THREE

Setting an Example

BY LEE GOMES

April 17, 2000

The technology industry, that fountainhead of buzz phrases, has an expression to describe what happens when a company uses its own products. It’s called, poetically enough, “eating your own dog food.”

Most of the biggest names in the computer world are avid puppy-chow chompers. At Microsoft Corp., for example, software developers working on the next version of an operating system are required to use the product they are developing for their day-to-day computing needs. Cisco Systems Inc., which sells computer-networking equipment, is moving many of its business processes—and even some of its telephone system—onto its own in-house network.

Software maker Oracle Corp. is one of the latest companies to embrace doggie dining—and, like the other companies, it has good reason to do so. Oracle sells the software that big businesses, including Web sites, use to store their in-house business data; it also provides the consulting services used to get that software operational, an area that provides the bulk of its income. Over the past 18 months, Oracle has been trying to move customers to redesigned versions of its main products, allowing users access to information through standard Internet-style browsers rather than specially written software.

But if Oracle’s customers should upgrade to the new software, shouldn’t Oracle be using it, too? More significantly, if Oracle’s customers should be using the software to dot-com themselves and exploit the Internet and e-commerce—a constant theme of Oracle’s marketing—why wouldn’t Oracle do the same?

Well, Larry Ellison, chief executive of the Redwood Shores, Calif., company, wants the world to know something: “We are eating our own dog food,” he says, “and it tastes great!”

Over the past year, Oracle has undertaken a major effort to rework all of its computing operations—in the process changing much of the way it does business. The process is bringing new efficiencies to Oracle, but has not been without some bumps along the way.

Previously, Oracle had scores of computers all over the world storing its data in a system known as client-server computing—an approach that, just a few years ago, represented conventional wisdom about the kind of computer system a state-of-the-art company ought to have. In a typical client-server setup, computers were decentralized; each geographic region, for example, would have its own computer department running programs tailored to it. More often than not, these scattered operations didn’t talk to each other, making it difficult to get a company-wide view of things.

Client-server evolved because companies wanted to take advantage of low-cost desktop personal computers and workstations to move away from their expensive mainframes. Now, things are coming full circle: As part of its big redesign, Oracle, for instance, is replacing dozens of its in-house computer systems with just two or three.

To make that happen, the company first had to build a data-communications network that would connect all of its scattered operations around the world. Mr. Ellison himself had a big hand in that project. It then had to move all of its record keeping to the latest versions of Oracle’s software, which work in connection with browsers.

The overall goal was to put as much of the company’s internal software as possible on a single internal corporate network, so that each of the company’s 43,000 employees in more than 100 countries could ask a question and all get the same answer. In other words, Oracle itself should operate as much as possible like the Internet, whose very growth is fueling a huge increase in Oracle’s own sales and stock price.

“We are doing this to gain all the benefits of moving to an e-business model,” says Gary Roberts, who as Oracle’s senior vice president for global information technology has responsibility for much of the effort. The project will also help “prove to the world that our products work,” he says.

Mr. Roberts says that a big part of Oracle’s drive involved paring back the number of disparate inhouse computer systems. The company once had nearly 100 different kinds of machines handling e-mail. Soon, it will just have two. And where Oracle had more than 80 programs to track the work of its sales force, it will soon just have five.

That means substantial savings. Simplifying the e-mail system alone, for example, slashes the number of trouble calls his technicians have to make to 300 a month from 3,500. And rather than requiring a staff of 60 to keep e-mail running, Oracle now gets by with just a dozen. Mr. Ellison says Oracle is trying to squeeze as much as $500 million in costs out of its operations through the cutbacks.

There are other benefits, among them easier access to information. In the past, simple questions, such as “How many people work at Oracle?” were surprisingly difficult to answer. Someone would, by hand, have to query dozens of databases all around the world, enter the results in a spreadsheet, then add the numbers up. Now, there is a single human-resources database that has an up-to-date employee count at all times.

Another benefit involves basic financial reporting. The company once spent a week or two after each quarter figuring out what its sales had been. Now, it expects to be able to close its books within a few days after each quarter. Mr. Roberts says it will be much easier for managers to know about sales levels even while a quarter is under way.

“It takes a lot of stress out of knowing how well we are doing while the quarter is under way,” he says.

Little wonder many of the changes are popular with Oracle employees. Consider expense statements. In the old system, an employee returning from a business trip would submit a traditional expense report on paper, along with all the accompanying receipts. The form would be reviewed by the employee’s supervisors, and then by a series of people in various accounting departments. Reimbursements could take six weeks.

Now, the report is written on the employee’s computer using a form accessed through a browser and then submitted via the company’s intranet. Supervisors review it on their own browsers, and send it along electronically to accounts payable. Reimbursement checks arrive within five days.

To be sure, Oracle’s effort hit some snags along the way, not least its own bureaucratic resistance to the new way of doing things. And the company had to be sensitive to national-sovereignty issues when closing data centers overseas—it didn’t want anyone to think it was reducing its commitment to foreign markets. To show that this was a company-wide effort, the first data centers to be shuttered were all in the U.S.

But none of this was enough to derail the project, which Mr. Roberts says is on track to be finished in the next few months.

“We are completely reinventing how we do business as a company,” he says. “In the Oracle of a few years ago, if I was an executive vice president of a region, I was like the CEO of my own company. Everyone was reporting to me. Now, we have changed the entire model, and that always brings difficulty.”

Of course, many people would find it ironic that a company like Oracle, which is in the database business, would have been itself so badly organized that it couldn’t until now easily say what its headcount was.

“Yeah, I know,” says Mr. Roberts. “It’s ridiculous.”

Mr. Gomes is a staff reporter in The Wall Street Journal’s San Francisco bureau.