Oracle vs HP and the consequences of this battle

Decisions have consequences. The more you wield, the larger the impact your decisions have on the people around you. This is especially true for Oracle or HP.

Oracle’s decision to stop making new versions of its database software based on the Itanium chip has severe consequences for HP, which had planned a future for its servers running on Itanium technology. HP also claim it was an illegal move performed by Oracle, forcing HP’s Itanium customers to switch to Sun servers, a company which was purchased by Oracle last year. Furthermore they claim that Oracle terminated a long term contract in the development of Itanium technology with HP. Therefore, HP has filed a lawsuit against Oracle. It is important to review the consequences of these industry changes.

As for HP’s server division, if their lawsuit turns out to be unsuccessful, the consequence consists in shifting focus away from Itanium technology servers towards different technologies. This also has consequences on selecting their industry partners to effectively support this new roadmap. Next to this, HP will have to encourage their existing Itanium customers in changing their Itanium server for different technology servers. This might result in a potential loss of customers and damage to its brand name.

Do you think Oracle’s actions are to be considered unethically or do they have valid arguments to state their recent decisions?  

The dispute between these two large companies has consequences for thousands of companies and governments far beyond their own industry and is a good example of the importance of competitive intelligence. Does your company have the processes in place to  keep you up to date with the latest insights on the market environment? Do you understand your competitors, customers, suppliers, regulators and distributors?

Balancing trust and innovation in the internet industry

During the last few months we have seen several security breaches into large companies’ online networks. Does this call for more regulation for internet companies? During the eG8 Forum in Paris last month, internet leaders and government regulators had the opportunity to exchange ideas concerning the future of the internet and whether it should be further regulated. The main discussion point is the boundaryless freedom enjoyed by internet companies and the huge amount of customer info captured in their databases that include both personal and financial details.

On the one side we have European telecom companies such as Vodafone and several national government bodies, arguing that there is too much at stake and that therefore trust, privacy and copyrights have to be guaranteed. Also from a fair practice viewpoint, telecom giants urge for regulation; why should internet companies be excluded from regulation when companies in all other industries aren’t?

Meanwhile the other side, including companies such as Google and Facebook, argue that innovation should be maintained. A McKinsey study revealed that the internet contributed during the last 5 years 21% of growth in mature economies. By imposing regulation on internet companies, they claim, this growth will level off. Furthermore, they argue, self-governing processes are present in many internet companies, such as eBay and Amazon.

Is there a middle ground between trust and innovation? Is it possible to implement a set of laws which prevents data misuse and enforces consumer rights, but at the same time allows for the internet industry to realize its full potential within a legal framework? Next to this, regulation often lags behind innovation. Basel III, for example, is a set of laws responding to those invented financial products which have caused the financial crisis of 2008. Should we be proactive or reactive when dealing with the new possibilities of the internet?

New legislation required for future online transactions?

In the last weeks of April, the largest cyber attack ever took place when criminals successfully hacked into Sony's two online gaming networks, PSN and Sony Online Entertainment. Financial details of millions of online customers worldwide were extracted during the cyber attack.

As an immediate outcome of this disaster, Sony faced several lawsuits. Also on a broader level, this disaster has provoked drastic consequences. In the US, Republican Mary Bono Mack, who heads the Commerce Committee's Consumer Protection Panel, said she would introduce a new bill. According to her and others, the existing legislation falls short in obligating companies to secure sensitive information and to timely inform clients about such security breaches. Because more and more people become active online purchasers, large online companies such as Amazon, Sony and Apple contain vital financial information of an increasing amount of people, to such an extent that legislation should become updated to make companies safeguard this valuable information. Not only is an increased security needed, but also concerns about privacy and the potential trade in personal data should be considered.

Does this security breach mean that online consumers should doubt the security of their online transactions on all e-platforms? Are iPhone users OK with the fact that Apple can track their users? This matter can also be applied for companies; should companies which purchase online services such as cloud computing also be worried?

Conflicts of interest and how to deal with them

There is seldom a case when conflicts of interest do not occur. These are situations in which an individual is involved in multiple interests, mostly a personal interest which does not align with his professional responsibilities.  Such a situation corrupts the actor’s decision making and arises in many fields such as politics and business. A high profile example of the last century is the Arthur Andersen – Enron story.  Or, a recent one is the accusation of Rajaratnam of insider trading, who made an illicit 63.8 million US dollars over the last years by trading on illegal insider tips.

The next example tells you that conflicts of interest arise in diverse contexts. Surgeons, having years of experience in their proper practice, are regarded as the best innovators in medical devices. And so they often engage in entrepreneurial activities and commercialise their own developed devices. Their reward: royalties on the amount of devices sold. Consequently this remuneration model encourages surgeons to sell as many of these devices as possible. Their personal gain of selling devices (royalties) conflicts with their interest as a surgeon, which exists in offering the best possible health solutions.

Conflicts of interest can be complex legal situations and, if handled incorrectly, they can have negative outcomes for the people involved. Companies have gained experience in coping with conflicts of interests and the following highlights practices to avoid or deal with conflicts of interest.

Avoidance of decision making

The best way to deal with a conflict of interest is removing them immediately once they are discovered. A recently elected politician might sell all his corporate stocks and resign from any corporate boards in order to remain neutral in his political judgement. This, however, is often easier said than done. A better way is to abstain oneself from making any decisions when one finds oneself in a situation of conflict of interest. A situation in which a manager does not participate in the decision-making of which legal advisory firm to hire because a family member of his is a senior member of a potential legal contractor, can be considered as way of avoiding such a situation of conflict.

Code of Ethics

Every company should have a Code of Ethics in which, among other sections, some important guidelines and imperatives of how a situation of conflict of interests should be addressed. This section should include topics such as the hiring and supervising of family members and in which way corporate gifts should be offered or accepted. Corporate gifts should be considered as a sign of commitment between two cooperating companies, not as a bribe. Therefore companies should offer these gifts publicly and with a broad audience.

Legal advice

When in doubt of how to act, companies can always seek legal advice, demonstrating transparency.

Corporate culture

The culture present in the company also plays an important role in how employees or board members act in a situation of conflict of interest. An open, transparant culture should be established which promotes individual responsibility and which is intolerant against conflicts of interest.

Over the course of the years companies have refined their social policies into a robust Corporate Social Responsibility, covering not only conflicts of interest but also environmental issues, health programs, community support etc. Even though some industries are more prone to conflicts of interest and companies will have their own emphasis on how to cope with them, the basic guidelines are in all present. “Prevention is better than Cure” is such one next to keeping things transparent and acting along one’s best intentions.

Towards a more comprehensive metric

Until now countries’ success has been measured by their GDP, Gross Domestic Product. In my opinion, purely economic growth can’t express completely the total well-being of a country’s inhabitants. Aren’t there other metrics to determine national wellbeing?

This social study area has been given renewed attention since the end of 2009 when Sarkozy commissioned Nobel Prize winners Joseph Stiglitz and Armatya Sen and many others to think about how to construct such a metric and to determine its possible hurdles. Out of such research, French policy makers should be able to deduct the determinants of people’s happiness on which consequently social policy can be build. Also, this metric should be taken into account when analyzing a country’s GDP and will increase therefore the importance of national wellbeing and sustainability in a country.

In my opinion, happiness increases when the unemployment rate decreases. When one has a job, one feels part of a larger group and has a reason to get up in the morning. Next to this, access to health and a good work – life balance seem to me other vital determinants of people’s happiness. Next to this I think with the installation of a happiness index, social policy will gain in importance at the expense of economic policy which has by far the upper hand in politics nowadays.

Let’s also think about what this phenomenon means for one’s personal life. If wellbeing and sustainability are more often addressed in future politics, we might also on a personal level value the non-economic parts of life stronger. This was an important topic of many parties ‘agenda during the General Elections of last week.

On international relations

Since the beginning of the New Year, we have read numerous articles about tensions between America and China. These issues tend to focus on the US accusing China of violating human rights, disagreements regarding currency politics, accusations of western companies being disadvantaged by ever changing economic policies and the ‘forced’ technology transfer in joint ventures with local companies in China. China, on the other hand, claims that international US economic policies are too protectionist.  These issues are to be viewed in an attempt of US to safeguard its position as largest economy and largest political power, while China wants to manifest itself as a major global economic power.

These tensions become more and more visible because China nowadays competes on more levels of the value chain with the western world. While having historic roots in low-cost manufacturing, Chinese companies are moving up in the value chain into more value added positions and are increasing their global presence, as witnessed by the acquisition of BorsodChem by Wanhua Industrial Group in Hungary.  And so many Chinese manufacturers are in direct competition with western companies. Next to this we are also seeing disagreements concerning access to natural resources as both countries attempt to safeguard their national interests.

This economic war, as it is lately often referred to, is detrimental for the global economy. The world would benefit from cooperation between the two countries pursuing mutual benefits and maintaining fair access to natural resources. Cooperation will not only balance the world economy, but it will also help enabling a more effective tackling of global issues such as climate change, terrorism and poverty.

The only way to accomplish such cooperation is in maintaining open international discussions. A ‘China vs. the world’ scenario can be avoided if China faces up to its responsibilities as an emerging global player and if the rest of the world learns how to adjust to China’s growing impact. 

Japan and the energy question

The earthquake in Japan and its triggered tsunami caused many casualties and a nuclear incident at the Fukushima plant. As the world deeply mourns for this tragedy, the debate is back on whether nuclear energy should be included in the energy mix of the future. Because there are both pros and cons about nuclear technology, this is a difficult to answer question.

This statement actually goes for all electricity generation technologies; there is no champion which is better than the others. Fossil fuel electricity generation causes climate change, nuclear power generation produces dangerous nuclear waste and finally electricity generation from renewable energy sources makes up for only a slight percentage of today’s energy mix. Renewables still need a lot of investment to gain economies of scale.

The incident in Japan makes us think about how the future of energy will look like. While Hidehiko Hishiyama’s, a director general at the trade ministry, states that renewable energy alone isn’t sufficient and that nuclear power is essential, one needs to take into account another important trend in the energy and utilities sector. This is the development of smart grids and smart meters. Smart meters make measurement possible. And that which can be measured, can be managed. Consequently, companies which have implemented an energy management system can save money and resources by reducing their carbon footprint.

If energy efficiency and smart grids will be part of everyday use in the future, (intermittent) renewable energy sources are a better fit to the energy demands than (bulky) nuclear power. However, if safety can be guaranteed with regard to nuclear power generation, also this can be considered as an interesting alternative.