The Central Intelligence Agency had commissioned the project to build a commercial database management system for IBM mainframe computers and code-named it Oracle. Software Development Laboratories took the Oracle name in 1982. After completion of the project, Ellison, Miner, Oates, and Scott had a vision of developing and distributing their database software as a profitable business opportunity.
From 1982 to 1986, Oracle had achieved 100% growth. On March 15th, 1986, Oracle went public, one day after Microsoft’s initial public offering. From 1986 to 1989, revenues skyrocketed from $55 million to $584 million, making it one of the largest independent software companies in the world, employing over 4,000 people in 24 countries. The Oracle Corporation’s objective of becoming a profitable database software company had been achieved. Market and industry growth continued until the third quarter of 1990. Oracle suffered a $15 million dollar loss on $240 million in revenues.
Between 1988 and 1991, operating margins had plummeted from 23 to 3 percent. During this time, the company’s stock value also fell. Oracle responded by letting go of 400 employees in the United States and reorganizing its senior management team. This business problem was the direct result of something the company simply overlooked. As the company was focusing all of its energies on growth during the late 1980’s, they were losing sight of their internal operations and infrastructure. They also planned their expenses based on the 100% annual growth rate they experienced in the prior years, causing them to lose money.
In addition, they delayed the delivery of their latest product, which allowed the competition to draw closer to them. However, the release of their next product would see Oracle quickly rebound and turn things back around. In July of 1991, Oracle was working on a new database software that had the ability to manage text, video, audio, and other data through a set of loosely connected servers.
This database software was called Oracle 7, and was one of many IT solutions that would put Oracle ahead of the competition and save the company. 996 saw database sales grow by 20 percent and then to 10 percent in 1997, the year Microsoft released its rival SQL server, which was a cheaper alternative database release with aspirations of stealing Oracle’s market share. During this time, Oracle attempted to expand beyond databases and entered into the two largest application software markets, enterprise resource planning and customer relationship management. Ellison saw this as a lucrative business opportunity, considering the fact that the ERP market was estimated at $20 billion in 1999 and projected to exceed $65 billion by 2003.
The CRM market was estimated at $4 billion in 1999 and projected to exceed $16 billion by 2003. Ellison recognized that CEO’s wanted to understand profitability per costumer and to be able to detect dissatisfaction before the customer leaves. He realized that ERP and CRM software would allow CEO’s to do that by turning database information into knowledge about consumers. Ellison’s vision of internet-enabled software began to take shape in 1999 with the release of Oracle8i. It was followed by internet-enabled versions of all the company’s key software products.
A key IS solution in the development of Oracle Corporation would be Oracle e-Business Suite, which would include a collection of ERP and CRM applications that automated many necessary business functions. This would be the beginning of the high impact IS solutions to follow. In June of 1999, Ellison declared that Oracle would attempt to save $1billion dollars by the end of 2000 by transforming into an e-business. Ellison then eliminated all non-e-business options from the company. This bold move was an incredible success and a brilliant IS solution to some of the company’s business problems.
The changes were easy and smooth to implement. An example given in the case was that of an expense report. In the past, a sales rep would fill out an expense report and manually send it to headquarters. Now the sales rep just completes the forms on the web where the report can be tracked. Not only did this create $6 million dollars in direct savings, the reports were easier and faster to complete. This solution did not only benefit employees, but customers, too. In the past if a customer wanted to demo Oracle’s software, a sales rep had to set an appointment to do the demo in person.
Now, the sales rep can gain access to the customer’s browser and, over the phone, can do the demo over the browser at Oracle. com. The shift to self-service was a very necessary and profitable solution for Oracle. They began saving millions of dollars and hours of time. Another business problem Oracle had was a lack of centralization in the business. One clever way they did this was by changing incentives for country managers. Country manager’s incentives were originally based on revenue. This was to be changed to shift their incentives to be based on margin.
In the past, 97 e-mail servers existed with almost 120 databases in over 50 countries. This was dramatically reduced when Oracle gave each country CEO a choice. They could receive free e-mail through Redwood Shores or pay to service an e-mail server, which would directly impact their margin, and ultimately, their variable pay. This was a very effective IS solution to the lack of centralization problem the business had. Oracle would continue to centralize the business by pulling human resources, legal, sales administration, and marketing out of each country office and consolidating them at Redwood Shores.
Oracle now had a single system that served everything. Oracle saved a lot of wasted money by centralizing its marketing department. The products were the same in every country, so the centralization made sense and was absolutely necessary. By June of 2000, Oracle had gone from 63 to 17 company websites worldwide. By August 2000, the company was down to one website, Oracle. com. This solution saved the company a lot of money that was being wasted operating multiple websites for multiple countries and confusing the brand with different languages, colors, and logos.
The transformation to e-business saved Oracle a ton of money, but this wasn’t the only benefit of the move. The switch also generated marketing pull. Oracle’s customer base grew as a result of having better information about their customers’ and sales outlets. The pull strategy came to fruition by two combining factors. The story of the company’s transformation combined with the new gained credibility the company received by performing this transformation so publicly.
Now instead of sales reps attempting to sell the CEO of another company their software, CEO’s were going directly to Oracle technology to transform their own businesses. This pull allowed Oracle to open an online store, as opposed to hiring more sales people to handle the increased demand. This latest IS solution, in turn, created more sales. In 1999, Oracle began streamlining its Oracle University, which supported 2500 full-time employees in 143 countries while enrolling about 500,000 students annually.
These Oracle courses led to the certification of developers and programmers that the company needed to continue growth. This business solution was yet another great move designed to farm their own employees. iLearning technology was then created as a means of a continuing education extension to Oracle University’s certification process. This software would be hosted online and could be updated daily without patches. Oracle Corporation is a great example of a company who had the ability to predict the future of technology and make innovations to lead the industry. They took risks, and they paid off.
Larry Ellison took a big risk when he eliminated all non-e-business elements out of his business and made the transformation to e-business, and his company was rewarded with tremendous cost savings and higher revenues. He also predicted at the end of a June 2000 press conference that the software industry would vanish and be replaced by a service industry. This remains to fully be seen, but it appears there could be truth to this. Cloud computing has been the next innovation in computer technology, as we say many companies now providing services that used to require us to install software on our computers.