Ellison recounts early days of Oracle

Picture Larry Ellison broke. Hard as it may be to imagine, at one point in his life the CEO and co-founder of Oracle Corp. couldn’t pay his mortgage. That was 30 years ago, long after Ellison contributed all $1,200 in his pocket to help build a database startup company that would make him $26 billion richer today.

So how did Ellison exactly go from zero to hero? At this month’s Oracle OpenWorld in San Francisco, California, the 63-year-old Ellison took conference attendees to a behind-the-scenes tour of Oracle’s history. Visibly in good spirits, Ellison uncharacteristically laughed several times during his keynote address as he recalled Oracle’s humble beginnings with his partner and Oracle co-founder, the late Robert Miner. 

In the 1970s, Miner was Ellison’s boss at Ampex Corp., an inventor of advanced tape drives based in Silicon Valley. Ellison said Miner asked him to write a database that would manage the tape drives and soon after, a competing company called Precision Instruments Inc. offered him the job of vice president for software.

“My task was to develop software for some exotic mass storage devices, but we did more software and less of the devices,” recalled Ellison. “The company president asked me to look for someone we could outsource the job of software development and I thought of Bob.” 

Ellison convinced Miner to quit his job at Ampex and to bid $300,000 for the project. They bagged the deal only to find out that the next higher bid was for $2 million.

With his $1,200 and Miner’s $800, the two set out to form a consultancy firm they called Software Development Laboratories (SDL) and hired their friends Bruce Scott and Ed Oates to help develop the original version of the Oracle software.

“Our first office was a ground floor space with only one window that Precision Instruments rented to us. We posted outside our door a handwritten sign to let people know SDL exists,” said Ellison. “Very early on our goal was to sell a network database. But the more we researched on the subject the more we realized it’s old. At that time, IBM was working on something called the IBM System R, the first relational database which we need to build our first RDB (relational database) system.” 

Many firsts

Like any pioneering companies, Oracle keeps a record of firsts, except for what it called its maiden product. There was never an Oracle Version 1. SDL intentionally called its first commercial release Oracle Version 2 to imply that all the software bugs had been addressed already.

“Who in the world would buy software called Version 1 from four guys in California?” Ellison said with a laugh. 

Ellison was SDL’s first salesman and sold the first copy of Oracle Version 2 for $48,000 to the Central Intelligence Agency and proceeded to install the software himself at the CIA’s closely guarded computer room. Ellison admits the name Oracle was the codename for the CIA-funded project he had worked on at Ampex.

With the prospect of money from the CIA project and from new orders coming in, SDL decided to move to an expensive office address and shift from mere consulting to full software development.  

“We also changed our dress codes and started wearing suits, or at least long pants,” Ellison said.

What the four-man company didn’t know then was that the process of procurement and payment in government could take a long time. 

“I know how to program and that’s about it. It took us nine months to get paid by the CIA and we were already getting lots of orders but we didn’t have money,” said Ellison.

A slice of accounting

These days, companies would panic at the early sign of accounting problems but not SDL back then. Its founders wanted to get a bank loan to fuel their growth but their total lack of accounting knowledge almost made it impossible to get a credit rating. 

“We discovered we’re bad in accounting… The bank asked us to submit a balance sheet and financial statement. None of the men knew what a balance sheet was and how to make one so we just copied from our customers and made up numbers. To make a long story short, we got the loan,” Ellison said.

Ellison and his partners also did the oddest thing by hiring the pizza boy who delivered to their office every night as Oracle’s first accountant.

“One night we chatted with John Camp, the pizza boy who consistently brought our pizza, and we learned that he was studying accounting. We said why don’t you quit your job as a pizza salesman and become our chief financial officer. Take whatever you need, we will never know,” Ellison told him.

Not only did Camp quit his pizza delivery job he also eventually quit school following Ellison’s advice. He took over the books of SDL much to his father’s disappointment, Ellison recalled. Camp later became a software developer when SDL hired its first real accountant. 

While all these were taking place, Charles Phillips, the current president of Oracle, was still at the Air Force Academy. 

The rest is history

A venture capitalist, Don Lucas, holding office next to SDL, became intrigued by the late working hours and cheap cars that Ellison and company kept. Lucas became involved with the company, helped the novice Ellison pay his mortgage and instilled business discipline at Oracle while taking a seat in the board. 

In 1983, the company adopted the name Oracle Systems and opened offices in key US cities and expanded to Europe and Japan. In 1986, Oracle went public. By this time, aside from IBM, new competitors such as Ingres, Informix and later on Sybase and Microsoft started showing up.

“Oracle was growing and many of our employees were marrying each other and having ‘Oracle babies,’” Ellison recalled. 

It was also around this time when Charles Phillips worked as software analyst at Morgan Stanley and started tracking Oracle. Ellison appointed Philips as Oracle president in 2004.

But the good times came to a temporary halt with the recession of 1991 when Oracle reported its first quarterly loss. 

“But that’s a brief period. Since then the company has launched multiple products like Oracle Version 7, which swept all competition and demolished Sybase,” said Ellison.

Today, Ellison proudly proclaims Oracle as the largest enterprise software vendor in the world, able to buy 21 software companies to date for a grand total of $19 billion. He remains at Oracle’s helm while his co-founders Scott left in 1984 to form Gupta Technology (now Centura Software) and Oates retired from Oracle in 1996. Miner died 10 years ago. With his self-made fortune, Ellison has secured for himself the No. 11 spot in the 2007 list of the world’s billionaires. 

“I’m enjoying myself more now compared (to) before when we were just weeks from running out of money,” Ellison said. “That was more stressful; we ate canned soup and slept in our suits. Being a start­ up was very demanding. Today, we take on larger problems that offer more challenges, (and that) are more interesting and more fun.”   – Alma Buelva