Enterprise systems management : Software Development Laboratories - Book Report/Review Example

?Oracle History Larry Ellison, Bob Miller, and Ed Oats founded Software Development Laboratories (SDL) in 1977. SDL was founded to implement a commercial version of Relational Database Management System (RDBMS). Inspiration to implement RDBMS system came from the 1970 paper on RDBMS authored by Edgor Codd named “A Relational Data for Large Shared Data Banks”. In 1977 SDL implemented first commercial version of RDBMS for CIA. The code name for the project was Oracle. The unique product that the company offered was increasingly recognized in the market and company changed its name to Oracle Systems Corporation to identify itself with its flagship product Oracle. Oracle decided that it would use SQL to retrieve data from database because founders understood that IBM’s SQL will become a de-facto standard. This was one of the early strategic decisions. So Oracle made sure that commercial RDBMS that was developed was compatible with SQL. This gave Oracle a significant advantage over other service providers in those days. Oracle wanted to exploit then forthcoming world of minicomputers. Oracle realized that minicomputers were relatively cheap and hence there would be a young market minicomputers and hence for its database. Foreseeing this, Oracle had quickly geared up to develop portable RDBMS. This innovation laid the true foundation of this IT giant. In 1979 Oracle got its first customer in the form of Wright-Patterson Air Force Base. Oracle had significant technological advantages over the products that were in use then. This meant that Oracle had no trouble attracting customers to a new technology. IBM at that point of time was trying to market its RDBMS system for Mainframes. This helped Oracle in its marketing efforts as the customers it talked to already had an idea of RDBMS system. The technical advantage coupled with marketing advantage from IBM systems mainframe RDBMS must have helped Oracle to grow as quickly as it did in its initial phase. Oracle’ success story continued as more and more customers opted for Oracle. Meanwhile the focus at oracle had been to help the customers. Oracle continued to develop newer versions of its RBDMS by adding functionalities that focused at helping customers with the ease of use and configuration. Oracle added technical capability to scale up the db access and storage capacity. Oracle also moved in the direction of reporting techniques by developing Interactive Application Facility that helped user format data into more usable reports. By 1982 Oracle had a customer base of 72 customers and estimated revenue of nearly US$2.5 million. Oracle invested nearly one fourth of this revenue in R&D activities. Portability of database systems and consistency of the data were the focus of Oracle strategy then. 1985 saw a shift in Oracle strategy. Oracle shifted its focus to develop capability that empowered client/server mode. This allowed multiple desktop computers to access database server over a network. And this new focus also meant an increasing focus on data security. With this Oracle was leading Client/Server revolution. In 1989 Oracle was preparing for the internet boom. Oracle added the functionality of Online Transaction Processing (OLTP). Internet boom arrived in 90’s and Oracle reached to new levels with this. As Larry Ellison once quoted on the risk they took on the future of internet, “if the internet turns out not to be the future of computing, we’re toast; but if it is, we’re golden.” Understanding the need of the customers Oracle launched its Oracle E-Business Suite-11 that includes software to perform financial- (Oracle Financials), manufacturing-, enterprise resource planning and HR- (Human Resource Management Systems) -related functions (Oracle HR) in the year 2000. Oracle E-Business Suite removes integration expenses and risk from application implementation. This integration suite was a win-win situation for both Oracle and its customers. This was a major advantage for the clients as it saved them on huge IT budgets and helped Oracle sell more applications. This made other competitors move towards offering integrated solutions, making integrated solution an industry standard. Oracle continued to focus on internet technologies even during the downturn in enterprise IT in the year 2000. Oracle delivered some of the major technical breakthroughs that are a standard in the computing world today. These technologies include Oracle Real Application Cluster, Oracle E-Business Suite, Oracle Grid Computing, support for enterprise Linux, and Oracle Fusion. At the beginning of the millennium Oracle acquired its rivals PeopelSoft and Siebel. These were high value acquisitions that helped Oracle strengthen its position as a market leader and offer products in the entire spectrum of internet technologies. Meanwhile the industry was moving towards Java based internet applications. Oracle continued to build next generation applications. Oracle released its Oracle Business Intelligence Suite in 2006. In 2008, Oracle acquired BEA Systems. With this acquisition Oracle aimed at providing top class middleware portfolio. At same time Oracle released it Oracle 11g release of database. This release was focused on delivering many features that were the need of high growth rate and complexity of the internet world. In 2010 Oracle acquired Sun Mircrosystems. This acquisition was strategically important Oracle was a leader in Middleware, Database systems and Sun was leading hardware provider with Sun Servers. This acquisition made Oracle the largest and most complete provider of industry and business application software. This suite of applications includes middle-tier software, Enterprise Resource Planning (ERP), Customer Relationship Management Software (CRM), and Supply Chain Management Software (SCM). Oracle has a strong presence in the services fields. Oracle offers Consulting, Training and Certification, Product Support, and Financing. Oracle’ clients include all the fortune 100 companies. It has touched almost every industry. Oracle can boost about the fact that it has developed and deployed 100 percent internet-enabled enterprise software across its entire product line: database, business applications, application development, and decision support tools. Today Oracle competes for new database licenses on UNIX, Linux, and Windows operating systems primarily against IBM's DB2 and Microsoft SQL Server (which only run on Windows). IBM's DB2 still dominates the mainframe database market. Here is the graphical representation of revenue in second quarter of 2011: Enterprise IT Strategy Dictionary meaning of the word Strategy is ‘an elaborate and systematic plan of action’. In the context of Enterprises Strategy it means general plot to develop when the enterprise meet drastic changes and severe challenges. Enterprise strategy helps align efforts of all the employees of the organization in one direction, i.e. to achieve one single goal. Aligning the goals of all employees in very important in order to achieve best in class output which will eventually make customer happy and customer satisfaction is the key to survival of any business. With the progress and development of economy and society, especially the economic globalization, modern enterprise theory put more emphasis on strategy management. Strategy management is the consequence of the development of society and economy. After so many years’ studies, some school have already formed, such as school of rationing resource, of object strategy, of IT strategy, of nature choosing strategy, logic strategy, of planning and designing, of process strategy, of innovating strategy, of cognizing psychology, and of enterprise culture strategy, etc. Definition of a strategy means defining vision, mission, goals, strategies, tactics, and action plan. It may answer following questions: What are its strengths? How to portray itself against the competition? What are its priorities? Resource based theory is one of the dominant theory of formulating enterprise strategy. This approach attempts to link capabilities of the organization and the external environment that the company operates in. In contrast to the input/output model, resource based model defines that the internal capabilities of the organization are more important to determine the action plan for an organization. Doing SWOT analysis is identified as one of the steps of identifying the internal capabilities of an organization. Another theory talks about the intention of an organization to be the leader in specific domain, i.e. Market Leadership Strategies. Now for an organization that defines its goal as market leadership should focus on developing new products and technologies. The organization should try to define innovative business process. Take for example the case of Microsoft. Microsoft focused on being market leader by defining new business processes. Innovation is very important to gain and maintain leadership. One of the very innovative strategies is Blue Ocean Strategy. This strategy shifts focus of an organization from fighting to gain a share from existing market to create a new market altogether. Such strategies at an organization level can create huge impact on the future of an organization. To summarize a strategic intent is a company's vision of what it wants to achieve in the long term. It must convey a significant stretch for your company, a sense of direction, discovery, and opportunity that can be communicated as worthwhile to all employees. It should not focus so much on today's problems but rather on tomorrow's opportunities Business Model Business model has been defined in many ways in the modern business literature. However common to all the definitions is how a firm makes money; some go beyond this and discuss creating value. A business model tries to identify: What value does the organization bring to the table? What is customer base of the organization? How will the organization profit from offering the specific value? How does the organization plan to compete with others? Innovation is the key while creating or defining a business model for any organization. Take for example eBay or Amazon. These companies lead the way defining innovative business models. They leveraged the arrival of the new technologies and changed the way business was done. ‘Do Some Business Models Perform Better than Others? A Study of the 1000 Largest US Firms’, a white paper written by a group of students at Sloan School of Management concluded that a business model is indeed responsible for the revenues that organization makes. It is also responsible for the valuation that the organization gets. There are different types of Business Models. Utility based business models. A business that is based on a service that the end user can consume may use this type of business model. This model’ focus is on attracting customers to user their services. Manufacturing based business models. A business that produces an end product that consumer utilizes focuses may use manufacturing based business model. This business model tries to address how to manage raw material support, manufacturing processes, labor costs, etc. Commission based business model. This model tries to address how a broker can make money by earning commission on services he offers. Advertising based business model may be helpful if you want generate revenues for both service provider and advertiser. Merchant business model dictates how a merchant can reach sellers to get the goods and takes these goods to buyer to make profits. Subscription based business model talks about getting participants to subscribe to the services offered and make profits based on the volumes of the subscription. Oracle – Enterprise Strategy and Business Model Oracle has evolved over time. When Oracle started it had only one business model. Its enterprise strategy was to gain market leadership by launching first commercial version of RDBMS system. Oracle worked for CIA as a first client. Oracle’s strategy to create a portable version of RDBMS system was successful. Oracles choose C language to develop RDBMS system. This helped Oracle to easily ship its products on any operating system. In order to maintain its market leadership Oracle wrote C-compiler for IBM’s mainframe system. This helped Oracle to ship its products on any IBM Mainframe system consolidating Oracle’s hold on RDBMS market. Here we can understand that though identifying the business opportunity was the key, major growth boosters were the decisions that followed. Take for example making Oracle compatible with SQL, using C-language to implement Oracle. And the opportunities that others missed were capitalized to start a dream story. Once Oracle established itself as a market leader, it shifted its focus to its customers. Oracle continued to work on its RDBMS system to release next versions packed with new features. Every version intended to add capability that will help its customers to scale up their operations and build on top of the existing infrastructure. Oracle also focused on ensuring safe and secure ways to upgrade helping existing customers. To put it in the words of Oracle the strategy around 80’s was to, “sim­plify data management, build solutions for emerging com­puting platforms, and increase system interoperability so that data could be synchronized or migrated.” By the end of the 80’, Oracle’s busi­ness strategy and innovation transformed a startup company of 35 employees into a global, publicly traded powerhouse with more than US$500 million in revenue Oracle saw a great potential in the world of internet. And Oracle shifted its strategy to develop computational capabilities that will help Oracle’ customers access databases over the internet. This strategy was implemented by heavy investment into the research and development. Success of internet proved their strategy right. With time Oracle shifted its strategy to not only building on its existing capabilities but also on delivering intelligent information to database users by adding business intelligence capabilities. As a famous quote by Oracle’s CEO Larry Ellison goes, “A single unified process automation database with integrated daily business intelligence moves the company out of the dark and into the information age.” Oracle quotes its strategy as, “We believe that information matters. We believe that information is power. We believe in doing everything that we can to help our customers lower their costs, get information on demand, and make the best decisions, so they can compete and win.” With this strategy, Oracle has changed the definition of the database. Now database is not just a place to store data but to retrieve data intelligently to help the customers understand it. In current scenario customers use technology, applications, and services to build applications that help them retain the value of existing investments, stay competitive in existing economic scenario, 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 3, 20,000 customers and supports these companies in more than 145 companies. Oracle strategy now is to focus on reducing TCO, total cost of ownership, and increasing ROI, return on investment. With such a strong presence in the database market and having build huge research and development capabilities Oracle focused on acquiring companies and products that enabled Oracle to offer a complete stack of products. Like the acquisition of SUN Microsystems has helped Oracle establish a leadership role in hardware business. Strategy Recommendations Oracle has comprehensive product portfolio under its belt. Oracle is market leader in Database and Hardware. It should focus on becoming the market leader in middleware and applications. This strategic goal can be achieved in many ways. Apart from focusing on developing on the base it has, Oracle can focus on acquiring on companies that have a promise to be the market leaders as Oracle has strong cash inflows. Acquisitions should also focus on gaining competitive advantage. This is easier said than done. Today there are around 50,000 companies in United States alone with combined annual revenue of $180 billion. Key factors that can help a company in IT industry succeed are technical expertise and ability to market itself. It is important to identify the competitors. In the case of Oracle main competitors are Microsoft, IBM and Apple. Company Market Capitalization (in billion $) Microsoft 143.58 IBM 123.47 Oracle 123.47 Apple 79.54 With this kind of competition Oracle needs to focus on its core strength of customer focused research. Identifying new business needs will also be a key factor. Today there are 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. Oracle needs to capitalize on these opportunities. Enterprise software market is expected to grow significantly in coming years. Some of the future trends include: Software as a service (SaaS) Cloud computing Open Source Oracle needs to capitalize on these upcoming trends by defining the way business is done these segments. Oracle has a strategic advantage because of its strengths that include its current market share, its R&D capabilities, and its marketing and sales capability. Oracle should continue to focus on its coherent brand strategy. The focus on IT to business value and business alignment should appeal to the top management of the companies. It should continue to support its customers by a comprehensive support strategy. Oracle must come up with innovative integrated product rather than forcing customers to upgrade to multiple versions. It must focus on developing technical capabilities to exploit ever changing field of technology. It should focus on leveraging the strength of its relational database management system. One of flaws in the Oracle’s strategy till now that I see is the release of multiple versions of the database (8i, 9i, 11i, etc). From customer point of view this is annoying as it forces customers to spend extra money and time on upgrading. A significant trend in the software and computer industries has been a shift towards cloud computing. Under this model everything that the 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. In this model businesses are able to save on many costs. Though it is difficult for company like Oracle to shift completely towards cloud computing, developing in house clouds that can then be used to service the clients can be a solution. References: Oracle. Available: http://www.oracle.com. Last accessed 14 March, 2011. ‘Do Some Business Models Perform Better than Others? A Study of the 1000 Largest US Firms’. Authors: Peter Weill, Thomas W. Malone, Victoria T. D’Urso, George Herman, Stephani e Woerner. Sloan School of Management, Massachusetts Institute of Technology. Oracle Press Release on Oracle completing 3o years. Available: http://www.oracle.com. Last accessed 14 March, 2011. ORACLE, THE INFORMATION COMPANY, Oracle internal paper on Oracle business strategy. Available: http://www.oracle.com. Last accessed March 14, 2011. Oracle Corporation, Wikipedia. Available at: http://en.wikipedia.org/wiki/Oracle_Corporation. Last accessed March 14, 2011. Oracle financial results. Available at: http://www.oracle.com/us/corporate/investor-relations. Last accessed 14 March 2011. Read More