Oracle's start-up matchmaker

With more than $30 billion in acquisitions over the past five years, business software giant Oracle is looking for more opportunities in the Middle East. The company's ventures program director, Jonathan Tikochinsky, told "Globes" what Israel has to offer.

In the past five years, business software giant Oracle Corp. (Nasdaq: ORCL) has spent more than $30 billion on company acquisitions, some of which were major deals such as Siebel, and BEA, but it also spent a fair amount on companies that were relatively small. These acquisitions, judging at least by the figures in Oracle's financial statements, have pretty well justified themselves. The company's value has almost doubled since it began its buying spree in 2004, as has its revenue, which totaled $22.5 billion for its fiscal year ended May 31, 2008, and net profit, which reached $5.5 billion.

This buying spree has barely been felt in Israel. Aside from acquiring Demantra in 2006 for $41 million, Oracle has not acquired any technology here. The company's name has frequently cropped up behind the scenes; one instance was the talks it held with PHP developer Zend Technologies Ltd., but aside from this and the center of excellence through which it invests in companies in partnership with the Chief Scientist, Oracle has done precious little in the way of strategic moves in Israel.

The success of its mega acquisitions and the maturing of the enterprise infrastructure software world in general, have prompted Oracle to launch a series of partnerships with fledgling technology providers. Or to put it another way - to find a start-ups whose solutions can be integrated into Oracle's growing product range. This activity is similar to that of other giants operating here such as Microsoft Corp. (Nasdaq: MSFT), SAP AG (NYSE: SAP), and IBM Corp. Leading the activity is (NYSE: IBM), is Jonathan Tikochinsky, who for the past two years has served as Oracle's ventures program director.

Tikochinsky's geographic region covers Europe, Africa, and the Middle East (EMEA), but he operates principally in Israel where the most of the region's start-ups are. "Product managers at most companies know the companies in the field, and know which partnerships interest them," he says. "This region, on the other hand, is mapped out far less." Tikochinsky says Oracle currently has 40 product managers. His role is to meet with each manager, find out what "holes" in their technological offering are a priority for them to fill, and then find a start-up that will fit the bill.

Although in technical terms, what Tikochinski is describing here sounds simple, in a giant company with a vast range of products, most of them new, and an organizational structure that looks almost incomprehensible to an outsider, access by start-ups get access to the right person is nearly impossible, especially if there are time limitations. "We're looking now at the future technology road map, and thinking about how to complete it and which companies would be suitable," Tikochinski says. "We realized that we have to work on very fast communications routes, and also provide added value to those companies that team up with us."

Growing together with the start-ups

Oracle has two modes of cooperation with start-ups in Israel. The more familiar of the two is the aforementioned center of excellence under which the company is supporting 15 companies in cooperation with the Chief Scientist. Oracle's motive here is to provide IT infrastructure (made by Oracle, obviously), to early-stage companies in order to grow together with them once their sales begin to increase. The director of the center in Israel, Ziv Omer, also represents the other side of the start-up partnership strategy - to generate an influx of new technologies into Oracle that Tikochinsky is now managing.

In the meantime, the Israeli companies currently in partnerships with Oracle include Cyber-Ark Software Ltd., which develops security solutions; Unipier Ltd. in telecommunications infrastructure, and Oblicore Ltd., in customer relations management. "We looked at hundreds of companies and we very quickly said no to most of them," says Tikochinsky. "At the moment we're in talks with several dozen companies, most of them in Israel." The incentive for early-stage companies to enter partnerships with Oracle is pretty clear. Collaborations with giants help start-ups get more attention, and "ride on the back of the tiger" when it comes to generating product sales.

In the final analysis, the goal, stresses Tikochinsky, is that Oracle's thousands of sales personnel will get to know the products of the partner companies, and sell them as part of Oracle's product suite in the respective fields. Because of this, he says, "Bringing a partner company is a process that takes several months and calls for a proper plan for system integration, and a sales and marketing strategy. I want the partnerships to work in 50% of the cases, not just 10% or 15%, so it is important to conduct a thorough investigation, and have a proper plan before you move ahead."

Oracle conducts its other mode of cooperation with Israeli start-ups mostly through alliances with local and overseas funds. And what message does Tikochinsky have for those fund managers who finally get to meet an Oracle representative and start dreaming about an exit? "My focus is on finding partnerships, and for the company partnerships are the real thing," he says. As with many other companies, in Oracle too, once a company is in the system, it can upgrade the relationship with it and move on to business development, at which stage it will decide whether it wishes to acquire it.

Published by Globes [online], Israel business news - - on August 31, 2008

© Copyright of Globes Publisher Itonut (1983) Ltd. 2008

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