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Oracle CEO Safra Catz: We're All On The Same Journey

Oracle

Oracle is making a huge push to the cloud—both in terms of the software it develops and how it manages its own business.

That cloud-first focus shouldn’t be interpreted to mean that Oracle is in any way leaving customers who still use on-premises software in the lurch. Oracle CEO Safra Catz took that issue head-on during a panel discussion at Oracle’s Modern Supply Chain Experience in San Jose in January.

Oracle CEO Safra Catz said that by moving to the cloud, businesses today have the potential to do more and spend less doing it.

For example, while Oracle is moving its own supply chain systems to the cloud over the next year, the company recognizes not everyone is ready to make that move, Catz said.

“A lot of our customers have significant investments in Oracle E-Business Suite, JD Edwards, Demantra, and others—and they’re getting good value from those products,” she said. “We don’t leave folks behind, and for some, it’s not the right time to move to the cloud.”

Oracle Executive Chairman and CTO Larry Ellison made much the same point during the Oracle Modern Finance Experience conference in San Francisco in 2015. He pointed out that during the years that Oracle has been working on cloud-based applications, it has continued to make significant investments in its on-premises offerings as a matter of principle—and smart business practice.

“If you decide a few years from now that you want to move from JD Edwards on premises to our cloud offerings for manufacturing, supply chain, and financials, that will be partially influenced by whether you trust Oracle as a technology supplier. If we didn’t continuously invest in the products you bought, that would erode your trust,” he said.

Oracle spends more than $5 billion a year on research and development, he said, with significant investments in both cloud and on-premises applications. He has often said that Oracle expects “a decade of coexistence,” during which companies will maintain some of their key applications in the cloud and others on premises.

“Every company has a different situation and will make the decision on the time to move to the cloud when it makes sense for their business,” Ellison said. That’s why Oracle offers both the next version of the continuously improving on-premises applications and the next version of its cloud products. “It’s up to you to decide the timing,” he said.

Updates Now or Later

Of course, the advantage of using cloud applications is that customers can take advantage of new features and fixes as soon as they become available, rather installing an upgrade on their own premises when time allows, including making any necessary customizations.

Some companies even skip upgrades altogether in order to avoid those hassles—which leaves their organizations functioning on software that is years old.

That puts them way behind competitors that are getting immediate access to modern features through the cloud.

“How many of you have gotten requests from the business—for a different distribution model, different suppliers, different customer experience, a different supplier experience—and you think you can’t do it because you’d need to upgrade?” Catz asked the audience at Modern Supply Chain Experience. “But today with modern cloud applications, we finally have the technology that’s compelling [both] technically and from a commercial point of view. We have the potential of doing more and spending less doing it.”

The pressures of the global economy make change and modernization a necessity. But companies hesitate to make the leap to cloud applications for a variety of reasons; perhaps they’ve just recently upgraded to the most recent software release and want to just coast with that for a while.

“The thing is, you can’t rest on your laurels. Your competitors aren’t. My competitors aren’t,” Catz told the crowd.

Going From Broken to the Cloud

In fact, Oracle provides an excellent case study on supply chain modernization: Seven years ago, the company didn’t really have a supply chain to worry about. Then it acquired Sun Microsystems.

“We thought we should do this—because it was necessary to be completely in charge of our supply chain for cloud ultimately, and in between for engineered systems, said Catz.

At the time, however, Sun was losing $300 million per quarter, causing most observers and analysts to doubt the wisdom of the acquisition.

Reversing those losses became the focus of Catz, then president and CFO of Oracle, and Cindy Reese, Oracle’s senior vice president of worldwide operations, who previously ran supply chain, manufacturing, and logistics at Sun. Catz met once a week with Reese, hardware engineers, and developers to review bills of material line by line, asking why a certain item had to be single source or why a specific supplier was being used. Products were standardized, and those that weren’t selling were eliminated regardless of whether the engineers thought they were “cool to work on,” said Reese, who joined Catz on stage during the Modern Supply Chain Experience conference.

That activity went on for three years and saved $110 million, Catz said.

Oracle plans to have its own cloud migration completed within the next year, Reese said—and her organization is particularly excited about Oracle’s recently announced cloud-based supply chain management applications.

If Oracle’s cloud-based supply chain systems of today were available when this transformation was taking place, Catz said, “it would have changed our ROI immediately.”

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