Winning the War on Complexity

An Oracle White Paper

April 2001

Winning the War on Complexity

 Winning the War on Complexity

FOLLOW THE LEADER

“Integration is the most
Margin increases of 14 percent over two years. Savings of more than
important thing. Without that, it
doesn’t matter how agile your $1 billion in a year. How does a company achieve figures like these
applications and systems are. in today’s markets? Simple.
If they are not interrelated and
Or rather, by simplifying.
all on one database, you’ll
never achieve the goal of In 1998, Oracle Corporation managed its worldwide operations in
making it easier for much the same way that many multinational companies still do: The
customers and yourself.”
company had built a huge, distributed, worldwide corporate culture
— Sam Changizi, vice on a client/server computing infrastructure. Hundreds of databases
president of E-commerce, in countries around the world held silos of information. Sixty
@Comm independent profit centers created redundant data and
applications, independent spending, productivity inefficiencies, and
huge maintenance bills.

“To find the answers to simple questions, such as how many

employees we had, we would literally have to go out and touch 60
databases,” admits Gary Roberts, senior vice president, Global IT,
Oracle Corporation. “We were spending uncontrollably, adding
more databases, applications, infrastructure, and personnel to
support our growth, while exponentially increasing complexity. For
example, we had 120 e-mail databases globally. The cost and effort
of doing a simple upgrade was going through the ceiling, and . . . we
were eating up our profit margins.”

Roberts and other senior officers decided to transform Oracle into

a model e-business. The company began centralizing data,
automating and integrating core business functions, and leveraging
standard internet business processes, using its own E-Business Suite
of software. Oracle expected by doing so to save money and
increase margins. And it did, saving $1 billion in the first year alone
and improving profit margins as well. Over the past two fiscal years,
Oracle’s annualized operating margins have improved from 21
percent to 35 percent.

But saving money was only a start. Oracle’s transformation to an e-

business also transformed the corporate culture, making it easy to

Winning the War on Complexity

 share information around the globe, so that senior management
could make decisions based on facts about the business. It
transformed sales, automating and enforcing a step-by-step process
for selling products that can be seamlessly tracked from lead to
close. It transformed customer service, providing self-service access
to most of the information that customers need and freeing support
personnel to focus on critical issues. Employees, customers, and
suppliers now have access to the applications and data they
need—when they need it—and decisions are based on current,
consistent information across the board.

How can other companies achieve similar success? By leveraging

the internet as a global network and centralizing information,
enabling access from anywhere in the world with a standard Web
browser. By adopting new internet business practices rather than
modifying software to work with outmoded business processes. And
by relying on integrated, complete software suites that link together
all company departments into one seamless information
flow—from marketing to Web store to telesales to sales to
accounting—rather than cobbling together point solutions that were
never engineered to work together.

“The ability to access our CENTRALIZED DATA=CENTRAL INTELLIGENCE

Oracle database through a
Many global enterprises add unnecessary complexity to their
Web browser has given us a
global knowledge of our operations by distributing the workload to local systems. For these
suppliers and buying organizations, simplifying IT activities involves buying software
patterns, so that we can applications that support consistent, worldwide operations from a
combine worldwide single instance of the software. These centralized implementations
purchases to get better can be accessed from any point on the globe via a simple Web
terms, pricing, and service.” browser.
— John Basone, director of “We’re using technology to differentiate ourselves from our
IT, CSX Lines competitors. The shared-service model with the Oracle E-Business
Suite has vastly reduced our overall costs and enabled us to supply
more timely information to our managers,” reports John Basone,
director of IT Finance at CSX Lines, the largest U.S.-based ocean
carrier, serving more than 100 seaports and transportation
terminals in 80 countries and territories around the world. To
reduce the cost of doing business, CSX Lines implemented a global
purchasing network based on Oracle applications. “The ability to
access our Oracle database through a Web browser has given us a
global knowledge of our suppliers and buying patterns, so that we
can combine worldwide purchases to get better terms, pricing, and
service,” Basone explains. “We centralized the Oracle database in
North America with access through our frame-relay network to all of
our 240 sites throughout the world.”

Winning the War on Complexity

 Having a centralized source of global data also streamline
manufacturing operations, as McDATA has demonstrated. With
operations in Canada, the United States, Germany, the United
Kingdom, and Japan, McDATA is implementing the Oracle E-
Business Suite and Oracle8i Database to centrally manage its
multicurrency, multiorganizational operations from a single source
of data. “We’ll be doing everything on Oracle—designing and
building our products, shipping, managing credit and collections—
essentially, we’ll be running our entire business on the Oracle
platform,” explains Debra Morton, director of business systems at
McDATA.

“In today’s market, with tight TRANSFORMING BUSINESS

technical staffing and Companies look to a variety of software applications to help them
application vendors
expand markets, strengthen relationships with customers, and
producing upgrades at a
furious pace, the ‘toolkit’ increase overall business efficiency. But software is a parts-and-labor
approach simply doesn’t business. Building an e-business involves connecting the various
make sense. With Oracle and parts of a business together, improving business efficiencies and
the integrated Oracle E- customer service and reducing costs. In most cases, companies buy
Business Suite, we don’t the parts and integrators put them together. These application
have to write interfaces and
integration efforts involve expensive and time-consuming custom
keep up with software
upgrades. We have a development work to connect applications, data, and business
comprehensive solution, and processes as hardware is deployed, networks configured, and
we get support and software installed. But far and away the largest integration cost stems
consulting from a single from trying to integrate two or several pieces of software to fit
source. The result is a major seamlessly together into one business system.
competitive advantage.”
Industry analysts report that many companies are spending as much
— Doug Allen, CIO and as a quarter of their IT budgets trying to integrate their business
president, ASP Hosting and systems. For a majority of enterprises, IT systems that don't
Managed Services Group,
intercommunicate remain the main barrier to information access. A
Hostcentric
December 2000 Gartner Group report found that back-end
integration efforts can represent 90 percent of the implementation
work, making it one of the top three reasons why sales force
automation projects fail. Sales applications must interface with
inventory, order entry, billing, and tracking systems. Web stores
must be integrated with fulfillment systems. And so on.

For example, with enough integration work, an order that originates

in a BroadVision Web store can be passed to a JD Edwards order-
management system. Companies can use vendor-built middleware
interfaces—or “connectors”—to simplify the job. But it’s still a big
task for consultants—which means a big expense for the company.
Even the connectors need to be tuned and customized to fit a
particular integration task. If anything goes wrong, it’s the customer’s
problem.

Winning the War on Complexity

 “There is no better And integration takes time: Full-scale enterprise software
integration method than implementations involving cobbled-together best-of-breed
designing the entire applications can take as long as two years to complete. No sooner
application suite to work
has a company finished the integration project, moreover, than one
together to begin with, and
here Oracle has a huge of the software products gets updated, the interfaces change, and the
head-start on the industry.” entire process starts all over again. Each time someone upgrades a
single component of the application environment, developers have
— Sharon Ward, director of to take apart the software, add the upgrade, reintegrate the
Enterprise Business components, test the new system, and then deploy all over again.
Applications, Hurwitz Group
No wonder many companies avoid upgrades altogether, even if it
means foregoing key new developments in software functionality.

There are many reasons for this expensive scenario:

• Conflicting development agendas by multiple vendors

• Time-consuming and costly integration processes

• Nonunified upgrade procedures

• Cross-training issues related to a shortage of skillful labor

• Lack of vendor accountability due to multiple sources of

support

• Time-consuming deployment cycles, including juggling

multiple platforms, architectures, software packages, and
consulting services as part of project management

• Multiple vendor contracts and sources of support

• The need for a common data model, which must be

cobbled together or “reverse-engineered” from various
applications

COMPLETE AND SIMPLE

Does deploying application software have to be so complex? Not if
businesses implement integrated software suites built from the start
to work together instead of attempting to build a business system
from disparate parts. According to Colleen Niven of AMR,
integrated suites allow users to share information between
applications, making it easier to manage business processes and
track related activities. She points to the Oracle E-Business Suite as a
leading example—a comprehensive e-business software
environment designed and supported by one company. From
customers to suppliers and everything in between, businesses can
run one integrated system across all their operations around the
world.

Winning the War on Complexity

 This shift in business strategy can yield tremendous cost savings.
“Oracle is now integrating all
of its applications into a “We estimate that just in purchasing alone, based on converting our
modular, seamlessly worldwide sites to the Oracle purchasing module and improving our
upgradeable suite that will processes . . . we’re going to save $35 million per year,” CXS Lines’
allow customers to gain all Basone says.
enterprise-application
functionality without retaining The Oracle E-Business Suite simplifies the integration process by
expensive consultants to bolt coordinating all key business functions, from marketing and sales to
together multiple disparate manufacturing, order processing, fulfillment, and customer service.
pieces, from multiple It pivots around open standards that streamline data-processing
vendors.”
activities both within the Oracle E-Business Suite and with third-
— The Death of Best of party software applications.
Breed, a Summit Strategies Agilera looked for this type of integrated suite to tie together its call
newsletter, April 2001
center activities with each customer’s e-mail and Web interactions.
The motivation for the full-service application service provider
(ASP) was to simplify its marketing campaigns by correlating
customer data from each interaction point into a cohesive
marketing program. “With the integrated Oracle E-Business Suite, we
don’t have to write interfaces and keep up with software upgrades,”
says Doug Allen, CIO and president of Agilera’s ASP Hosting and
Managed Services Group. “We have a comprehensive solution, and
we get support and consulting from a single source. The result is a
major competitive advantage.”

Staff Leasing, the largest professional employer organization in the

U.S., also cites integration as a major attraction of the E-Business
Suite. “A single-vendor relationship simplifies matters, and
integration is extremely important,” says Senior Vice President and
CIO Lisa Harris. Staff Leasing’s integrated system reduces the time
company agents spend on the phone by an average of 30 seconds
per call and cuts total work time spent on select clients by 27
percent. The benefits are irresistible: improved customer service,
reduced costs, and a stronger competitive advantage.

And for McDATA, the integrated system makes it easier to track

production schedules, arrange for shipments, and book revenue.
“With our former business systems, the purchase-order cycle took
about two weeks,” says Morton. “With Oracle, we can turn POs
around in one day.”

These customer successes are in marked contrast to typical

enterprise software implementations, which often get bogged down
by complex integration efforts. The reason is simple: Most
application software vendors sell components that must be
modified to meet each customer’s unique business needs.
Consultants and systems integrators glue the pieces together,
resulting in a unique software configuration for each customer. As

Winning the War on Complexity

 new versions of the software are released, the customized
configurations must be upgraded and reintegrated.

Oracle takes a different approach, motivated by one overriding

premise: reduce complexity. Take the labor out. Remove the
variations from one installation to the next by encouraging
customers to run standard, certified configurations.

Sharon Ward, director of Enterprise Business Applications at

Hurwitz Group, calls the Oracle E-Business Suite the first contender
in an elite echelon of software that she calls “über” applications:
applications that cover the functionality typically provided by ERP,
CRM, SCM, e-business, and a host of niche applications. “Businesses
require this type of integrated suite to support the complex, fast-
paced, multichannel economy we live in,” she says.

According to AMR’s Niven, with an integrated application suite,

there is no need to spend time or money on integration. Working
with a single vendor simplifies support and maintenance. And the
releases of the individual products and modules are coordinated,
lessening the burden on the IT staff for upgrades. The software
company handles the software business, allowing their customers to
focus on core business.

“The Oracle E-Business THE SIMPLE BUSINESS CASE

Suite gives users an
Winning the war on complexity means more than centralizing data
unprecedented breadth of
functionality without the and implementing an integrated suite of software. It also means
messy integration avoiding the temptation to modify packaged applications—to
challenges associated with “force-fit” them to conform to outdated business processes. To stay
best-of-breed approaches.” on-track, companies are better off implementing standard
applications that yield a rapid ROI.
— Sharon Ward, director of
Enterprise Business When Hitachi Systems decided to upgrade from Release 10.7 to
Applications, Hurwitz Group Oracle’s E-Business Suite Release 11i, the world-leading global
electronics company saw the chance to update its business
processes as well. “We were using highly customized applications
that would taken years to upgrade, ” says Dave Farwell, vice
president of Business Finance at Hitachi Data Systems. “ We wanted
to do it fast, and we wanted to eliminate all this customization going
forward.” Hitachi decided instead to implement the Oracle E-
Business Suite in a “plain vanilla” fashion, wherever possible
modifying its business processes to match the software.

Put simply, companies need to make the distinction between what

they need and what they want. In most cases, what they need
represents 80 percent of the value of a particular business
application. Is it worth undergoing tedious and expensive
customization work to attain that last 20 percent? In some cases, the
answer is yes – particularly when that last bit of business

Winning the War on Complexity

functionality yields a competitive edge. But for standard functions
such as expense reporting and order entry, the objective should be
to implement the basics and move on. These business processes are
not what differentiates the business in the marketplace. Why not
save time and money by modifying the business practice to
conform to the software rather than the other way around?

Smart customers are coming to the same conclusion Hitachi did.

When a large global energy company realized its core business
competency lay in building power plants rather than modifying
software, Oracle worked with senior managers to redefine, simplify,
and modernize the company’s core processes, move them to the
internet, and map them to the Oracle E-Business software. No
changes were required to the standard implementations, and it took
just five months to roll out the first manufacturing plant. Now, the
company has a stable set of software applications that are easy to
upgrade and maintain, because they are based on standard
configurations.

How is this possible? Within most industries, the lion’s share of the
deployment is common from one site to the next. Because Oracle
owns both the software and the consulting practice, innovations
learned during repeated consulting engagements gradually end up
back in the product and become the standard way of doing
business. As time goes on, the standard software begins to match the
best practices for that industry. The software becomes progressively
more refined with each implementation.

By helping customers centralize, transform, and simplify their

businesses, Oracle removes complexity and cost and frees
corporate resources for those unique projects that truly differentiate
a business from its competitors.

Winning the War on Complexity

 BUSINESS FLOWS
“Oracle has done the hard
In a typical e-business scenario, customer-order information is
work of pulling many best-of-
breed solutions into an simultaneously transmitted from the marketing applications to the
integrated application suite. ordering system to the back-office financial and inventory
Its XML-based integration applications—and then on to supply-chain partners for
architecture is both open and manufacturing, design, and fulfillment. Putting all the pieces
comprehensive. There aren’t together in a cohesive fashion is an incredibly complex task. That’s
many companies with the
why Oracle’s top-notch applications come with best-of-breed
resources to pull this off, and
none that could do it any internet business processes that have been refined and perfected on
better than Oracle.” thousands of implementations.

For example, instead of implementing a new marketing campaign

—Joshua Greenbaum,
principal, Enterprise management system or procurement system, Oracle allows
Applications Inc. customers to implement complete business flows such as “campaign
to cash” and “procure to pay.”

Most marketing VPs don’t have a view into the “cash” part of their
marketing campaigns, because most marketing software allows a
company to plan marketing campaigns but doesn’t tells the business
how many leads were generated or how much product was sold.
Marketing is important, but being able to follow the dollar—from
marketing campaign to cash in the general ledger—is much more
important. Business must be able to track the cost of a marketing
campaign to the receipt of payment from the customer.

This type of holistic business approach made an immediate impact

at McDATA Corporation, where recognizing deferred revenue is
now automatic, as is generating month-end journal entries to adjust
for multiple currencies. Oracle E-Business Suite applications drive
an automated order-to-configure process that extends throughout
the supply chain. “The old way of creating journal entries was very
time consuming,” says McDATA’s Morton. “Oracle automates the
process; it is much more efficient.”

“Oracle has attacked the FASTFORWARD FLOWS TO RAPID RETURNS

deadly dragon of costly, Implementing enterprise software is traditionally a lengthy process,
extended ERP often taking as long as two years to complete. McDATA hired
implementations with
Oracle Consulting to manage an implementation process that took
consistent, fixed-scope
methodology and, according just ten weeks. Morton and her team have witnessed quick
to FastForward customers, improvements in their internal business processes. What’s the
has handily won.” reason? Other vendors offer point products for specific, unrelated
tasks. Oracle offers complete solutions with guaranteed
— Aberdeen Group implementation timeframes.

For example, with Oracle Internet Procurement, Oracle offers the

only solution for automating the entire purchasing process—from
procurement to payment—within a fixed time frame. Another
example of rapid delivery is Oracle’s new Global CRM in 90 Days

Winning the War on Complexity

 initiative. Using CRM applications to improve customer retention
and acquisition has never been more critical, and this solution
offers swift returns on a company’s investment in global customer
relationship management.

With Oracle FastForward Flows, Oracle has defined a set of proven

business flows and packaged them with rapid implementation
services, support, education, and software. Designed to dramatically
reduce the complexity, time, and cost associated with large-scale
implementations, these standard implementations give customers a
path to fast business benefits.

“When we originally looked at GET IT ONLINE: SOFTWARE AND SERVICES

outsourcing the Oracle ERP For companies that want to avoid in-house implementations
solution, we estimated that a altogether, Oracle offers E-Business Suite applications as an online,
hosted versus an in-house
hosted option via Oracle.com. As part of the FastForward Flows
solution would yield a 64
percent return on investment. deployment, customers can choose whether to deploy the software
We went live in May 2000, and in-house, via Oracle.com, or through one of Oracle’s ASP partners.
year-to-date now we are
And unlike other vendors that focus on making disparate
realizing approximately a
76percent return on applications interface merely to implement a local ERP system,
investment.” Oracle offers E-Consulting, which focuses on leveraging the
expertise inherent in integrated software in order to implement
— David Lachicotte, vice global e-business strategies. Oracle’s E-Consulting methodology
president of Information allows much of the implementation work to take place off-site, rather
Technology, Commercial Net
than at the customer’s location.
Lease Realty
For large ERP deployments, AMR estimates the cost associated with
software interfacing can be as much as $13 million the first year and
$2.4 million per year thereafter. With an estimated 50 percent of IT
budgets designated to software interfacing, Oracle E-Consulting
provides an option that enables rapid implementation of e-business
strategies at significantly reduced cost, eliminating the need for
time-consuming, costly software interfacing.

Establishing standard, virtual consulting practices not only speeds

the implementation process but also streamlines the process of
managing the applications remotely. In many cases, Oracle can
manage an entire e-business system for its customers from its virtual
Oracle.com environment.

With its three core components, eSelling, eDelivery, and

eManagement, Oracle E-Consulting uses the internet to rapidly
deliver strategy, technology, and implementation services that
transform traditional businesses into e-businesses, using Oracle
software.

Winning the War on Complexity

 “Our growing needs in STANDARD FROM TOP TO BOTTOM
Europe, Asia, and the U.S. From top-tier e-business applications through middle-tier
can only be met with a application servers to the underlying database, Oracle’s entire thrust
flexible, open system like is toward standardization. Instead of multiple options for its core
Oracle’s E-Business suite.
infrastructure products such as Oracle9i Database and Oracle9i
Oracle also has expertise in
the high-tech discrete Application Server, there are just a handful of standard
manufacturing sector. That’s configurations and options. This makes it easier for customers to
the business model we want track software releases, upgrade their applications, and obtain
to follow and Oracle supports technical support.
it as part of its standard
implementation.” Standard configurations also make it easier to offer remote
management capabilities. Regardless of where the computers reside,
— Debra Morton, director of Oracle can run the applications and manage them over time.
Business Systems, McDATA Oracle can even become a “virtual DBA”—handling backups,
Corp.
upgrading software, maintaining the network, tuning the systems, and
troubleshooting problems. Standard configurations, easily accessed
and managed via the internet, make location irrelevant.

Oracle is also working with vendors such as Compaq Computer

Corporation to certify standard application platforms in which the
hardware, operating system, and all the software applications have
been tested to work together seamlessly. The motivation is obvious:
make complex systems simple by delivering preconfigured and
preintegrated e-business infrastructure solutions.

With this standard, repeatable, quantifiable approach to enterprise

software deployments, Oracle envisions a New World Order for its
e-business customers, based on internet business practices (IBPs)
that define new rules of engagement:

• Centralize critical business information and make it

accessible via a standard Web browser.

• Deploy globally rather than locally.

• Implement complete internet business flows rather than

dated business rules.

• Use standardized, certified configurations rather than

modifying packaged applications.

• Invest in integrated software suites designed and engineered

to work together.

• Focus on your core competency: Shift complexity out of

your IT organization by deploying online services.

It’s all made possible by the power and integration of the Oracle E-
Business Suite and supporting infrastructure software, such as
Oracle9i Database and Oracle9i Application Server. Customers who

Winning the War on Complexity

 choose to build their businesses around these products benefit in
many ways:

• Increased profits

• Reduction in overall labor costs

• Improved reliability

• Streamlined operations

• Rapid implementation and speedy ROI

• Better performance

• Configurations that are easier to manage and upgrade

• Minimized training

• Higher user satisfaction

• Improved customer information and business intelligence

“Customers achieve ROI: RELY ON ORACLE’S INTEGRATION

infrastructure savings from
In its report “E-Biz: Down but Hardly Out” (March 26 2001),
the thin-client model. But
over the long term, the real BusinessWeek found investments in e-business remained strong,
savings spring from putting despite the current economic slowdown. A recent Time Magazine
business processes online.” article reported the new rallying cry in today’s economy is “spend
to save” (April 1, 2001). The article quotes General Electric CEO
—Josh Greenbaum, Jack Welch proclaiming “You won’t see one ounce of slowdown in
principal, Enterprise
tech spending from us. We are driving the hell out of IT spending.”
Applications Inc.
Companies are forging ahead with their plans for automating front-
office and back-office operations, focusing on software
implementations that give the most rapid results.

Simplification equals cost reduction. Cost reduction equals rapid

implementation. Rapid implementation equals rapid ROI. Few
business leaders question the potential of e-business systems to
reduce costs, increase productivity, improve accuracy, and get
closer to customers. Achieving these objectives is a lot easier when
the e-business applications are tightly integrated. Gone are the days
of buying different applications from a host of technology vendors
and spending countless hours and dollars integrating them. The
goal is to obtain working software, right out of the box. The Oracle
E-Business Suite enables companies to efficiently manage customer
processes, manufacture products, execute marketing campaigns, ship
orders, and collect payments—all from the same set of business
systems.

Companies that want to succeed in today’s marketplace need to

begin by waging their own war on complexity. It’s up to senior

Winning the War on Complexity

executives such as Welch to lead the charge, since decisions about
enterprise software ultimately affect every part of the organization.
And for the roadmap, the tools, and the services they need to help
their companies win, they won’t find a better ally than Oracle.

Winning the War on Complexity

Winning the War on Complexity
March 2001
Author: David Baum

Oracle Corporation
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Oracle is a registered trademark of Oracle Corporation. Various

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Copyright © 2001 Oracle Corporation

All rights reserved.