Sybase CEO John Chen: Tale of a Turnaround

What’s behind SAP’s acquisition of Sybase? John Chen, Sybase’s CEO, offered compelling clues in an in-depth interview shortly before the merger was announced

By Eric Knorr and John Gallant, ITworld |  Mobile & Wireless, Analytics, SAP

Few companies get a chance at a second life. When John Chen signed on as CEO of Sybase in 1998, the database software vendor was, in Chen's own words, "a very, very dead company." Once a strong competitor to Oracle, Sybase had lost its way, in part because it missed the opportunity to enter the enterprise application market Oracle now leads.

John Chen
Sybase CEO John Chen

Over the next decade, through the efforts of Chen and his team, Sybase turned around and reinvented itself as an enabler of the "unwired enterprise." Then, in mid-May, enterprise software giant SAP signed a merger agreement with Sybase, citing Sybase's leadership in both mobile and in real-time analytics.

[ Why would SAP buy Sybase? Hint: It's not for the database. ]

Since the merger announcement, Sybase has not granted interviews to the press. But in March, before rumors about the merger began circulating, John Gallant, Chief Content Officer for IDG Enterprise, and Eric Knorr, Editor in Chief of InfoWorld, sat down with Chen for an hour-long chat as part of the IDG Enterprise CEO Interview Series. The interview explored how Chen was able to rescue Sybase from the brink and establish the company as a key mobile enterprise player. The result was a discussion rare in its frankness - one that provides retroactive insight into the real reasons SAP found Sybase so attractive.

Tale of a turnaround

Knorr: You led the company into the mobile space very early. What did you see that other people weren't seeing? All the talk today is about mobility, but it wasn't when you started to drive the company in that direction.

Chen: I knew we were going to get to that. That has a little bit to do with history. Most other CEOs will claim that they're visionary. The fact of the matter is that we backed into it somewhat, and to be really honest, we didn't have another choice. Because in the e-world, we lost it.

When I took over this company, we were behind in various technologies, not only in the e-world. We made our college effort trying to get there; we had our app server. But by that time, we were the seventh app server in the universe, where WebSphere and WebLogic already had 75% of the market. And then Sun had about 6%, and this guy has about 9%. And all of us have nothing, comparatively speaking. So you can't rebuild a company based on that.

You have to have something that you are uniquely qualified to do. I always ask the question -- what is our right to be a company? That's a good question, right? I mean, I don't care if you're selling ice cream. You know, what do you actually do so that people will sustain you? You need to have some capability and know-how that's unique to you, especially in technology markets. That's number one. And we kind of lost one generation.

We didn't have applications, like ERP and MRP. That was before my time. We decided not to go there. It turned out to be a near-fatal mistake. And when I came in, the e-world was big. Everybody's IPO'ing their business plan and everybody's making millions and Sybase had deteriorating revenue and was losing money and all that.

Fortunately, we had a good installed base and a good loyal set of customers. And they were questioning our survivability; so were a lot of people. So I knew [I had to] be making money and stabilizing the troops and stabilizing the customers [who said]: "Okay, you guys are going to be in business, I'll take my time moving away from you."

And that was the general concept in the 2000 timeframe. Everybody's making zillions of dollars and the stocks are 300 bucks in some of the companies. Most of them don't exist anymore, but...we were not doing anything. I mean our market kept low, basically with nobody following us. It was a very, very dead company at the time. So one thing we decided was...we need to be somebody that is interesting and worth following. That means that you have to do something that other people haven't done yet that will be meaningful over time.

But you can't ask the customer, because there are two problems. If you ask the customer, well, they don't know what they need to know. They're expecting people like us to be a kind of advisor. And secondly, if they articulated what they needed, I'm already too late. Because, most likely, if they asked my competitors, my competitors would go in and say: "I'll you what, you ought to do this, this, and that." And then by the time [my customers] tell me, I'm too late. I'm going to play a catch-up game forever.

So we decided to look at what we can do and what the world looks like. And fortunately, at that time, we partnered with a couple of companies, at least the people who were willing to chat with us. The big one was really Intel. They were pushing Centrino chips in the early 2000s. So they came up with this "unwired enterprise"; they spent $300 million to do this campaign. I had no money. So I immediately called myself "unwired enterprise." I see somebody's branding this and I don't have money to brand it. By the way, we didn't have credibility either. If I came up with "unwired enterprise," nobody would listen to me at that time, right?

But the hardest thing is to keep the sales force focused. The sales force still needs to put food on the table while I go develop this grand scheme. My sales force calls and says: "Hey, I like this stuff you're calling 'unwired enterprise,' it's sexy, it's whatever. But what the hell is it? Because my customer doesn't know what the hell you're talking about." Those are the kinds of issues we had to deal with.

So, in some ways we backed into it, but we didn't really have a choice. We needed to leapfrog it, and we knew if we leapfrogged it correctly, it would be big time. If we leapfrogged it wrong, well, it's no worse than when we were given no respect anyway at the time.

Gallant: So how were you able to make the transition?

Chen: The key was that we had a team of people who were willing to do this, who would hang in there. Because there were going to be a lot of ups and downs. And there were, but we have a great team. If you look at our executive team, we've been together for a very long time. I've been here 12 years; some of them have been here longer than I have.

If you remember, we acquired a company called PowerSoft. PowerSoft acquired a company in Waterloo, Ontario that does compilers. In the year 2000, nobody was buying compilers.

I was on a mission to cut costs and make money. So I flew up to Waterloo. At the beginning of the journey I was going to shut it down. When I got there, I was very impressed with the loyalty of that team and the capability of that team. So I came back and started thinking that there's got to be something that we could ask them to do.

Now, at the same time, coincidentally, it was the early days of Palm [which had been bought by 3com]. 3Com wanted to have a lot more intelligence on a device. Apple had failed at that with the Newton, if you remember. I said, well, these kinds of devices don't have a lot of memory or processing, but it's got to be able to do more than just keeping contacts, address books. I mean, it's got to be able to do more than that, right? So we started taking an interest in that.

I came from a chip design background. I used to design VLSI chips for Motorola. So I said -- well, we could apply the same concept, take the compilers and compile application-specific code. So take the hardware concept of ASICs, application-specific ICs, into application-specific code.

So I challenged the team in Waterloo. I said: What is the smallest database you could build? And this is very interesting historically. We went to 3Com and 3Com came up with some ideas about the smallest usable applets. Apple obviously is a much better marketing company, but we had that concept way back when.

So we were generating applets with our compilers. We had the first ultra-light Java compilers that could compile things down to 60,000 bytes. [Those apps] actually did something. They didn't do a lot. But 60 kilobytes is all they gave us in terms of real estate. Today that's nothing. But in those days, ten years ago, it was a different world.

So we got really interested in that, and then we won a lot of embedded business because of that. So at the time when IDC and Dataquest were tracking that market, called the embedded database market, the whole market was only $300 million. We owned almost 70% of that market. We were in all kinds of software, even Siebel - you know, all the CRMs - and Remedy. We were in handheld devices like FedEx and in all kinds of hardware, software. In fact, the government used it in the system for international travelers, with the palm reader. That palm reader is on our mobile database. High-end chain stores were using it to scan prices, like Andronico's. So we ended up doing very well.

Basically it was an open systems equivalent of a simple technology. What simple could do. We don't do hardware; they do the proprietary hardware. But I have the open systems part of it. So that's how we got started, and then after that we got into content delivery, we got into encryption, we got into device management, we got into collaborative software -- you know, Bluetooth, Ultra Wide Band.

Next page: There's money in mobile

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