Oracle 'eats its own dog food' to excel
By Zatni Arbi
SINGAPORE (JP): Doing business is about making money. The more money made the better the business. Now, how can we make more money?
One school of thought places emphasis on selling more. The more we sell, the more money we'll make. Of course, this is not always true, because if we are not careful, our operating costs will also jump as we pump up our production, marketing and sales efforts.
Therefore, another school of thought focuses on keeping operating and production as low as possible rather than expanding marketing efforts. It makes a lot of sense, too. If we can produce and sell the same volume of products but reduce production costs, we will also be making more money.
A newer school of thought, more in tune with the new economy, says that we should not spend a lot of time trying to cut costs or increase sales. Instead, we should focus on finding new ways of doing business that will give our company more value.
Needless to say, a strategy that combines the three approaches will yield the most value, and that seemed to be the idea that Oracle Corporation wanted to share with a group of Chief Financial Officers of medium and large-sized companies during their CFO 2000 Forum at Shangri-La, Singapore, two weeks ago.
Saving US$1b
When discussing a company's savings, operating costs and the bottom line, who better to speak to than the CFO? In this respect, Oracle is very lucky to have Jeffrey O Henley, Executive Vice President and Chief Financial Officer. Indeed, if the company had a Chief Executive Officer that wears US$3,000 to US$5,000 suits and lives in a US$40 million Japanese castle in Silicon Valley, it would need a very capable CFO to ensure it would continue to do well. In many respects, it has been Jeff Henley that has made Wall Street feel confident in Oracle.
Jeff is indeed one of the few unique CFOs. Most other CFOs stay behind their desks playing with numbers, but Jeff Henley, who very recently received the "CFO Excellence Award" from CFO Magazine, travels around the globe preaching about using Internet technology to cut operating costs and improve financial performance. Even when he is in his office in the Oracle Corp.'s headquarters in Redwood Shores, California, he spends time every day receiving and talking with customers on the same topic.
Jeff admits that Oracle got the idea of using the Internet to create substantial savings from Cisco Systems. Cisco, which is the largest vendor for networking products enabling the Internet, saved US$1 billion the first year it started using its own products to do business with its suppliers and customers. The main message during the CFO 2000 Forum was that Oracle has also been successful in saving US$1 billion by using its own products as the infrastructure for doing business.
The initiative came from Larry Ellison, Oracle's "colorful" founder and CEO.
"Larry wanted us to cut US$ 1 billion from our operational expenses, but he didn't provide any additional funds to make it happen," Jeff explained in the press briefing following his keynote speech. "We simply had to kill some of the ongoing IT projects that we thought were not urgent to cover the up front costs of the effort."
Approach
Oracle's effort to cut operating expenses started in June last year. Like Cisco, Oracle used its own application products to shift its business to the Internet. That was when the expression "eat your own dog food" became popular around the company. It means that you should use your own products, and if it works for you then you can sell it to your customers.
The benefits were twofold. It gave Larry Ellison, the CEO, the chance to get to know the products that his company was selling. It was a big revelation in the beginning, as Larry found out that Oracle, at that time, was not offering a complete set of applications that a business requires in order to become an e- business.
His people were using third-party products to fill the voids, and the result was a lot of wasted time in trying to stitch the products together. That has changed. Oracle has all the products necessary to build a complete e-business solution.
The second benefit was the US$1 billion savings that Jeff spoke of in his keynote speech.
"We realized $200 million savings by consolidating our IT, $550 million by putting our sell side on the Internet, $150 million by migrating the buy side to the Internet and $100 million by using Internet-based internal operations," Jeff said. "We are now working on our next target, which is to save another US$ 1 billion in the future."
How did the company achieve the US$1 billion savings? On the sell side, Oracle has boosted its indirect sales channels, built its own Web stores to support direct sales, and provided customer service through the Web and call centers. On the buy side, suppliers and service providers are encouraged to use self- service facilities provided by Oracle's own applications.
Internally, processes such as employees' expenses, hiring, travel bookings and holiday approvals are now done through self- service applications. In the area of IT, for example, Oracle has consolidated three regional data centers into one single global data center. Another example is that the company now uses two mail servers instead of 100 that it had in the past.
What was the gist of Jeff's presentation? First, to undertake such a sweeping change as moving to e-business requires top management commitment and active involvement. Secondly, e- business should also mean simplification of the business. Third, as shown by the number of key people leaving Oracle, the hardest part was to get management to accept the change and work toward the same goal.
But, most important of all, a company should prove that its products work well by using them in its own day-to-day operations before offering them to customers. Shouldn't the approach apply to other industries--even the government--as well? (Zatni@cbn.net.id)