Oracle’s embarrassment: Dragged down by Oregon Obamacare, antitrust suit

There’s the good Larry Ellison who donates hundreds of millions of dollars to charity but rarely talks about it, loans his valuable Asian art collection to museums for the public to enjoy, and has built a company (Oracle) that revolutionized the database and employs tens of thousands of people.

Then there’s the bad Ellison who’s used his billions to crush and devour the enterprise software industry, and charmed San Francisco into losing millions of dollars in backing his ego-stroking America’s Cup competition.

The bad Ellison has been on full display this month, evidenced by Oracle’s greedy attempt to eke out every penny from the corpse of Sun’s hardware business by allegedly strong-arming tiny independent support specialists, as came to light in documents filed in federal court. (Oracle declined to comment on these matters.) Oracle’s attack on a company that’s roughly 1,000th its size is outrageous enough. But it’s even worse that the move is intended to keep Solaris customers in line by forcing them to choose Oracle — and only Oracle — when it comes time to buy a maintenance agreement.

Another persona has been on view this month as well: can’t-do Ellison. Oregon state officials finally gave up on Oracle’s failed backbone for the Cover Oregon health care exchange; they’re now moving Oregon residents to the federal Obamacare website, HealthCare.gov, that got so much grief. It must be particular embarrassing that the feds did a better job (relatively speaking) than Oracle and on a more complex system than Oracle was hired to build.

The debacle in Oregon is particularly egregious because its effects go far beyond the bounds of the usual enterprise software screwup by delaying access to affordable health care insurance for millions of people. For someone like Ellison who puts his money where his mouth is to help those in need, failing at the Cover Oregon effort has to hurt.

For Solaris services, it’s Oracle the bully

Earlier this month, lawyers for Terix, a 17-year-old company that offers support for Solaris systems and other large servers, countersued Oracle, claiming that the software giant is trying to squeeze it out of the market by illegally using its control over the Solaris operating system, which it acquired when it bought Sun in 2010. (Last year, Oracle had sued Terix and Maintech, another support provider, alleging they “engaged in a deliberate scheme to misappropriate and distribute copyrighted, proprietary Oracle software code” in supporting customers using Solaris.)

Oracle “forces customers into all-or-nothing support contracts” with the software giant, without which they have no access to Solaris patches or firmware updates, says Terix CEO Bernd Appleby. That means Solaris users have much less incentive to hire support providers like Terix, which gets a quarter of its business from offering Solaris support.

By contrast, when Sun was alive, it “routinely” allowed hardware customers and third-party support providers to “obtain Solaris updates and Sun/Oracle firmware promptly upon release for free or a reasonable and fair cost,” Terix’s filing states. “Oracle turned off access to the free Solaris firmware repository in summer 2011, and now refuses to allow customers to obtain Sun/Oracle firmware unless they also purchase Solaris updates and Solaris software support dervices from Oracle,” the filing states.

As Appleby explained to me, many customers would prefer to have Oracle support for only mission-critical hardware — but not the rest of their servers. Oracle won’t allow that. It insists that all servers be covered by any maintenance agreement, and companies that don’t have a maintenance agreement can’t download software updates. “If you don’t have a maintenance agreement with Oracle, you are dead to them. Oracle won’t even pick up the phone,” he says.

But Oracle’s lawyers will pick up the phone to threaten any company it believes is horning in on its lucrative support business.

Given that Terix is so small (its annual revenue is less than $50 million), why does Oracle care what the company does? According to Oracle’s own financial reporting, hardware sales of Sun products have dropped steadily since 2010, but overall margins on the Sun portfolio have been steady and margins on services have climbed. You don’t need an MBA to figure that the only way Ellison and company can keep making money on the Sun acquisition is to squeeze out as much profit as possible from services.

Oracle has a monopoly on Solaris products, which is not in itself a violation of the law. But Terix’s suit essentially claims that Oracle is engaging in unfair competition and violation of U.S. antitrust laws. It’s an interesting case, but it may be tough for Terix to outgun Oracle. “For every $100 I spend on lawyers, Oracle can spend $100,000,” Appleby said ruefully.

For health care enrollment, Oracle fails Oregon

More than six months after it was due to open — and four weeks after 2014’s enrollment deadline — Oregon’s health care exchange is the only one in the nation that still doesn’t let the public enroll in coverage in one sitting. The exchange system, called Cover Oregon, is so troubled that Oregon last week called it quits with Oracle, the primary contractor.

A Cover Oregon technology committee recommended that Cover Oregon be scrapped and transitioned to the federal marketplace instead. Oregon CIO Alex Pettit said fixing the existing system would be too costly at an estimated $78 million, would take too long to implement, and would be too risky. Pettit said switching to the federal HealthCare.gov system, which actually works after an emergency repair job, would cost just $4 million to $6 million.

Despite months of problems, Oracle kept assuring the state that everything would be fine, according to reports by Oregon’s KATU-TV. On Oct. 2, 2013, one day after the exchange failed to go live, Oracle’s official corporate Twitter account sung the praises of the website: “Check out this article from @InformationWeek discussing Oregon’s successful #HIX, built on #Oracle technology.” Not only was it not a success, it didn’t even work.

About three weeks after Cover Oregon went live, Cover Oregon CTO Garrett Reynolds emailed his boss, CIO Aaron Karjala, a damning review by Reynolds’ team of Oracle’s work. “The review shows that the Oracle development team’s quality of the work was atrocious and that they broke every single development best practice that Oracle themselves have defined,” Reynolds wrote. “It is one of the worst assessments I have performed in my 18 years of Siebel work.” (Oracle bought Siebel years ago and has incorporated it into its various products.)

At that point, Oracle switched gears, admitted the site was a mess, and pointed fingers at Oregon. As far as Oracle is concerned, “Cover Oregon lacked the skills, knowledge, or ability to be successful as the systems integrator on an undertaking of this scope and complexity,” Oracle President Safra Catz said in a letter to Cover Oregon.

No doubt, there’s blame to be had at Care Oregon. Remember that positive InformationWeek story? Its report relied on statements from Cover Oregon CIO Karjala, who in the weeks before its launch gave no indication of major issues and in fact crowed to the press about the care his team took to do it right, surely as part of an Oracle-sponsored media effort. Karjala has since resigned from Cover Oregon at the request of the state’s governor, after a review found significant management failures.

This is not so much a case of bad Ellison as a reality check that big, bad Oracle is like any other systems contractor when it comes to executing complex projects. Hapless clients are part of the reality in that business — otherwise they wouldn’t need prime contractors in the first place. Oracle’s been in that business a long time and prides itself as an alternative to a typical, inside-the-Beltway dysfunctional government contractor kept alive by cronyism.

There are plenty of complexities in both issues, and as they say, mistakes were made by more than one party. But at bottom, Oracle could have done better in both situations, which is why it’s been a bad month for both Ellison and Oracle.

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This article, “Oracle’s embarrassment: Dragged down by Oregon Obamacare, antitrust suit,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.