For 27 years, Oracle has been helping customers manage critical information. Our goal is to make sure that you spend less money on your systems while getting the most up-to-date and accurate information from them. How can you do this? By simplifying or outsourcing your IT infrastructure to reduce costs, and by integrating disparate systems to create a single, global view of your business.
Why is Oracle the only company that can do this for you? It's simple. While our competitors see an industry that offers a unique configuration for every IT system, customers who can't predict the total cost of a system, and organizations that spend a disproportionate percentage of their resources on systems integration, we see one where people can focus on their business, not on their IT department, where businesses buy systems, not individual components that have to be cobbled together by high-priced consultants, and where cost predictibility is a given, not an exception.
We know our vision works because we've seen it work at Oracle. Right now, we're consolidating information and globalizing our business. All of our customer information will be in one place. All of our employee information, our product information, our Web store, our service system, a unified set of procurement processes--everything. By consolidating our servers and Web sites, we'll have cut our IT costs by 80 percent. Last fiscal year, in a challenging economic environment, our operating margins still increased--from 34.5 percent in FY 2001 to 36.9 percent in FY 2002. This contrasts favorably with the considerably lower margins reported by Siebel, SAP, PeopleSoft, and IBM for the same period.
The globalization of our IT systems has also given rise to deeper changes at Oracle--changes in the culture and values of the company and its management. Oracle had been a company made up of many independent business groups, managed by self-reliant generalists who valued their autonomy. Oracle has become a company of interdependent business groups, managed by specialists who value their knowledge and excel at teamwork. As a result, it's more fun to work at Oracle these days. There's less management conflict, because decisions are based on up-to-date, shared information. Facts, not force of personality, rule the day. The more we know, the more rational our decisions. We know more by spending less.
Three Problems: Fragmentation, Systems Integration, Incomplete Automation
Why did we embark on this transformation, more than four years ago? Because Oracle, like every other company at the "dawn of the Information Age," was suffering from three painful things: data fragmentation, an overabundance of separate components requiring integration, and incomplete automation.
These three problems--along with their enormous associated costs--are interrelated. Historically, all the information about a business has been chopped up into so many little bits that the administrative costs for any information is high. And the more money companies spend on separate components, the worse the problem gets. Every time a business adds another separate system, another separate database, it puts in one more slice, one more dice--which makes information even more fragmented. Worst of all, companies are actually paying more to get less information. They may be spending a huge percentage of their IT budgets on systems integration, yet they still suffer from incomplete automation across front and back office, which means they will never have the information they need to make informed decisions.
We talk with prospective customers almost every day. Virtually none of them have access to all the information they need, even though all of them are spending a fortune on IT. Because information is spread across so many different databases, they can't answer basic questions such as how many customers they have, or who their most valuable customers are. So much for the famed "360-degree view" of the customer they'd been promised. They may not know what their total headcount is on a given day, or how many suppliers they have.
A global system, by contrast, provides complete and consolidated information across all lines of business, products, and geographies. When our globalization is complete, we'll know more about our customers. We can provide better service. We can negotiate better discounts with suppliers.
It's not that Oracle didn't try having lots of databases. Like everyone else, we did all the wrong things. But we knew that if we could solve our internal business systems problems, we would be in an ideal position to help our customers better understand and solve their problems. Solving our own problems would not only help us save money, it would demonstrate that we really were experts--not just in technology--but in using technology to efficiently run a business.
Oracle Speaks from Experience
Oracle was the first software company to move its business application products to the internet. In fact, we started moving all our software to the internet back in 1995. So we've been using our own internet application software to run our business for years. Our internet systems were a big improvement over the old client/server systems they replaced. Having all our customers, suppliers and employees online made Oracle a more responsive and efficient organization. But the huge productivity gains we were looking for somehow eluded us. All our applications were on the internet. Everyone was connected. What was the problem?
Our information was scattered across hundreds of separate databases. That was the problem! Each one of our organizations--marketing, sales, service, etc.--had its own computer system. Each computer system had its own database. We had hundreds of databases around the world. Our data was so fragmented it was difficult for people to find the information they needed to do their jobs.
Separate databases also made it difficult to share information between organizations. And if groups can't share information, they don't cooperate. So, marketing didn't cooperate with sales. Germany didn't cooperate with France. Oracle was in effect a feudal operation run by a group of autonomous general managers. Every regional headquarters and every country had its own computer systems to support its activities. These distributed computer systems, along with divided management responsibility, conspired to create our duplication of effort problems.
Take a simple matter like pricing. We could set global prices and other global policies at corporate headquarters, but it was difficult to monitor or enforce them. For years, our general managers set their own prices, invented their own policies and procedures, and ran their own computer systems. As long as they delivered adequate profit, we left them alone to run their businesses.
This loose federation of independent organizations had worked reasonably well for a long time. But in an era of increasing globalization, it was breaking down. Our customers wanted us to offer the same prices, products, and services around the world. And we wanted to eliminate duplication of effort. We wanted to set a price once--not 150 times. We wanted to develop a marketing program once--not 150 times. We wanted to develop a business process once--not 150 times. We needed to globalize the business.
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