Oracle says yum to own menu for big savings

By ADAM GIFFORD

At Oracle, they call it "eating your own dogfood." That means using the same technologies and business processes you are trying to sell to your customers.

The results, say Oracle, have been spectacular. Over the past year it has taken more than $US1 billion ($2.49 billion) out of the company's operating expenses, and last week executive vice-president Gary Bloom promised it would slash a further billion dollars over the next year.

Under the traditional model, increasing revenue means increasing expenses, so operating margins remain static.

"In an ebusiness, you use technology and applications to flatten out the expense line - or, as is the case in Oracle, make it go down," Mr Bloom said.

The result should be more efficiency, a lower IT budget and more information coming through to executives on which to make intelligent decisions.

Oracle started by consolidating its 44 data centres around the world into one. E-mail has come down from 97 servers to two Hewlett Packard clusters. There is a single e-mail client used across the company: Netscape Messenger.

Mr Bloom said the company had eliminated regional variations in human resources and legal practices, creating globalised systems which were easier to automate.

That meant reducing complexity, standardising contracts and enforcing consistent business practices.

The tools its staff used to do their jobs became self-service applications delivered over the internet and underpinned by workflow engines.

Mr Bloom said just by shifting expense reports to the web, the company had saved $6.4 million in the United States alone, not including the millions saved because sales staff no longer express-mailed expense reports into head office to get paid faster.

The result of the savings in operational expenses is that, while revenues increased 15 per cent to $10.4 billion over the period, income increased 76 per cent to $2.3 billion, and the margin was 32.6 per cent against 21.4 per cent the previous year. The company is pushing to increase the margin to 40 per cent.

Mr Bloom said the $1 billion in savings comprised $200 million from consolidating IT resources; $550 million from customer-facing activities like moving service inquiries and sales to the web; $150 million from using the internet to communicate with suppliers; and $100 million in internal savings. He added that a further $50 million would be saved in IT costs, $50 million in the supplier area and $900 million in customer contacts.

Oracle marketing head Mark Jarvis told the Business Heraldf Oracle wants to move 80 per cent of its sales to the web by May 31, the end of its financial year. Currently, 20 per cent of sales are done online.

He explained how driving customer service to the internet can help save $900 million.

"If a customer calls us on the phone, it costs Oracle $351 to deal with that phone call," Mr Jarvis said.

That's the cost of the desk, the office, the training, the salary, the phone, and the computer the call centre operator types the query into.

"If you call Oracle, you have a 20 per cent chance of finding a solution to the problem on the first call. If you go on the web right now with exactly the same problem and you type it into the computer yourself, you have a 40 per cent chance of solving that problem.

"The customer knows more about that problem, so they are much more specific about what they enter, and our fuzzy matching has more likelihood of finding an answer.

"By going from call centre to web, you immediately increase the chances of finding a solution by 100 per cent.

"More importantly," said Mr Jarvis, "how much does it cost? Six bucks."