CEO Larry Ellison says new software gave Oracle the tools - and the inspiration - to integrate, communicate, and save a billion every year. And now he wants to do the same for your company.
Executives at Oracle Corporation were shocked when chairman and CEO Larry Ellison decided to manage the nitty-gritty details of the business a few years ago. The second-largest software maker in the world, founded by Ellison and two partners in 1977, was more accustomed to its colorful leader making headlines in yacht racing.

What was most surprising, reports Florence Stone in her new Ellison biography, The Oracle of Oracle, is that "time and experience - good and bad - have erased managerial flaws, as happens with many of our best business leaders … and he has developed into a great manager."

One of the things Ellison discovered as day-to-day CEO was that he had little control over his far-flung empire, because Oracle ran hundreds of different software systems, each managing one element of the company. "I didn't even know how many employees we really had," he says.

So Ellison decided the company had to "eat its own dog food," industry parlance for using its own products. But Oracle didn't have most of the software it needed to meld those many elements into one Web-based system, nor was it happy with what was available on the market. Thus began a software revolution that Oracle is now trying to extend to its customers. And it didn't just change the company's products, it forced Oracle to completely redesign the way it does business - and saved a billion dollars a year in the process.

American Way sat down with Ellison to divine his vision for
Oracle's future and, as always, he had provocative things to say.

American Way: Tell us about what you learned in the process of turning Oracle into an e-business.
LARRY ELLISON: We were the first company in the mid-1990s to move from client-server to Internet systems. I really thought this was primarily about changing technologies from the old one popularized by Microsoft to this new generation of technology where all you had on your desk was an Internet browser, and all of your out locations and data were on a server. But we realized the implications of the fact that we could contact all 42,000 employees, all our suppliers, and millions of customers for pennies through this global network. It was the beginning of the globalization of our business.

It used to be that we were organized feudally, and general managers in each country would set their own prices for the local market. So all of a sudden we were able to also set support policies and marketing strategies globally and make accounting, purchasing, and legal functions international, instead of regional. It was a reorganization from being lots of little national businesses to one set of products and processes for the whole world supported in a uniform way. The result was that we achieved huge efficiencies, saving a billion dollars the first year.

American Way: What were other concrete benefits?
ELLISON: Now managers only focus on one thing: how our technol-ogy can be applied to solve specific customer problems, or discover where our products need further development. Interdependence is fundamentally different from independence, so we've not only had an organizational change, but a huge cultural change. Those who loved being generalists thought this was awful, so we lost a few managers in the transition, but those who valued their knowledge as specialists thought this was great.

One of the biggest gains has been uniform support everywhere. The way you get quality is to define a set of processes and procedures and make sure they are implemented everywhere. The quality of support is now much higher.

American Way: What have been the biggest technological lessons in implementing this?
ELLISON: We've developed the eBusiness Suite, a complete set of integrated software to run your entire business: marketing, sales, service, accounting, human resources, supply chain automation, 75 major modules. The challenge isn't that the software is so difficult to work, but to move from what you have today to the eBusiness Suite.

We had 97 separate e-mail systems, 130 customer support systems, 130 accounting systems, and so forth, and we had to convert to a single, unified, global system. The way we did it was to take a portion of our business, Latin America, and hive it off from the rest of Oracle, as a laboratory to test the technology.

But before we could automate anything, we had to standardize the new processes we would need. It meant simplifying and modernizing every procedure, rethinking how we buy, sell, and support, defining everything precisely. We engaged senior management inside the company, which was another challenge. People ask the wrong question when they automate a company: Will this bunch of software allow us to purchase things the way we buy them today? The right question is, Will this allow us to purchase things the way we should be? The re-engineered process combined with the automation software is what yields the benefit.

American Way: If the benefits are so great, why are so few companies today far advanced in integrating and automating their entire extended enterprise, including vendor and customer relationships?
ELLISON: If you look at the very best companies, like General Electric, they've completely standardized on Oracle. GE Medical has done exactly what I've described, running the whole division on the eBusiness Suite. GE Power Systems is in the process of implementing this. Whenever GE across the system buys anything, they use Oracle iProcurement. I could name a long list of industry thought and technology leaders who are going this way.

You save because the new processes are much cheaper, but there's also a dramatic savings in IT costs. As we put in the Suite, we've cut our own IT costs in half in four years, going from spending $600 million to $300 million annually at Oracle. Agilent, in its first year, before the Suite was even up and running, cut 30 percent off its IT budget. All the best companies lead the way - they're the thought and technology leaders of their industries.

American Way: Your rivals would say they are putting together what they call "best-of-breed" systems - which combine the leading software of each type into one system - while Oracle's software products, while integrated with each other, are not the best
because you're a latecomer to some of these markets.
ELLISON: Microsoft was a latecomer to word processing, which was dominated by WordPerfect. It was a latecomer to spreadsheets, which was dominated by Lotus. Microsoft was late to graphics, dominated by Harvard Graphics, and late to desktop database, which was pioneered by Ashton-Tate/dBase. So what happened to all these companies? They vanished, because everyone wants all the pieces linked together, and they buy Microsoft Office.

People want you to engineer everything to work together. In fact, SAP was the first ERP company that had all the pieces of the back office put together. We're the first to have the back office, the middle office, and the front office put together effectively, automation extending from suppliers through the legal department and contracting to the customer. History has shown that the more complete the suite is, the more successful you become: It trumps "bastard-breed." The cycle always begins there, but ultimately the specialist companies die out. That's the way evolution works.

American Way: How are you handling the competitive and alliance relationship with your sometime partner SAP?
ELLISON: SAP is our number one competitor in applications, but our number one partner/reseller in database. We work very closely with the SAP database team so they have access to the latest in our technology, and we have engineers at SAP to be sure they make the very best use of it. We have a 70 to 74 percent share of the SAP-installed base, so less than 26 percent of their implementations are on top of our competitors put together. SAP is a great engineering company, and they know we have the best database, so they won't want to disadvantage their customers by sending them to a product that isn't as good. But it's a difficult balance. Someone called it "coopetition."

American Way: What about your other competitors?
ELLISON: We have database clusters, the ability to make several computers look like one computer. Our clustering technology, which is the ability to take multiple computers and attach them to a single database, is the only one to work with all applications. We can take four inexpensive Dell machines and group them together and run them faster than a Unix machine at a tiny fraction of the cost. And it's much more reliable, because if one of the Dell computers fails, three are left to keep the system running. The competition doesn't have fault-tolerance or skip performance for real applications. What we have is black magic in the database business. Not everyone believes this yet because clustering is so new, but we think clustering will help us dramatically increase our market share in database.

American Way: So Microsoft isn't on the radar screen?
ELLISON: No, and their low-end database offering is not doing very well, but we pay close attention to what they're doing.

American Way: Can you also serve smaller companies?
ELLISON: That's an area where we did compete with Microsoft's bCentral, but they've basically dropped out. The Oracle Small Business Suite is going to give the power of automation, heretofore reserved for the giants, to small companies with just five or 10 people. So whether you're running an antiques store or doctor's office, you can have your accounting, purchasing, sales, and other records automated to bring order out of chaos. And you don't even have to buy a computer because we run this as an online service [with all the software accessed via the Internet]. We think there's a very big global opportunity to service all these millions of small companies.


matt brasier is a london-based photographer who has been taking pictures since age 14.

lee emmert is an advertising and editorial photographer based in dallas. his clients include sun microsystems and hollywood casinos.
management according to oracle
former oracle insider stuart read worked in senior positions at the company for seven years and spent a lot of time thinking about why the company was successful. he set down oracle's unorthodox secrets in the oracle edge, and offered these oracle management tips to american way.

recruiting: "the company recruits new college graduates aggressively from a list made up of only the top colleges - and these are not just computer science majors. engineering, biology, chemistry, and math majors can bring a different perspective to the job."

training for versatility: "for oracle sales, support, marketing, and product lines, there is a yearly reorganization process that gives employees exposure to exciting new areas. this has enabled the company to adjust to a rapidly changing marketplace."

understanding customers: “there is nothing like putting an employee in the line of fire in the oracle demonstration stations at a trade show. also, customer support hosts employees from all over the company — including sales, development, marketing, and operations staff — for a week at a time answering calls and learning about products.” —