Oracle Business Strategy

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This document consists of Oracle Business strategy:History,Vision,Mission,competitors,clients,market,financials,future strategy and others.

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Oracle Business Strategy

  1. 1. TABLE OF CONTENTS 1. HISTORY.............................................................................................................4 1.1.Introduction.......................................................................................................................................4 1.2.Where are we currently?...................................................................................................................4 1.3.Where we want to be?.......................................................................................................................4 1.4.How do we get there?........................................................................................................................5 2. VISION.................................................................................................................5 2.1.1.Principles and Vision.......................................................................................................................5 2.1.2.Business Values...............................................................................................................................5 3. MISSION..............................................................................................................6 4. INDUSTRY VALUE CHAIN.............................................................................6 5. INDUSTRY ANALYSIS.....................................................................................7 5.1.Key Success Factors............................................................................................................................7 5.2.Competitors.......................................................................................................................................7 5.3.Current Attractiveness.......................................................................................................................9 5.4.Opportunities and Threats.................................................................................................................9 5.4.1.Opportunities..................................................................................................................................9 5.4.2.Threats..........................................................................................................................................10 5.5.Evolution..........................................................................................................................................10 5.6.Future Outlook.................................................................................................................................11 6. ORGANIZATIONAL STRENGTHS..............................................................12 6.1.Market Share....................................................................................................................................12 6.2.Key Strengths...................................................................................................................................13 6.3.Competitors Benchmark..................................................................................................................14 6.4.Assessment of Strengths and Weakness..........................................................................................15 6.4.1.Strengths.......................................................................................................................................15 6.4.2.Weaknesses..................................................................................................................................15
  2. 2. 6.5.Corporate Governance.....................................................................................................................16 6.5.1.Oracle’s Corporate Governance Principles....................................................................................16 6.6.Corporate Social Responsibilities.....................................................................................................17 7. STRATEGY FOLLOWED...............................................................................17 8. IDEAL STRATEGY.........................................................................................19 9. GAP- HOW IT CAN BE FILLED?.................................................................19 10. CONCLUSION................................................................................................20
  3. 3. 1. HISTORY 1.1. Introduction Almost thirty years ago, Larry Ellison saw an opportunity other companies missed when he came across a description of a working prototype for a relational database and discovered that no company had committed to commercializing the technology. Ellison and his co-founders, Bob Miner and Ed Oates, realized there was tremendous business potential in the relational database model--but they may not have realized that they would change the face of business computing forever. Today Oracle (NASDAQ: ORCL) is still at the head of the pack. Oracle technology can be found in nearly every industry around the world and in the offices of 98 of the Fortune 100 companies. Oracle is the first software company to develop and deploy 100 percent internet- enabled enterprise software across its entire product line: database, business applications, and application development and decision support tools. Oracle is the world's leading supplier of software for information management, and the world's second largest independent software company. 1.2. Where are we currently? From the inception to the present, Oracle has focused on innovation and results, and how they can benefit companies like yours. Oracle customers use Oracle technology, applications, and services to build information systems that help them retain the value of existing investments, stay competitive in the current economic climate, cut costs and improve security, make compliance easier, and manage complex upgrades with fewer risks. Today, Oracle is the largest business software company in the world, with more than 320,000 customers—including 100 of the Fortune Global 100—and supports these customer in more than 145 countries and leverage complete stack of complete, open, and integrated products that work with each other and with existing products, and realize low TCO and high ROI . 1.3. Where we want to be? We will strive to become No. 1 in middleware and No. 1 in applications, just as we've done in database. Our goal is to continue to innovate and to lead the industry—while always making sure that we're focused on solving the problems of the customers who rely on our software.
  4. 4. 1.4. How do we get there? With more acquisitions and integrations based on open standards, our customers will get real-world service-oriented architecture integration, advances in enterprise performance management and business intelligence, and Enterprise 2.0 capabilities. 2. VISION 2.1.1.Principles and Vision The success of Oracle’s products and services is based on three principles: • Simplify – Enterprises must increase the speed of information delivery with integrated systems. • Standardize – Enterprises must reduce cost and maintenance with open, easily available technology. • Automate – Enterprises must improve operational efficiency with technology and best practices. 2.1.2.Business Values Certain core values are essential to Oracle’s business: • INTEGRITY: Oracle employees demonstrate honesty and sound ethical behavior in all business transactions and personal integrity in all dealings with others. • MUTUAL RESPECT: Oracle employees consistently treat individuals with respect and dignity. • TEAMWORK: Oracle employees work together as a team for the collective interests of Oracle. • COMMUNICATION: Oracle employees share information widely and effectively with each other, except when confidentiality is required. • INNOVATION: Oracle employees seek innovative and creative approaches to problem solving. • CUSTOMER SATISFACTION: Oracle employees consistently treat customer satisfaction as a top priority. • QUALITY: Oracle employees make excellence and quality a part of day-to-day work processes and seek continuous improvement in all that they do. • FAIRNESS: Oracle employees are committed to dealing fairly with customers, suppliers, and one another. • COMPLIANCE: Oracle employees comply with all laws and regulations that govern Oracle’s business. • BUSINESS CONDUCT: Oracle employees observe the standards that have been established by Oracle and act ethically in their approach to business decisions.
  5. 5. 3. MISSION “Deliver the best information with the highest Quality of Service at the lowest cost” Oracle’s product and services must be the fastest, most scalable, most reliable, most secure, easiest to use, for all types of information 4. INDUSTRY VALUE CHAIN The Information value chain is a way to leverage information architecture in context based on a user’s immediate needs. The modern value chain is far more complex than the value chains of even a decade ago. The challenge, however, has been that information and the applications that house it have increasingly become more fragmented over time. Today, in virtually every industry, partnering across the value chain has become the norm. The Information value chain can be easily broken out into different categories of skills, tools and technologies for which every organization must achieve excellence in order to effectively compete and innovate.
  6. 6. 5. INDUSTRY ANALYSIS Computer software production in the US involves about 50,000 companies. Combined annual revenue of about $180 billion 5.1. Key Success Factors The success of software companies depends primarily on: • Technical expertise • Marketing Competitive Success Factors include the following. • Meet the real needs of customers better than the competitors • Develop core competencies that lead to higher levels of customer satisfaction • Process integration is considered to hold the key to future competitive success 5.2. Competitors
  7. 7. The company recorded revenues of $22,430 million during the financial year ended May 2008 (FY2008), an increase of 24.6% over 2007. Increase in the company's revenues was due to the acquisitions of Hyperion, Agile Software and BEA Systems. The operating profit of the company was $7,844 million in FY2008, an increase of 31.3% over 2007. Its net profit was $5,521 million in FY2008, an increase of 29.2% over 2007.
  8. 8. 5.3. Current Attractiveness Multiplying platforms: The software industry originally developed products for just a few different types of devices: PCs, servers, and supercomputers Today, there are more varied types of devices that contain computer chips and need software to tell them how to operate: everything from GPS systems, cell phones, video games, to "smart" household appliances. This increasing variety means a need for more and new software programs. Meanwhile, the growing use of wireless networking technologies means an even greater variety of software types. The result from all of this is a high need and demand for software. 5.4. Opportunities and Threats 5.4.1.Opportunities Market Attributes: • Endless new growth markets for using operating systems • Retail stores – to showcase products better • Open source software • On-Demand software Market Dynamics: • Business value is identified as a key market driver for Oracle’s strategy. • Oracle has a unique position in the application and database world that strongly supports the growth in current portfolio sales. • Oracle is focusing on the next wave of IT management solutions that will emphasize the capabilities to manage the business services life cycle rather than being limited to IT production management. Clients Perception and Adoption: • High customer satisfaction, on par with other Oracle products.
  9. 9. 5.4.2.Threats Market Attributes: • Competition mergers & acquisitions • Piracy • Copyright infringement Market Dynamics: Oracle’s vision will appeal only to the most mature enterprises in the next 12 to 36 months. Competitive Position: The competition to the current portfolio seems to weaken; although Oracle’s future competition is focused on BSM, its message may still evolve toward more business centricity within the next 24 months. 5.5. Evolution The software industry started in the early 1960s when universities and businesses first began to use computers and to seek out programs to do certain computing tasks. Many of these programs were written in-house by full-time staff programmers. Some were distributed freely between users of a particular machine for no charge. But others were done on a commercial basis, and the very first standalone software firms started in the United States in 1959-1960. The industry expanded greatly with the rise of the personal computer in the mid-1970s, which created a growing market for games, applications, and utilities. And gradually the concept that software should be bought and paid for took hold.
  10. 10. 5.6. Future Outlook The output of US software publishers is forecasted to grow at an annual compounded rate of 6% between 2008 and 2013. Computer Software Growth Shrinks Then Expands The enterprise software market will grow to nearly $300 billion by 2013, averaging annual growth of 5.4%. The fourth quarter of 2008 marked the beginning of several unsettling and uncertain quarters for the enterprise software markets. 2009 will be a difficult year; expect a slow economic recovery, with enterprise software market spending revitalizing no earlier than 2010. Future predictions: 1 Software as a Service goes mainstream 2 Tough economic times favor the big and stable technology companies 3 The desktop takes a beating in a tough economy 4 The Cloud computing grows more serious 5 Companies will spend money on anticipation management 6 Appliances become a software platform of choice for customers 7 Open Source will soar in this tight market
  11. 11. 6. ORGANIZATIONAL STRENGTHS 6.1. Market Share IDC recently published its annual report on software industry market share, which ranks software companies by revenue. According to IDC, despite Oracle's string of large acquisitions, including its pending acquisition of Sun, it will remain in third place behind Microsoft in first and IBM in second. Total revenue in enterprise software industry is expected to be $222.6 Billion
  12. 12. 6.2. Key Strengths • Research and Development: Research and development have always been a key focus at Oracle. Spending on R&D has always been high. In 2003 spending represented 12% of total revenues, and in 2004 the amount increased to 13%. The firm’s position, as communicated in their latest annual report, is “we intend to continue to invest significantly in our research and development efforts, because, in our judgment, they are essential to maintaining our competitive position.” • Production and Information Systems: As a premier maker of business software, Oracle has put its expertise to use in its own company saving more than $1 billion in operating costs by coordinating and streamlining all its business processes. Its three tier approach, “simplify, standardize, and automate”, form the core of its money saving strategy. In the creation of the service it provides to its customers, Oracle constantly strides to create competitive advantage by providing its customers with a higher return on investment. It does this by lowering the total cost of its software by improving integration, decreasing installation times, lowering administration costs, and improving the ease of use. "Our lean manufacturing solutions increase marketplace efficiencies, providing customers with quantifiable return on investment and competitive advantage" says Larry Ellison, CEO of Oracle.
  13. 13. • Marketing and Sales: Following the late 2004 merger with PeopleSoft, the sales force at Oracle increased 65%. This allows the firm to engage its customers face to face and to learn and understand a customer’s organization, processes, and specific requirements. In addition, Oracle has 11,000 consultants worldwide with the knowledge of how to implement Oracle technology and Oracle applications. Further, in addition to Oracle’s own sales and service forces are indirect sales channels such as resellers, system integrators/ implementers, education providers, internet service providers, network integrators, and independent software vendors. Oracle has made a commitment to focusing on the customer in its marketing and sales efforts. Profitability Oracle IBM Microsoft SAP Industry Market Gross Profit Margin 77.78% 42.52% 85.88% 70.11% 82.15% 48.37% 40.21% 12.49% 38.79% 24.30% 26.41% 9.62% Pre-Tax Profit Margin Net Profit Margin 27.94% 8.75% 25.98% 17.45% 17.64% 6.20% 34.3% 28.3% 21.2% 34.6% 12.2% 11.7% Return on Equity Return on Assets 22.4% 7.7% 15.4% 20.8% 8.7% 2.0% 6.3. Competitors Benchmark Importance Strength Measure Weight Oracle IBM Microsoft Platform support 0.05 4 4 6 Database and data warehouse support 0.05 6 8 3 Direct sales 0.1 3 2 1 Marketing 0.2 3 4 6 Web/Ecommerce 0.05 4 6 3 Research and Development 0.3 8 6 5 Technical Expertise 0.15 5 7 3 Financial resource 0.1 4 5 5 1 37 42 32
  14. 14. 6.4. Assessment of Strengths and Weakness 6.4.1.Strengths • Coherent brand/ portfolio strategy: Oracle presents an impressive and very advanced strategy compared with its current competition. The focus on IT to business alignment and business value should resonate very well with CxOs on each side of the fence. Oracle is positioned to potentially become the fifth major player in the IT management software market. • Value chain and market alignment o Strong product suite for applications and DBMS management that plays to Oracle’s market strength as a company. o Impressive customer support strategy. • Stability and viability: Very experienced IT management software management group. • Strong, charismatic, and motivated leader in Larry Ellison • World leader in supplier of software for information management • Offers consulting, education and support services for its customers • Strong sales distribution channels both domestically and internationally • Offers a single suite (Oracle 11i) which integrates all major areas of e-business into one package – one stop shopping • Experience and knowledge in the areas of data storage, business applications and e- marketing (see opportunities) • Strong balance sheet and financial position with both cash and assets, little long term debt • Non-union employees, little chance of work stoppage, and good overall employee relations • 70+ industry-specific Business Intelligence applications, improved security and administration capabilities, and ability to merge data from multiple sources into its Business Intelligence applications 6.4.2.Weaknesses • As impressive as Oracle’s strategy is in terms of innovation and thinking, it needs to advertise it more and use it to leverage client interest in current solutions. • Ellison has a no holds barred attitude which alienates people and can be a control freak • Less control over some international operations than domestic because of reliance on partnerships and alliances instead of direct involvement • In 1997 Oracle was having problems with its application business. Ellison found that different departments of the company used different products and that information sharing and exchange was difficult. Set out to offer a standardized suite of products to seamlessly integrate all aspects of operations.
  15. 15. • Raymond Lane, President and COO resigned recently, some speculate because he and Ellison did not get along due to Ellison’s desire to control the company and did not allow Lane to operate freely 6.5. Corporate Governance As a U.S.-based, publicly traded corporation, Oracle’s goal is to comply with the laws of the United States and the laws of each country in which it conducts business. Oracle provides detailed public accounting and analyst information. They also provide information about their values and vision; the Board of Directors and Board Committees; Oracle executives; and Oracle’s business ethics for employees, partners, and suppliers. As a U.S.-based corporation, Oracle believes they are in compliance with Sarbanes- Oxley regulations. Additionally, Oracle creates products and solutions designed to help other companies comply with the letter and spirit of Sarbanes-Oxley by increasing the control and efficiency of their customers over their critical business information and improving their financial transparency. 6.5.1.Oracle’s Corporate Governance Principles • Director Qualifications – A Nomination and Governance Committee assesses potential Board members based on their independence, character, and acumen. • Director Responsibilities – The basic responsibility of the directors is to exercise their business judgment and act in a manner they believe is in the best interest of the company and its shareholders. Board members attend the Annual Meeting of Shareholders, Board meetings, and meetings of committees on which they serve. • Director Compensation – The Compensation Committee determines the form and amount of director compensation annually, in accordance with the policies and principles set forth in its charter. • Chief Executive Officer Evaluation – The Compensation Committee conducts an annual review of the CEO’s performance and compensation. • Board Evaluation – The Board, led by the Nomination and Governance Committee, periodically conducts a self-evaluation to determine whether the Board and its committees are functioning effectively.
  16. 16. 6.6. Corporate Social Responsibilities Oracle has a long history of employee volunteerism, charitable giving, respect for the environment, and a strong commitment for improving education. Oracle has never taken the steps of recording their efforts for the benefit of their employees, shareholders, customers and policy makers around the world- until now. The innovative spirit behind Oracle’s technological success also drives innovative solutions and programs for the benefit of their communities. Programs such as ThinkQuest, enables the students to create educational Web sites and thereby build understanding across cultures, and Oracle Academy, which works in partnership with secondary schools to educate students, are just two examples of their creative efforts. Employees with their sense of volunteerism responding to major international tragedy such as Tsunami by helping out the local homeless shelter, their employees’ action are source of pride. 7. STRATEGY FOLLOWED Information matters. To compete in a real-time world, you need real time information. Imagine having built-in business intelligence in your IT systems. Imagine being able to deliver real-time, accurate, and actionable information to your executives, managers, and frontline workers, so they can respond to changing conditions, seize business opportunities, and make smarter decisions. You don’t have to imagine it. Oracle is making the information-driven enterprise a reality—right now. Oracle understands information. They solve more complex problems in governments and businesses around the world than any other technology provider—and
  17. 17. they have been doing it for nearly 30 years. At the heart of Oracle is a single focus: finding better ways to manage information. Information in One Place: Today your company relies on information technology, and your existing systems may provide you with a partial version of the truth. But the problems created by the complexity of your computing infrastructure likely outweigh the benefits you receive. You may have multiple data centers to serve offices around the globe. Each of these regional offices probably runs its own set of business applications to support its operations. The information put into these applications is defined by regional conventions such as currency, language, or differing business processes and priorities. Compounding issues, the volume of data in your enterprise is likely to be growing at an alarming rate. Finding a way to reduce the complexity of your information systems and prepare for the continued expansion of business data is not a concern limited to the IT department. It is an issue that can dramatically affect your bottom line and alter the direction of your business. You need all of your information in one place, giving you a single source of truth from which to make your business decisions. This kind of real time, consolidated information is available only if all business applications are engineered to work together by using a single information repository. Oracle is the only company that builds all the software necessary to do this. And they can do it at the lowest possible cost. Recent Acquisitions:
  18. 18. 8. IDEAL STRATEGY • Oracle must come with innovative integrated product rather than forcing customer to upgrade to multiple versions [occurs mainly due to acquisition]. As the time to innovation increases, the more is the business loss. Had this been followed periodically, SAP market wouldn’t have established. • Focus on building technical strength to enable easy innovation. • Leverage strength from relational database management area. • Acquisitions that gain competitive advantage must be continued. • Application servers should have been focused equally as it can generate huge revenue as database. • Oracle should have avoided multiple versions of database release (8i, 9i, 11i etc). This causes customer to be unhappy because they are forced to upgrade from their old database version to the newer version (higher cost to customer). 9. GAP- How it can be filled? I believe Larry Ellison has a strong and accurate vision for the future. As a co-founder of Oracle, he has taken a leadership role in the company since its inception, and has so far had a very successful track record Ellison is very aggressive in his tactics, but they have proven to be effective in achieving goals My recommendation is for Oracle to continue on the course charted by Ellison in releasing its new Oracle products, and to accompany it with a strong and strategic marketing/advertising campaign Oracle has also gradually increased its budgeting for its research and development department which is important if it wants to continue being an industry leader in the future because of increasing competition from companies such as IBM and Microsoft (among others) Oracle realizes it cannot ‘beat’ Microsoft in PC or IBM in mainframes, but believes it can be the number one provider of software on the internet, and should focus on its existing strong position in that area.
  19. 19. 10.Conclusion A significant trend in the software and computing industries has been a shift towards what is known as cloud computing, an infrastructure that is based on centralized shared servers. Under this model everything that a company needs in terms of computing will be located and maintained off-site rather than in house. Furthermore, the same company that manages the servers and physical equipment will also license a platform and software to a firm, which can then be accessed over the internet as an on demand service. Under this model businesses are able to save money on various costs including software service, which is a significant source of revenue for Oracle. Cloud computing also offers more efficient processing, storage, and bandwidth usage by centralizing the equipment and optimizing the software. There are a few potential downsides to the cloud computing model, including concerns over the security of centralized computing as well as concerns over the current limitations of bandwidth. A shift towards cloud computing would be a difficult one for companies like Oracle and Microsoft, who produce and distribute software to their clients in a traditional sense. The costs of developing and managing a cloud system are significant and provide barriers to entry. Companies like Amazon, Salesforce.com, Google, Net Suite and Right Now Technologies are examples of those which have already begun offering products based on cloud computing technology. In order to hold its position as a player in a changing industry Oracle will need to develop products to suit consumers' needs as the environment changes.

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