Shantanu's Blog

Corporate Consultant

October 07, 2003

Facts, Not Force Of Personality, Rule The Day

Alfonso Di Ianni
Senior Vice-President, Marketing, Oracle
One billion dollars in savings in a single year. Behind that ad line of Oracle Corporation lies a fascinating story about how a company finally put what it had been preaching - and selling - for some time to practice. Oracle's remarkable savings story began when, in 2000, it decided to start using the latest versions of its own application software to transform itself into an e-business. Oracle had been selling these products to its clients for some time, but it wasn't using the products itself. And like any of its clients, Oracle found that to implement the new software and systems in the organization, it had to confront numerous hurdles. In this interview with Business World's Manish Khanduri, Alfonso Di Ianni, senior vice-president, marketing, provides glimpses of what Oracle the organization had to go through.

Could you tell us about the recent changes at Oracle?
At the start of fiscal year 2000 we announced that Oracle would become an e-business and in doing so, save $1 billion. We would use our own application software, the Oracle e-business suite, to put every aspect of our business on the Internet. The success of our move into the 'new economy' would be measured the 'old economy' way. The question was: once Oracle became an e-business, would our margins improve enough for us to save a billion dollars? The answer turned out to be no. We were going to save a lot more!

What were the imperatives that lead Oracle to this decision?
Oracle was the first software company to move its applications products to the Internet - we started moving all our software way back in 1995. Having all our customers, suppliers and employees online made Oracle a more responsive and efficient organization, but the productivity gains we were looking for some how eluded us.
The problem was our information was scattered across hundreds of separate databases. 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 that it was difficult for people to find the information needed to do the jobs. Separate databases also made it difficult to share information between organizations. If groups can't share information, they don't cooperate. And lack of cooperation led to duplication of effort and inefficiency. The solution was quite simple, if we put all our information in one place - a global database on the Internet - then every one would know where to look for the right information.

How differently are things done today at Oracle as compared to, say, three years ago, after this process of change?
Oracle's business is divided into four geographic regions - North America, Europe, Asia Pacific, and Latin America. Each region was managed by a senior executive with regional headquarter staff. Each country had a general manger plus a team of people doing marketing, sales, service, accounting, legal etc. every regional headquarter and every country had its own computer systems to support its own activities.
This distributed computer systems, along with divided management responsibility, conspired to add to our duplication of effort problems.

But today it is all about the Internet and globalization. An e-business uses a global network - the Internet - and a global database to integrate all aspects of business. Every business function - marketing, sales, supply chain, manufacturing, customer service, accounting, human resources, everything - uses the same global database. An e-business runs on one unified computer system. Everybody is connected. And all the information is in one place.

Could you elaborate with an example?
Marketing was a typical example. We had a marketing group at corporate headquarters. We had another marketing group at our European headquarters. We had a marketing team in every country. In the end, our country managers would invent the marketing strategy they felt was best for each of their countries. So, every country had different marketing policies, processes and programs. Oracle was, in effect, a feudal operation run by a group of autonomous General Managers. We would set global prices and global polices at corporate headquarters, but it was difficult to moni9otr and enforce them. For years, our general managers set their own prices, invented their own polices and procedures and run their own computer systems, as long as they delivered, we left them alone to run their business.
This loose federation of independent organizations had worked reasonably well for along 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 needed to globalize the business.

How did the management actually drive through the process of change? Was there any resistance?
When we first began to move our business processes to the Internet and our information into a global database we encountered a lot of resistance. Most Oracle managers wanted to proceed cautiously. But we felt that if we did not move fast we were going to miss the biggest opportunity in the history of business. It took a while for us to understand that changing technology was the easy part of becoming an e-business. Convincing the people to change the way they worked, that was the hard part.
Before you can change, you have to admit that you have a problem. You have to understand your problem, and communicate the problem clearly, so everyone understands why the change is needed. In our case, the problem was quite clear - our information was so fragmented that people did not have access to information they needed to do their jobs. For instance, when it was thought that we had to globalize IT, our general mangers fiercely resisted this change. They were not enthusiastic about relying on corporate headquarters for their essential automation system. They were used to being self - sufficient. How could we convince them to support our globalization program?

We changed their compensation plan. Our general managers have always been paid a bonus based on how much they increased sales and profits. If they continued to run their own IT departments, they had to pay for it out of their budget, thus lowering their profit margins and their annual bonuses. Or they could use the global IT system for free. We would not charge them for global service. Resistance diminished, but it did not go away. Our general managers just did not trust a corporate headquartered organization to deliver all the computer systems they needed to run their businesses. But, with the huge success of the global IT program, they embraced it happily.

The very first organizational change we made was globalising IT. We decided to move all the IT people from all the countries and regional headquarters to a new global organization. Global IT first had to prove itself. Its very first project - Global email - was a stunning success. Oracle saves over $30 million a year as a result of the Internet. And, in the process, the new global IT organization had proven itself.

So what's the new marketing model at Oracle now?
We kept marketing people in the various countries, but they now report to a global marketing executive, not the country or regional managers. In the end, only sales and associated consulting services still report to the country managers. Even theses activities are automated and monitored by our new global computer system. Oracle has abandoned the model of distributed general management. Management specialization was part of our globalization process.
How has the marketing function benefited from this process?
Marketing cost went down because duplication of effort was eliminated. Every country stopped designing its own marketing program. Doing its own pricing. But global marketing's most important accomplishments center around using the Internet to increase the reach of all marketing programs. We moved all our product demonstrations to the Internet. So, now we demonstrate our products at our Internet seminars and in our Web store. Internet product demonstrations and our Web store delivered big productivity gains to our sales force. That was just the beginning.
What have been the biggest learnings to emerge from the process?
The introduction of Internet technology led us to globalization, which, in turn, changed the culture and values of the company. Oracle ahs become a company of interdependent business groups managed by specialists who value their knowledge and excel at teamwork. There are fewer management conflicts because decisions are based on up-to-date shared information. Facts, not force of personality, rule the day.

BusinessWorld - 29 October 2001

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