Music distributor Madacy tunes into outsourcing

SAN DIEGO – Since cutting IT hosting costs in half through Oracle Corp.’s outsourcing services, Philip Chung is still getting over the shock. The culture shock, that is.

In San Diego for the Oracle AppsWorld conference, Chung, an IT manager for Montreal-based Madacy Entertainment Group Ltd., said that through the adoption of Oracle’s E-Business suite and its outsourcing service, his IT staff have changed from being problem fixers to “system enhancers.”

“When you’re in support, all you seem to hear about is problems,” Chung told IT World Canada. “The biggest change was that we were no longer concentrating our resources on fixing problems.”

This meant playing less of the “middleman” in providing support for the various business units, he added.

Oracle customer Madacy is an independent music distributor label of music and video products. The company accounts for almost two per cent of all records sold in the US$13-billion music market, according to the company. Since becoming a private company last year, there was a clear mandate to reduce IT costs, Chung noted.

Initially, Madacy sought an outsourcer who was able to host both the hardware and software. But Oracle’s approach was different, Chung said, as its pricing is based on a percentage of the software licensing costs.

At AppsWorld, Oracle announced details surrounding its outsourcing unit. Tim Chou, president of Oracle Outsourcing noted that while still in its infancy, the Oracle Automation Platform — based on the Oracle Enterprise Manager product — is poised to become a significant part of Oracle’s business. End users will still license Oracle software as a managed option on a per-user basis; Oracle will supply hardware and also host and maintain the environment.

This appealed to Madacy. The suite offers automated provisioning, security and disaster recovery availability management. The system’s monitor is proactive and the company’s cost savings are well below those of hosting its own environment, Chung said.

“If your business grows and you need more licensing you’ll pay more (for) outsourcing but that’s value-added” and a clear sign of business expansion, Chung said. “It’s all based on standards processing so if I do have a problem then I can go to support.”

Since going live July 2003, the measure of success has been not only the cost savings, but also the increase in customer service, Chung said. All customer orders can be seen on one screen, increasing productivity and empowering the IT staff. Now the staff can focus more on analyzing and work on ways to improve the business, Chung said.

Through outsourcing, Madacy now has the capability to handle large orders more quickly and effectively — which meant that its customers have come to expect this new level of performance, Chung added. The system has to be robust enough to handle the workload, he noted.

As for advice to other Canadian companies seeking to outsource, Chung offers that before going live, “testing the systems to the point of breaking it” is key.

Much like fellow top tier rival SAP AG, Oracle has been making downstream moves to be seen as a viable option for the mid-market enterprise, said Warren Shiau, software analyst for IDC Canada Ltd. in Toronto.

Oracle defines the Canadian midmarket as one with $75 to $250 million in revenues, said Peter MacPherson, regional director, applications for Oracle Canada Co.

Oracle in Canada has been restructuring and creating a dedicated team for the Canadian midmarket space, Shiau said. It’s a change in strategy, he added.

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Jim Love, Chief Content Officer, IT World Canada

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