Why Oracle’s Advertising Claims Are Strategically Stupid

One of the more fascinating back stories this year has been the fight between Oracle and IBM. Oracle has been making claims it allegedly cannot support, and IBM has been going to the National Advertising Board (NAD) to get Oracle’s ads pulled.

The latest action, described here, suggests Oracle can do this until NAD asks them to stop. (This incident involves Oracle’s claim that its Exadata server is “5x Faster Than IBM…Or you win $10,000,000,” among other things. Oracle pulled the Exadata ad after IBM complained, and NAD deemed this action “necessary and appropriate.”)

Related: SAP’s Sikka Fires Back Against Oracle’s ‘Falsehoods’ About HANA

While this might seem like an interesting move because the ads get a lot of press coverage and the take-down order gets very little. However, there is a great deal of risk for Oracle on this path—it could be seen as fraud, and it certainly erodes trust.

Oracle’s False Advertising Risk

Trust is at the core of an enterprise IT relationship. This marks the difference between an enterprise vendor and a pretender—you can trust an enterprise vendor. The reason trust is so important is because the cost for IT solutions is so high that, if a decision is unsound, it can cost everyone in the decision tree his job, since the mistake tends to be material in nature.

Making enterprise IT decisions isn’t like buying a used car. It’s buying a relationship. At the core of this trust is the realization that after the sale the vendor will be there, through thick and thin, and have the buyer’s back. However, if the vendor lied about the potential for the system, and that lie is discovered, then the relationship is polluted and the decision makers are in a place of unacceptable risk.

A vendor that does this with intent, regardless of the reason, puts its customers at risk. This is one of the reasons why great care is given to advertising claims in the IT industry. It isn’t to avoid problems like the one highlighted in the link, it’s to avoid creating the perception that IT managers are cannon fodder or collateral damage.

IT managers have a tendency to talk to each other, change companies and, through this varied experience, view some vendor as unacceptably risky. Once a vendor gets a reputation for being unacceptably risky, though, it’s done as an enterprise provider.

More from Enderle: Oracle Shows What Happens When Sales Runs the Show

That’s why these moves by Oracle are strategically stupid. They create an increasing perception that Oracle represents too much risk. No IT buyer wants to buy from a vendor that considers customers expendable in the greater battle—particularly if the greater battle has nothing to do with them.

Oracle’s Strategy Has an Apple at Its Core

I think this strategy comes from Apple. When Steve Jobs took over there, he was faced with a huge problem: The products Apple had just couldn’t compete—its one business product, the Apple server, was one of the company’s few failures—so Jobs had to sacrifice his integrity in order to keep the company afloat.

Luckily for Apple, these were end-user products. End users, particularly those already loyal to the brand, can be forgiving. A bad personal purchase can be forgiven. One that puts a buyer’s career risk can’t be.

(If you’re wondering how such a strategy got into Oracle, recall that Larry Ellison was not only Steve Jobs’ closest friend, he was on Apple’s board in the early years of its turnaround.)

Oracle Receives a Warning From, of All Places, EMC

One of the more interesting things to come out of the data analytics that EMC is doing to analyze competitive weakness, which I wrote about last week, is the conclusion that Oracle’s customers, much like IBM’s customers in the late 1980s, are trapped. This is likely why Oracle feels safe making moves that put its customers at risk.

However, as IBM learned, being trapped is a problem that needs to be solved. Once customers and competing vendors craft an acceptable escape path, they leave in significant numbers. More importantly, potential new customers increasingly see the trap and avoid it. The combination of these two events can end a company—and that is the path that Oracle is on.

It’s something to chew on this Thanksgiving as you consider your alternatives.

Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.

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