Oracle takes a third kick at the can

Oracle Corp. is making more promises. This time, CEO and president Larry Ellison has stated the company will save US$3 billion in 2002, the third year of the company’s billion-dollar-a-year plan.

Ellison confirmed at Oracle AppsWorld in New Orleans last month that Oracle will go for the US$3 billion in savings.

“It’s easy to remember,” he joked. “One billion in year one, two billion in year two and three billion in year three.

“This is a 10-year plan though.”

In fact, Jeff Henley, CFO and executive vice-president at Oracle, said this plan will only go for the three years. He noted that in year four he hopes the company will see more resource growth.

“Larry had said we were trying to adopt a new e-business plan at Oracle and that by doing that we could save a billion,” Henley said.

The plan was to consolidate Oracle’s e-business processes and run them on Oracle software, ridding the company of much of its IT spending.

Henley admits that some of the consolidation came in the form of employee cutbacks, but that was by no means the largest part of the savings. “We are modernizing,” he said. “We’ve consolidated data centres. We’re now using global business practices and we cut our IT spending in half.”

Oracle cut its IT department from 2,000 employees to 350, according to Mark Barrenechea, senior vice-president for CRM products for Oracle.

However, Henley noted many of those employees were moved to other departments, not downsized. He added the company also increased its research and development department.

Henley admitted the globalization of company business practices still had to leave room for localization and cultural and language differences.

Barrenechea said globalizing the business processes has allowed for quick product roll-outs. “We did a global roll-out of over the weekend. Okay, it took four weeks to prepare, but every country went live simultaneously,” he said.

Barrenechea stated that much of 2002’s US$3 billion savings would come from internal support calls. He estimated that each call now costs the company about US$90. Oracle’s new self-support services will bring that cost down to US$5 per call.

“We haven’t yet deployed self-service support applications,” he said. “They will include knowledge management, call avoidance and searching similar problems.”

Oracle will implement iSupport, which will eventually consolidate and replace the company’s internal support system – Metalink.

Henley noted that Oracle has succeeded in its savings plans to date because they have plateaued costs while increasing revenue.

Ellison stated the savings goals are per-year, not accrued.