The captain.

As president of U.S. corporate database provider Oracle, Charles Phillips has his hands full. The former Morgan Stanley tech banker must help Oracle CEO Larry Ellison in the drive to absorb a rash of acquisitions valued at billions of dollars. Simultaneously, he's working to subsume all those cultures into one coherent offering while doing battle with German competitor SAP as both enter new markets. A former U.S. Marine and computer science student at the U.S. Air Force Academy, Phillips talked with LATIN TRADE Editor-in-Chief Greg Brown about discipline in the software ranks.

Let's talk acquisitions: Siebel Systems, PeopleSoft and JD Edwards, Retek, those are just the biggest. There have been 17 other acquisitions of various sizes.

It's true, we've been busy.

It has been said that every industry has a rule of three: There's a leader, a follower and a startup. Is that happening in your industry?

In the applications business, by a degree, certainly the number of viable, realistic suppliers has been shrinking. And we had to make sure we were on that short list. In the software business, it's so much about scale to be on that list, so the acquisitions were about making sure we achieve that scale quickly. But I do think the acquisitions have put us into another category. A lot of customers view us completely differently now. We're just a lot more strategic to them. We're running a lot more of their applications than they would have guessed two years ago. And in many large customers we have the same if not larger footprint than SAP. So it does position us very well against SAP.

Was this an overdue consolidation, or are you getting ready for some other big fight?

The consolidation was overdue. There were way too many suppliers, most of them unprofitable. And this is a unique industry in the sense that when you have too many suppliers, it's beyond the cost of the vendors themselves: There's a cost to customers. They still have to make all these products work together once they buy them, which is unusual. Having too many suppliers in some other industries just means prices are cheap and no one makes money, but you don't care, you're the buyer. But in this case the buyer actually pays a high cost because none of these products were designed to work together. So, the customers were actually driving, in a sense, the consolidation. There were just too many vendors out there. It's not done yet. I'd say we're halfway through it. There are other areas, particularly in the industries, where some of the same thing needs to happen. While we've consolidated the horizontal applications, the ERP [enterprise resource planning software], which you sell to all companies, that has not happened in the vertical applications, applications specific to banking or specific to retail. And that is a whole new area that has largely been untapped by the large companies.

It seems Oracle has certain areas locked up, while SAP has others. Is it a matter of pursuing completely new sectors and not rob from each other? My impression is that there's little motive to change software once you have bought in.

If you look by industry today, there are certain patterns. We're big in certain industries and SAP is large in others. But what they're using from SAP is financial administrative systems. So when I say verticals, I am talking about the operational systems that drive revenues, not just your accounting system, if you are a retailer, but your merchandising system, your stocking system, things that actually drive business. Those things, even in SAP's biggest industries, they're not doing, for the most part. They're still doing mostly financials. They're good at financials, you have to have that, there's no question. But what we've found is, in some of their stronger industries, once we come in with these other applications that are more unique to that industry, [customers] are willing to buy our applications and in some cases replace SAP applications. The fight isn't over and it's hard to switch applications, but people do it occasionally. And certainly we can sell and surround SAP in some of those accounts.

Where do you see greenfield, sectors where nobody's in charge?

Well, there are industries where we are strong on the back end but the front end is still open, the unique applications for that industry. So, like, telecom, where most of them are using our database, a lot of them are using our financial applications, but then there's billing, provisioning, all these things are unique to telecom. It's a huge industry, they spend a lot on technology, and they have a lot of data. Those are all things we like. Banking, the same area. We have the leading application for banking, but it's highly fragmented. Healthcare, no leader there, essentially. So, there are very large industries that are still building a lot of their own applications by hand, custom applications, largely because there weren't many things around years ago, and they have a culture of building things for many years now. And so, now that packages are becoming available, there's less of a reason to do that, but those packages have to be supported by someone large, and so that's the missing ingredient: You need the package and a large supplier. When those two things come together, they start to go toward packages.

You guys wolfed down a lot of corporate cultures in a short period of time. How are these acquisitions not leading toward a culture clash, like what happened at DaimlerChrysler and AOL Time Warner?

We don't integrate companies the way a lot of other companies do. We don't sit there and try to have endless meetings and a U.N. status where everybody's happy. We make decisions fairly quickly, and it's us acquiring them and we basically get on with it. So, DaimlerChrysler, where they had dual headquarters and kind of had dual policies, in our view, doesn't work. We've never tried anything like that. We merge them into our systems within months and into our processes within months and our financial people are driving things, our management team is driving things.

We bought you, and that's it.

There's no confusion about who's in charge. Either you like that or you don't like that, but it certainly clears up things and gives people clear marching orders. If they don't like that, okay, they can go somewhere else and people who like that can stay.

Oracle is balancing the demands of the customers it has acquired while simultaneously piecing together disparate software. It makes a lot of financial sense. Does it make engineering sense?

It makes engineering sense as well. Every generation we come out with a new product, a new application built on a new architecture. It's not uncommon for us to have Product A and, in parallel, be developing Product B, the next generation. So, whether we made any acquisitions or not we would still need a next-generation technology because things have changed from five or seven years ago. The only thing the acquisitions do is give us more customers to sell those applications to and to help fund it. If you look at it that way, it's just a new product that we're writing. It's no different from what we've always done. And hopefully we'll get out on time and we'll see what happens.

You've said in the past that the acquisitions are about getting new customers. Is this business so tight that there's no other way to grow?

I think people underestimate the value of the customer relationship in our business. It's very hard to switch products. Once you get the customer relationship and they have some products installed, they tend to want to buy more from you. The cross-sell and up-sell and the ability to go back into that installed base and sell 10 [times] what they've already bought is huge once you have the sticky connection on the first product, as long as it's working. So acquiring the customer is acquiring not only an existing revenue stream but a future revenue stream because as you extend your product line they will take more and more of the product line. It's an opportunity that's hard to measure but certainly it's a real one. That's the way the industry has always worked. Once you get that customer you go back in over and over again.

It seems that, sector by sector, you really need engineers who come from those industries, in the same way that stock analysts tend to come from the businesses they understand.

That's exactly what we're doing. That's why we're making the acquisitions. That's how you get those people. Because they grew up in different careers than a guy who has been programming databases for 20 years. When you buy a Retek, which is the retail company we bought, all those engineers grew up building applications for retailers for the last 20 years. It is a different industry, different experience, and trying to get there on your own with generic people and teach them retail, it just never works. That's one of the benefits of acquisitions. You get people with a completely different pedigree.

Seems to me the reason you and I are talking is that you're the next CEO of Oracle.

See, now you're trying to get me into trouble. Larry is going to be there a long, long time. He's a very young 61.