| BUSINESSWEEK ONLINE : AUGUST 16, 1999 ISSUE | ||||||||
| ||||||||
 | ||||||||
| INFORMATION TECHNOLOGY
Oracle: Practicing What It Preaches Now, it's not just selling Webware--it's using it When it came to the day-to-day operations of Oracle Corp. (ORCL), founder and Chairman Lawrence J. Ellison wasn't showing much interest. If he wasn't masterminding some dramatic new software strategy, he was off pushing the limits of man and machine on his 80-foot racing sailboat, Sayonara. And his evenings? They were spent gazing at the cherry blossoms that blew from his lush backyard Japanese garden into his teahouse. Those were Ellison's passions. That is, until this past April. That's when, for the first time in years, Ellison took an active role in the annual budget meetings at the Redwood Shores, Calif., company. Perhaps he should have tuned in sooner. Sure, nine of the top 10 corporate Web sites were using Oracle's database or financial software as the foundation for creating E-commerce Web sites. But what the outside world didn't see was that Oracle, the world's second-largest independent software company, was in near-chaos. Embarrassingly, the cause of the problem was poor use of technology--Oracle's own. The company was still using older, non-Net versions of its software. Even though Oracle sang the praises of centralized management of corporate data, it had its financial and human resources information scattered across the world on roughly 70 computing systems that couldn't easily communicate with one another. The result: Oracle execs couldn't quickly find out such basic things as how many employees it had or how many copies of its database had been sold in the past week. BIG SAVINGS. Today, the E-engineering of Oracle is Ellison's newest passion. He has ordered his managers to radically revamp the way they use computers and the Internet. His deadline: The end of 2000. The biggest single initiative is consolidating all of the company's vital computing systems from more than 40 data centers around the world--including financial info, human resources, and E-mail--into two locations. Oracle has moved routine jobs like travel planning and expense reports online. Ellison has eliminated about 300 positions and expects to transfer people from obsolete jobs into consulting or sales. Total projected savings: $1 billion a year. At the same time, the company will adopt its own software to automate and integrate its sales force, Web site, and marketing operations. And it's launching a new Internet store linked with the sales force that will computerize routine tasks like letting customers update their contracts. That should free salespeople to target new accounts. The company hopes its online store will eventually increase database sales alone by 10% to 15% a year. It's benefits like these that Oracle hopes to not only enjoy but to show off to potential customers. In the past, Oracle preached to buyers the benefits of using its software to streamline operations, boost revenues, and take full advantage of the Net's reach. Yet it had to point to other companies--such as Cisco Systems Inc.--as glowing examples of how it's done. ''We can't sell this and not use it. This is ridiculous,'' says an exasperated Ellison. ''We are supposed to be selling the technology to help customers become an E-business, but we're not an E-business. This is just not credible.'' Oracle's struggles show just how hard it is for companies to get beyond the rhetoric of E-business and actually do something about it. This overhaul also provides a checklist for all sorts of businesses undertaking the same sort of wrenching transformation. First on that list: anticipate hiccups. While E-engineering can bring a huge savings in cost and time, it can also bring turmoil and resistance. For example, Weyerhaeuser Corp.'s efforts to re-engineer its door-building operations have taken four years to get right, while costing four times its initial $2 million investment. MIDNIGHT OIL. For Ellison, E-engineering may prove to be just as tricky. Perhaps that's why he's tackling it personally. Employees say Ellison is plugged in as never before. Phone calls before 9 a.m. are now common from the normally late-rising CEO. And he's asking people to defend their usefulness to the company. Ellison says he has three questions for his employees: ''Are you building our products? Are you servicing our products? Are you selling our products? If the answer is no, no, and no--tell me again very slowly what it is you do? We are going to try to automate you away.'' Even President Raymond J. Lane feels the pressure. For the first time in his seven years at Oracle, Lane--who oversees daily operations--feels as if he has a boss. ''It's healthy to have somebody scrutinize,'' says Lane. ''It may feel nice to not have a boss, but it is not good for the shareholders.'' Ellison has made four executives responsible for turning Oracle into an E-business. Vice-President Gary Roberts is in charge of technology purchases and consolidating the data centers. And three managers are supposed to ensure Oracle is making more effective use of the products they're developing: Senior Vice-President Ronald A. Wohl for corporate applications, Senior Vice-President Mark Barrenechea for customer-relationship software, and Executive Vice-President Gary L. Bloom for Oracle's core databases. Ellison hopes to create a feedback loop between the people inside the company who are using its products and the people who are creating the products. There's no doubt Oracle needed these jolting changes. Because the company didn't link its sales data to marketing activities, it had no way of quickly evaluating the effectiveness of a marketing program. It took, for example, two years to learn that the company's Safe Switch program--which encouraged corporations to move from competitors' databases--had been a roaring success. Had Oracle known earlier, it would have put even more resources into it. ''We have been like blind people behind the wheel of a car speeding down a highway,'' says Mark Jarvis, senior vice-president for worldwide marketing. SHARING AN EDGE. Oracle hopes to fix that problem by quickly adopting its own customer-relationship management software. That's a suite of programs that links data about customers' direct purchases and service records with marketing plans and information about orders processed through Web stores. On June 7, the CRM software was handed out to 4,000 of Oracle's U.S. salespeople, marking the first time the company's sales force has been required to enter detailed customer data into a centralized system accessible to any Oracle executive or salesperson. This move helps Oracle catch up with archrival Microsoft Corp. (MSFT), which on June 23 announced it will roll out a second generation of similar software for its 12,000 salespeople. In the past, it took two weeks for top Oracle executives to see mere summaries of sales reports--often too late to do anything about it. Now they can log on, look at the latest detailed reports, and take action. Last month, for instance, Lane noticed that the U.S. sales forecast had dropped by $3.5 million. He quickly drilled down into the data and found out which customer had changed its purchasing plans. After talking to a sales rep, he contacted the customer and helped negotiate a deal. The whole process took just 24 hours. The new software makes team players of Oracle salespeople, too. In the past, they were reluctant to share information about customers for fear that they would become expendable. But now they're gaining invaluable information that helps them pitch to customers and close sales. Vicki Ross, a sales manager in Seattle, says she's able to initiate a sales call knowing almost as much about the customer's technology needs as the customer does. The system even helps her keep track of her commissions--an incentive to close more sales. Oracle expects its sales force to be even more efficient since its online store opened in July. The store enables customers to purchase software upgrades or add extra users to their license without having to call a salesperson. That way, reps can spend their time cultivating new customers. Oracle already is reaping measurable benefits. For example, it has done away with its paper-based expense reporting system, opting instead to have employees file everything electronically across the company's computer network. The result: Instead of an eight-week turnaround time on getting paid, Oracle reimburses its employees in four days. While the potential rewards of transforming the business are great, the challenges can't be overlooked. Right off the bat, Ellison ran into resistance from some European-based execs who were afraid of losing control over how they run their businesses. Ellison offered a choice. They could stick with the current systems and pay for them on their own, or they could get centralized computing services for free. He pointed out that their profit margins--and bonuses--were at stake. ''Now, they are beating down doors asking to get on the system as fast as they can,'' Ellison says. NO DEALS. There are external challenges, too. Oracle risks irking its customers. The sales-system overhaul changes the way the company negotiates prices and other terms. Instead of sales reps cutting practically any deal they can to make quota, Oracle is adopting standard contracts with volume-based discounts. And since all the pricing and order information is online and can be readily analyzed, it will be hard for a salesperson to break the rules. Already, some customers are nervous about the new system. Alan Fisher, chief technology officer at Web auctioneer Onsale Inc., says that his company got great prices even when it was small--and that was an important factor in its ability to afford Oracle databases. Now that price-haggling has been purged from the system, he's concerned that prices may simply be too high. ''I think the move to a more standardized contract makes lots of sense, especially since the negotiations with Oracle have been tense in the past,'' says Fisher. ''But I hope that Oracle will price its software fairly from the start.'' Can Ellison pull this off? It's not clear sailing ahead. After all, this is the first time the company has ever tried to limit its growth in expenses. Still, if anyone can get the job done, it's Ellison, says analyst Neil J. Herman of Salomon Smith Barney. ''Hey, what they are doing is just good business,'' says Herman. ''Larry is a great motivator.'' Ellison doesn't plan on being this much of a bean counter forever, though--it's just not his style. If all goes as planned, he'll be able to concentrate on smelling the cherry blossoms by the time workers finish building his replica Japanese palace in tony Woodside, Calif., two years from now. By Michael Moeller in Redwood Shores, Calif. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
|  |
 | |
RELATED ITEMS Oracle: Practicing What It Preaches TABLE: How Oracle Corp. Is Harnessing the Web INTERACT E-Mail to Business Week Online | |||
