hudson Founder, Sun Microsystems) Interview: Winston Prakash (Architect, Sun Microsystems) Rahul Pandey (Sr. Director , Oracle) Srini Sankaranarayanan (Sr. Manager, Oracle) Mahendra Durgam (Principal Member Technical Staff) Manoj Kumar (Sr. Manager, Siebel) Paromita Dutta (Systems Engineer, Sun Microsystems) Aswini Das (Senior Member Technical Staff)