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Insiders say Oracle's best hope in the cloud wars with Amazon is a team led with a 'culture of fear,' and executives are leaving

oracle Clay Magouyrk
Clay Magouyrk, the executive vice president of Oracle Cloud Infrastructure.
Oracle

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  • Current and former Oracle employees say there's a "culture of fear" at its flagship cloud unit.
  • Cloud boss Clay Magouyrk at times aims for results by "beating down" workers emotionally, they say.
  • OCI, the cloud unit, has lost at least a dozen VPs since the start of 2020 and is facing lawsuits.
  • See more stories on Insider's business page.

In May 2017, the Oracle executive Clay Magouyrk was presenting at a livestreamed all-hands meeting for the database giant's nascent cloud unit when he ran into a problem with his laptop. The attendees who spoke with Insider said that while they each remembered a slightly different version of Magouyrk's wording, the gist of his frustrated aside was that the laptop must've been built by "tiny Asian hands."

The day after the meeting, the executive Don Johnson — who at the time was Magouyrk's boss and the overall leader of Oracle's cloud business — apologized in an email reviewed by Insider for "not stepping in" during what he characterized as "inappropriate commentary."

"We at Sparta pride ourselves on being progressive, unfiltered, and bucking the trend of typical corporate America," Johnson wrote in a copy of the email reviewed by Insider. Sparta was, at the time, the codename for Johnson's unit, meant to evoke the imagery of a small-but-mighty team bent on overtaking Amazon Web Services, the dominant cloud platform.

"The comments made yesterday do not reflect my own views on how we should be leading our organization and will not be exhibited by my management team going forward," Johnson wrote. He also pledged to bring on executive coaches for his team.

But ultimately, when Johnson stepped aside last summer to lead new projects at Oracle, Magouyrk was appointed to take over Sparta, now called Oracle Cloud Infrastructure — a unit of over 10,000 employees that people close to the company say brings in about $1 billion a year in revenue. In March, the company said it booked $10.1 billion in revenue for the most recent quarter. It doesn't disclose specific revenue for cloud units including OCI and said only that OCI grew 100% over the same period of 2020.

Magouyrk, a former Amazon software-development engineer who joined Oracle as an individual contributor in 2014, quickly impressed Oracle Chairman Larry Ellison and CEO Safra Catz with his ability to deliver results quickly, leading to his rapid ascent through the ranks to preside over Oracle Cloud Infrastructure.

But the reign of Magouyrk has raised questions about Oracle's culture. Magouyrk's leadership style was cited in a pair of lawsuits filed by former vice presidents against the company and an executive, including an allegation that he once told an executive that his actions were "f---ing stupid" in front of all of OCI's senior leaders. One of the former vice presidents who sued Oracle died by suicide in April. Oracle is seeking to force both cases into private arbitration.

Oracle insiders who spoke with Insider said the comments alleged in the lawsuit were generally "tame" compared with others Magouyrk had made. Magouyrk was "abusive to people in large group settings. It was never, 'Stay after the meeting and let's have a conversation.' If he was upset, he would insult you personally and professionally," one former employee said. "He'd drive grown men to tears, and then just be like, 'Jesus f---ing Christ.'"

All told, a dozen current and former Oracle employees and executives said there was what one person described as a "culture of fear" at OCI, telling Insider that Magouyrk is known for trying to get results by "beating down" employees emotionally. One employee said they were told during the interview process that they were going to want a "fear buddy" to turn to when they inevitably thought they were going to get fired. They spoke on the condition of anonymity because they were concerned speaking out might negatively affect their careers.

Magouyrk has had a meteoric rise at Oracle, promoted from an individual contributor to an executive vice president within about six years. But insiders said Magouyrk has failed to develop the management skills necessary to run a business of OCI's size. And since 2020, Oracle Cloud Infrastructure has lost at least a dozen vice presidents, including Rahul Patil, a former senior vice president of software engineering, and Steve Daheb, a former senior vice president. Insiders said they believed at least some of the attrition was attributable to the culture created by Magouyrk. 

Magouyrk's behavior has so far been tolerated, according to insiders, because he won over Ellison and Catz by building what is perhaps Oracle's single most important business, which represents the core of the database giant's efforts to reposition itself as a cloud-computing heavyweight, with Ellison repeatedly slamming market leader Amazon Web Services in public. Oracle's cloud ambitions came to the forefront last year when it signed a key customer deal with Zoom and won the bid to host TikTok's infrastructure in the US (though that deal fell through).

"Larry trusts Clay because Don and Clay built OCI," one person said. Magouyrk is "selling OCI as the future to Larry and Safra," another said. Oracle declined to comment on Magouyrk's management style or OCI's culture. Magouyrk and Johnson did not respond to requests for comment.

Magouyrk's ability to deliver impressed Oracle's top brass

Magouyrk joined Oracle in July 2014 as an individual contributor, having worked the previous six years as a software-development engineer at Amazon. 

At the time, Oracle was just entering the cloud-infrastructure business under the leadership of the longtime executive Thomas Kurian — once considered a leading candidate to one day take the company over as CEO. Kurian did not respond to a request for comment.

Early on, Oracle made an acquisition Kurian hoped would help reinvigorate Oracle's lagging cloud business.

But it wasn't a good fit, two former executives said. The acquired product was designed for corporations to build a very small-scale cloud, and Oracle was trying to "shoehorn" it into the platform to make it work for large enterprise customers, the executives said. "Customers hated it," one person said.

In the end, Ellison decided that Kurian's vision wasn't living up to expectations as an AWS rival and tapped Magouyrk and Johnson — a former Amazon principal engineer who joined in 2014 as Oracle's senior director of engineering — to lead the charge on creating a "second-generation" cloud from scratch. 

Magouyrk, who was Johnson's first hire at Oracle, impressed Ellison early on with what he was able to accomplish with a small and nimble team. At Oracle, the production cycle for the first version of a new cloud feature could take six months. Magouyrk's team was able to cut it down to two weeks. 

"Larry would say something, and Clay would say, 'We can make that happen,'" one former senior-level employee said. "He impressed Larry with his ability to deliver, even though the way he did it was by being incredibly aggressive and beating up on people."

The rise of Sparta led to infighting at Oracle

The new group was codenamed "Draco" and later renamed "Sparta." Modeled after AWS, where Johnson and Magouyrk both previously worked, the group created a set of leadership principles modeled on Amazon's. A copy of the "OCI values" reviewed by Insider included principles like "put customers first," "don't be a jerk," and "own without ego." The group filled out its ranks of so-called Spartans by poaching engineers largely from AWS. 

The rise of the OCI also caused rifts within Oracle — the legacy of which can still be felt today. Kurian, who was still leading the first-generation cloud that had been internally redubbed "Oracle Classic," started a rivalry with the Sparta group. One person said Kurian at one point pressured Accenture to choose Oracle Classic instead of what would become OCI. Accenture did not respond to a request for comment.

Finally, in summer 2018, Ellison issued a decree: Johnson would be given overall control of the cloud business, while Kurian would oversee the rest of Oracle's products. Kurian left in the immediate aftermath of that decision, according to two people familiar with the situation, with one describing it as a "rage quit." Kurian was named CEO of Google Cloud later that year, replacing Diane Greene. Google did not comment for this story.

The decision effectively made Magouyrk the second-in-command of Oracle's cloud business, with one former employee describing Johnson as the "mature older statesman" who kept his outburst-prone protégé in check. Once, a former employee walked out of Magouyrk's office after a screaming match, according to someone who witnessed the meeting, and quit. Johnson, whose office was next door, marched into Magouyrk's office and said: "You need to get him back or you're done," according to the employee. The person who quit did not respond to a request for comment.

Insiders said Magouyrk gained a reputation among some for being generally difficult to work with: In 2016, Oracle acquired the startup Dyn and integrated into a group overseen by Magouyrk. Three months after the deal closed, Dyn's leadership made it clear that it would not work with Magouyrk, with Oracle eventually reassigning it to Johnson's direct command.

Nonetheless, in June, Johnson told employees that he was stepping down from direct leadership of OCI to pursue new projects within Oracle, with Magouyrk tapped to replace him. 

Magouyrk leads a 'fear culture' inside Oracle's cloud, employees say

Now in command of OCI, Magouyrk was able to place his own stamp on the organization — to the chagrin of at least some employees.

Many of Magouyrk's outbursts happened during weekly meetings held on Fridays, sources said. The "operations meeting" usually has between 60 to 100 employees dialed in to go over the previous week's events. The "critical-projects" meeting on the same day includes a smaller group of executives. During that meeting, Magouyrk reviews a packet with 50 or so pages, with each page or two representing a different leader with the status of a critical project.

Each project is marked with red, yellow, or green, signifying whether the project is on track, according to a packet viewed by Insider. Completed projects appear in blue. "Clay sometimes accuses you of being a 'watermelon,' or green on the outside and red on the inside," one person said.

The worst thing you can be in Magouyrk's eyes is late, people who have worked for him said. "He says things like, 'Why is the f--- is this late? Every single week you're slipping. Do you have a f---ing clue what you're doing?'" one person said.

After a big disagreement or incident, sources say Magouyrk sometimes reassigns an executive to be an individual contributor working on a low-priority "special project." That executive's organization gets reassigned to another leader.

The lawsuits filed by the former vice presidents allege the Oracle executive Tony Grayson, who reported to Magouyrk, "actively insulted people" and changed dates to impress his boss "even though the team had told him these dates were unreachable, and then would tell the team they were failing when they could not meet those dates." Insider previously reported Oracle appeared to have reassigned Grayson to "focus on key data center innovation and architecture-related projects."

Magouyrk's type of management style can be effective in some respects, but only to a point, former employees said.

"To a point, the fear culture is helpful because people really do push themselves — the internal joke at OCI is Microsoft is a country club," one former executive said, referring to the perception that Microsoft provides more work-life balance than other companies but may not be as ambitious. "But beyond that point, fear doesn't work. Fear just means people cover things up. They go watermelon."

Notably, Johnson returned to OCI in December, starting a new cloud and artificial-intelligence organization that he described in an email to employees as "an extension of OCI, not a division of it." Magouyrk continues to lead OCI "proper" under the new structure. Oracle's internal organizational chart, viewed by Insider, shows that Johnson now oversees about one-third of OCI employees. Oracle declined to comment on the unit's structure.

Magouyrk may not be what Oracle needs to win the cloud wars

OCI's culture can also translate over to the unit's dealings with customers, insiders said.

For instance, OCI established a program called FairShare. A 2019 document viewed by Insider describes FairShare as a "limit to protect customers from bursty workloads."

But one person with direct knowledge of the program characterized it differently, saying it is a list of customers to which Oracle had previously given big discounts in exchange for positive marketing testimonials or other services, but to whom it now regretted giving those discounts.

When those customers attempt to launch new computers on Oracle's cloud, it will sometimes return an "out of capacity error" and allow another customer who pays full price to use those resources, the person said. A person close to Oracle's operations disputes this characterization, saying that its capacity-management systems ensure "equal" distribution of resources that doesn't favor any customers over others.

"One of the challenges for Oracle is perception and reputation," Daniel Newman, a Futurum Research analyst, said.

"The company is aggressively working to overcome what can sometimes be classified as being difficult to do business with despite having more than 400,000 customers and being on a steady stream of growth" in its cloud and software-as-a-service efforts, he added.

Oracle's "first-generation cloud simply missed the mark," Newman said. "It wasn't competitive with the likes of AWS and Azure," but its second-generation cloud has been much better and yielded high-profile customer wins and "encouraging growth," he added. Newman also said the company had yet to clearly break out the revenue numbers for its public-cloud business.

Insiders said the cloud unit would need a more sophisticated, seasoned operator. Perhaps ironically, one former executive points to the success that Kurian has seen in turning around Google Cloud in the years since he left Oracle. Kurian has proved to be an effective leader and salesperson, increasing Google's appeal to larger customers and making it more competitive.

"They need a Thomas Kurian," one former executive said of Oracle. Without someone like that, the former executive said, Oracle's cloud ambitions could be in jeopardy.

"Something is going to go wrong enough that they are not going to be able to shove it into the closet or sweep it under the rug," the person said. "They are going to run out of people to take the fall and they are going to have to hire somebody."

Do you work at Oracle or have insight to share? Contact reporter Ashley Stewart via encrypted messaging app Signal (+1-425-344-8242) or email (astewart@businessinsider.com).

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