The story goes that Oracle founder
Larry Ellison was poised to eat can of dog food to illustrate that using its own software improved the company, when his PR entourage vetoed the idea.
But he got his point across in words: “We make premium dog food and it tastes great. I saved billion dollars and I think we’ll save another billion this year,” he said recently in an interview in the US.
“So does that make me nervous?” asked his CFO Jeff Henley, the man directing these operations. “Not really; we’re reasonably optimistic because Internet technology is playing such crucial part.”
Having gone through the first phase, Oracle’s top dogs have become apostles – telling their story and promoting the notion that if you sign on for the e-com journey, greater efficiencies and productivity won’t happen overnight, but they will happen.
Henley admits e-commerce is more than slapping in lot of technology. “I wish it were so easy, but the more complicated your business the harder it is.”
And Oracle was about as complicated as it gets, he says. Founded by Ellison in 1977, two years after Microsoft, it’s now one of oldest software companies. It made its name with its database business and packaged applications.
With over 40,000 people in 60 countries like many successful firms, it added bit of flab over the years.
“Being decentralised in the early years enabled us to penetrate markets and get global growth. Every country had its own manager and worked as team. But that hurt us when we tried to become global. I’d argue that the smart thing today is being highly centralised, because we have the technology to manage centralised operations.”
The mission to save $2 billion
“I’d never say everything we’ve done is totally e-business, although the vast majority was. Let’s face it, you can’t just do little belt tightening or trimming and take out two billion from total of seven billion in costs. You have to go through the whole transformation for that magnitude of savings.”
Henley admits there was scepticism in the company as well as Wall Street when they announced their goal of pruning back $1 billion.
“We thought it would take 12-18 months; we actually did it in nine months. Last spring we said since we had lot of operations remaining, we’d try for another billion, so I put together new chart to pinpoint where those benefits would come from.
“Most of them will come in future technology projects in the CRM area,” he says, where they’ve just scratched the surface.
To become an e-business, Henley believes you need to look at self-service.
“Self-service is the most fundamental part of e-business. I think it’s the biggest productivity driver of anything that we’re doing and our customers are doing. It means using the Internet and designing workflow in way that customers, suppliers and your people operate in self-service mode.”
There are three kinds of self service:
? Accessing information on the Internet. People are becoming more comfortable with that.
? Updating records online. Consumers, customers and employees will do lot more of this. You’ll update employee records, benefit plans, rather than phoning or mailing forms.
? Transactions on the web. Doing your own transactions. Customers buy from you rather than calling salesperson.
“So self-service isn’t about just saving money, it’s about providing better more immediate service and that’s why it’s been accepted so well.
The Internet can also connect your customers all the way back through the supply chain. Of course it’s not always easy because many of your customers won’t have all the applications.
“But you’ll see big rush for people to modernise applications so they can begin to collaborate around the Internet. Then everyone gets economic value in terms of inventory reductions, lower costs, immediacy, and you’ll get products to market quicker. With not the same kind of barriers to entry that there used to be, many smaller companies are more excited about the Internet than large companies,” Henley says. “With the compelling way it overcomes geography, small companies have huge opportunity to leverage from it.”
What Oracle learned
There are three things to address: technology, processes and structure.
“As I said earlier, e-business isn’t just slapping in bunch of new technology. It’s new way of thinking of doing business, different kinds of processes, and it’s even structurally – how do you want to organise, do you want the same kind of organisation in global world that you had traditionally before?”
1. Technology change
“We think people will move off the client/server architectures they built in the ’90s and embrace Internet architecture where everything is accessed from mission critical stand point, around browser. So everyone will have PC or something to access powerful databases and transaction capabilities sitting in the network somewhere and doing it with simple browser. This is why people will have to reinvent and modernise their IT structures.”
We consolidated our data service from an entrepreneurial model where every country had its own IT system inside the company. Some of the small companies had tiny computer systems. In the mid-’90s we regionalised those systems to three locations: Singapore, California and London.
“Now we’re looking to consolidate those three into one. So Oracle will go to one data centre serving four divisions, 60 countries, 41,000 employees. The reason we can do that today is the advance of technology. We couldn’t do that couple of years ago.
“Servers weren’t big enough; we didn’t have some of the clustering technology, and our bandwidth wasn’t cheap or abundant enough around the world.
“So instead of having three data centres we’ll have one. We’ll have backup system by the way in Colorado Springs.
“The more difficult thing is to run our 60 countries and four divisions on exactly the same version of all of our software. There is degree of pain here to get global business practices for sales, marketing, or HR,” he says. “Every function in Oracle is being forced to rationalise its business practice and get every person in that functional organisation around the world to do things the same way.”
He reckons this will take about three years. “We see it as long process. We started in finance several years ago and over time we began to do it in every function.
“But the idea of centralisation of IT is fundamental. We believe you can’t be true global company unless you have the same global business practices, and share customer and supply information.
“Many companies in the ’90s talked about being global company,” he says. “I don’t think many of us truly appreciated what that meant. The IT part isn’t easy either, migrating the data etc, but the harder part is the politics, of getting all the different organisations to embrace this idea.”
The power of one
“In terms of the data, in Oracle we had 200 customer databases. couple of years ago we had 60 countries, four divisions. Every division in every country had different customer databases. So we were very distributed. When we finish the project by next summer we expect to reduce that 200 to one.
“We expect to have one customer database and for company our size we’ll probably be the first one to do it. I’m not aware of another $20-$30 billion company in 60 countries which has single customer database.” Again everyone struggles with the issue of technology, but it’s really an issue of companies going through the process, he emphasises.
Email was one of the first things to be centralised. “Like many companies, this was our most mission critical operation, we had 100 email servers around the world, we’ve reduced that to two. We’re running 41,000 people around the world on two servers in California.”
This is great testimonial to how to save mone