Oracle shoots for massive savings

Oracle shoots for massive savings

Eighteen months after Oracle's CEO Larry Ellison pledged to transform the company into a truly Web-enabled business and reduce expenses by $US1 billion, Oracle announced plans to shock sceptics on Wall Street again by doubling those savings.

Gary Bloom, Oracle's executive vice president, made the announcement during his opening keynote speech at the Oracle OpenWorld conference. Bloom's remarks coincide with a multitude of product announcements by the company that were showcased during the week-long exposition.

"We've taken well over $1 billion in expenses out of Oracle," said Bloom, harkening back to a promise made by Ellison in June, 1999. Although Wall Street analysts chalked up Ellison's plans as "marketing hype", Bloom said the company has delivered "real results" and plans to shave even more from its overhead. "We think we can actually take it to $2 billion," said Bloom. "We don't think it's marketing hype at all."

Oracle's latest cost-reduction initiative aims to continue the process of converting Oracle from a traditional business into an e-business, said Bloom. To date, the company has centralised a significant portion of its internal business processes and infrastructure, including its global data centres and e-mail servers. Likewise, the company will continue to look for savings through the consolidation of internal operations such as human resources, accounts payable and order management, Bloom said.

"Everything here is about exploiting economies of scale," he added. In addition, the company plans to consolidate its own information technology support - a move it expects will save at least $250 million. Other initiatives that it plans to rely on in order to reach its $2 billion savings goal include further Web-enabling of customer interaction and internal operations, Bloom said.

For example, Oracle consolidated 44 of its data centres into two global data centres, said Bloom. In addition, the company consolidated 97 of its e-mail servers into two mail servers that use clustering technology from Hewlett-Packard. Licences for the company's database products have increased by 21 per cent, which has also lent a boost to Oracle growth during the past 12 months. "It's a little bit more than marketing hype."

Revenue for the company increased by 15 per cent, to $10.4 billion, during the last year, said Bloom. Likewise, net income has increased by 76 per cent, to $2.3 billion, he said.

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