Oracle's Internet Savvy Brings Home the Gold

Oracle's Internet Savvy Brings Home the Gold

Jeffrey Henley

By Nick Wakeman, Staff Writer

Oracle Corp. is in the midst of an internal makeover that already has saved the company $1 billion and is opening up new markets and customers for the world's second largest software maker.

Oracle is turning itself into an electronic business, one that is tied to its customers and internal operations by the Internet. And by becoming an e-business, Oracle is better equipped to help government agencies become e-businesses, too, said Oracle Chief Financial Officer Jeffrey Henley.

The software developer's electronic commerce initiative has helped it win work building a system for the Transportation Department to sell registrations and collect fees via the Internet. It also is helping the Air Force develop online training systems, said Steve Perkins, senior vice president and general manager of Oracle's federal business.

The Internet also is extending the company's sales force. "It is easy to get people together in Washington, but most of the government operations are outside Washington, in places like Bismarck, N.D., and Fort Huachuca [in Arizona]," he said. "We can hold cyberseminars and put our experts on interactively, or we can drive them to our Oracle channel online."

"This is a great message for our customers," Henley said. If Oracle can become an electronic business, so can they, he said.

While the e-business transformation started a year ago, the software developer probably is only half finished with the process. "There is a huge opportunity to get this company more efficient," Henley said.

The Redwood Shores, Calif., company is riding high on its success of grabbing a leadership role as a provider of electronic business solutions. Revenue for the company's third quarter, ended Feb. 29, was up 18 percent to $2.4 billion and net income was about $500 million, up 80 percent from the same quarter a year earlier.

For its fiscal 1999, which ended last May, Oracle had total revenue of $8.8 billion and net income of $1.3 billion. The company's stock closed April 7 at $87.13. Over the past 12 months, the stock price ranged from a low of $11.25 to a high of $90.

The company should have about $10 billion in revenue in fiscal 2000, Henley said. About 20 percent of its revenue comes from the global government market.

The company's strong margin growth is related directly to its push to operate as a electronic business, Henley said. The company is creating savings by making moves such as putting more customer support and services online and consolidating company data centers and IT operations.

Customers can expect more ways to interact with Oracle via the Internet, from ordering products to troubleshooting problems to training opportunities, he said.

The company also is rolling out new database, financial management and customer relationship management software suites designed for building an electronic business.

"We think we are several years ahead of our competitors, but we have to keep it up," Henley said.

Keeping up with competitors, such as Informix Corp. of Menlo Park, Calif., and Sybase Inc. of Emeryville, Calif., is one of Oracle's biggest challenges, said Brian Eisenbarth of the investment banking firm Collins & Co. in San Francisco.

"They are clearly the leader [in the e-business space], but they are so big," he said. "The smaller companies are more flexible and nimble."

Competition is fierce, and besides database competitors, such as Informix and Sybase, Oracle also competes with IBM Corp. of Armonk, N.Y., Microsoft Corp. of Redmond, Wash., SAP AG of Waldorf, Germany, and Siebel Systems Inc. of San Mateo, Calif.

"We can't get cocky," Henley said.

In the government market, Oracle is aggressively chasing projects where agencies are looking to use the Internet to streamline processes and save money, Perkins said.

Procurement systems are the most popular electronic government application, especially with the General Services Administration looking to use online auctions, and other agencies eyeing the Internet to collect bid information. But Perkins said that even more savings and efficiencies can be found beyond simple procurement systems.

Government agencies can use the Internet to forge a closer relationship with their suppliers in the same way that automakers do, he said.

"You can have exactly the same kind of collaboration between the Department of Defense designing a weapons program or NASA designing its programs and their supplier communities," Perkins said. "The real opportunity is to use procurement to pay for the platform, but then move to collaborative design practices."

Oracle also is targeting service-to-citizen applications with its customer relationship management software. For example, the Transportation Department is using Oracle software to sell licenses and registrations and collect fines.

"We use the same software to sell our products [over the Internet] that they are using it to collect fines," Perkins said.

Oracle's position with its government customers is "one of their strong points," said Andrew Roskill, an analyst with the investment banking firm Warburg Dillon Read LLC of New York. "They have been very aggressive in getting their products certified and getting on the GSA schedule," he said.

Oracle also has built its software around suites, such as packages for enterprise resource planning, financial management and database management. This has helped the company keep up with customer demands, said Ron Salluzzo, senior vice president for the state and local government practice at KPMG of New York. KPMG is one of Oracle's certified solutions partners.

"Our customers aren't just looking for the next piece of technology, but for an overall vision, and Oracle has designed its software around an overall vision," he said.

While Oracle does have its own consulting service, it acts in more of a collaborative role with systems integrators and consulting firms and not as a competitor, Perkins said. The federal group has about 1,000 consultants.

The consultants only work on Oracle products. "We look for ways to optimize the application's performance, we understand the software's internals, and we bring best practices," he said.

But the consultants really are not experts at business process redesign, change management or large program management. "We view what we do as a support business," he said.

Some major projects Oracle is pursuing as a subcontractor include the Air Force Integrated Space Command and Control contract. Oracle is on a team led by TRW Inc. of Cleveland that is chasing the $1.8 billion contract. They are in a head-to-head competition with a team led by Bethesda, Md.-based Lockheed Martin Corp. team. That contract will consolidate several command and control systems into an integrated system.

Information technology now is about transforming the way a business or agency operates, Perkins said.

"For the first time, IT isn't just about reducing costs, but it is about new business models," he said, "and those models couldn't exist before the Internet."

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