Oracle’s supply chain conference, Modern Supply Chain Experience, took place last week in San Jose, California. The overarching theme this year, as it was last year, involved the advantages of Cloud solutions. Oracle is committed to the Cloud for all their applications, the acquisition of NetSuite further demonstrates that, but in this case their focus was on the advantages of Cloud in their supply chain applications.
Not all of their customers sounded quite so bullish about wanting to move quickly to Cloud-based supply chain applications. Nevertheless, top executives kept repeating “it is not a question of if customers will want Cloud solutions, it is a question of when.”
The total cost of ownership for Cloud applications is much better. Cognizant has been implementing the Human Capital Management (HCM) Cloud, one of the earliest Oracle Cloud solutions, for some time. The Cognizant executives I talked to estimated Cloud HCM went in 50 percent faster than the traditional solution. And upgrades are almost a nonevent.
Cognizant is a partner that is committed to Cloud, but Oracle executives will privately admit that not all are. One top executive pointed out that the traditional implementation model which involved customizing the base code, creates an annuity for system integrators that they hate to give up. But their leading partners are getting innovative, they are spreading the implementation and maintenance fee payments for their customers out over five years and creating industry specific templates that further speed the implementation cycle.
Safra Catz, the spirited and energetic CEO of Oracle, spoke to a small group of industry analysts. She made the point that Oracle despite public criticism is not late to the Cloud, but late to the word “Cloud.” Larry Ellison, the cofounder of Oracle, “dragged the company here.” The rewriting of the platform took 14 years because when they acquired other software companies, they did not allow any reuse of code. Developers needed to learn the new tool set and rewrite the code in a format now understood to be critical for Cloud applications. In Larry, “we have a 71 year old billionaire that is still actively involved in development because all the pieces are coming together.”
To make the switch to Cloud Oracle, internal culture changes also had to be made. Ms. Katz pointed out that when you were negotiating large multimillion dollar software license deals, six month negotiations were not that unusual. But you “can’t negotiate six months when an implementation takes three months.” Today pricing and quoting all the way out to commissioning the software often occurs without a human touching the order. This creates a lower cost of sales that allows them to sell to better service smaller customers.
A Vice President with supply chain product management responsibilities reinforced that point in a private conversation. Oracle’s Transportation Management (OTM) has been available as a Cloud option for a couple of years. Today, almost 90 percent of net new transportation management deals are Cloud. A few years ago the average TMS customer had a freight spend greater than $100 million. Today it is less than $30 million. This has also contributed to very fast growth in the Asia Pacific and Latin America regions. And in TMS, the switch to selling lower cost TMS solutions has not led to a hit in revenues because they are selling over twice as many solutions as they used to.
Other internal changes at Oracle have included creating customer and implementation success managers. The sales force is incentivized for Cloud sales more than on premise. They have educated the sales force that a sale can no longer be a “hit and run,” but rather the salesperson will need to stay engaged with the customer, make sure they get value from the solution, and only then be in a position where they can help guide customers to other Cloud applications that can help provide value. Early adopter’s implementations are being closely monitored’ Oracle is staying involved in those projects even when a systems integration partner is doing the implementation.
Oracle is also implementing their supply chain Cloud solutions internally. The push to providing Cloud solutions for customers is changing their internal supply chain because Oracle hosts these solutions in their own data centers. They hope to have completed the implementation by the end of the year.
While this article has focused on the main theme of the conference, the company continued to role out products with a dramatically improved user experience, products that better support core supply chain processes like S&OP, announced new Internet of Things (IoT) products, and put forth a roadmap for exciting new supply chain AI applications.