Oracle Corp.'s president says a far-reaching agreement with Ford Motor Co. announced last week also signals a radical new direction for Oracle's relations with financial companies.
In the deal with Ford, pending signing of a definitive agreement, Oracle would be powering an extensive network processing $80 billion annually of the automaker's transactions with 30,000 suppliers.
But president and chief operating officer Raymond J. Lane said the theory behind the so-called AutoXchange, described as the world's largest business-to-business electronic network, applies to "any industry with a supply chain," and financial services is one.
He said Oracle, breaking free of its typecasting as a data base provider, is deep in discussions to enable financial companies to "go to the head of a supply chain" as Ford is doing. Improvements in business processes, pricing, and payment systems could be worth billions of dollars a year. He said Ford's idea, if spun out, could be "a $30 billion IPO with $1 billion in annual sales."
Oracle, No. 2 to Microsoft among independent software companies, with $10 billion of revenue, offers to be the networking or services "backbone" for any "company at the head of a supply chain that wants to own it" and not squander the financial rewards, Mr. Lane said in an interview.
Oracle offers literally to be its customer's partner. Ford would own a majority of their joint venture. "Some will want less than 50% ownership to get it off their balance sheets, and we think financial institutions are in this category," said Mr. Lane, second in command to chairman Lawrence J. Ellison.
The Ford announcement Nov. 2 was "a shot heard 'round the world," Mr. Lane said, because it underlined "what we already knew internally" about Oracle's Internet -- not just data base -- prowess.
It "lays out for the world that Oracle can provide the data bases, the applications, and the services to enable industrial-strength Internet backbones for the Internet economy," Mr. Lane said.
Though 93% of public "dot-com" companies use Oracle data base technology, he said, Ford is its first significant inroad in providing Internet solutions for traditional large-corporate infrastructures.
Mark Murphy, a research analyst at First Albany Corp. in New York, said a "psychological" shift has taken place.
He said the deal with Ford brings credibility and "a new dimension to what Oracle is and could become." It is "making a long-term bet on the Internet."
Oracle said it wants to help financial institutions offer business-to-business procurement services to their corporate clients. Mr. Lane described this as global procurement "on the Internet via our exchange, running auctions and reverse auctions and adjudicating payment."
An electronic bill presentment and payment capability introduced last year -- on which, Mr. Lane, said, Oracle has booked revenues -- would be part of the mix.
Mr. Lane, a former Booz-Allen consultant, said that the Internet will let companies finally accomplish the reengineering goals they have found so elusive for 20 years.
Tasks that proved impossible in the past generation of distributed computing would be transformed by the network or Internet computing vision championed by Oracle and Sun Microsystems Inc., among others.
"Distributed information is a good thing, distributed computing is a bad thing," Mr. Lane said, citing the impossibility of knowing such things as "how much did I sell today."
He advised chief executive officers to "get more tactical, not strategic." The Internet has the potential to improve business processes by an order of magnitude, he said, but CEOs have to be involved. "They are the only ones, by definition, with no bias," he said.
He said Mr. Ellison made an internal reengineering his top priority and Oracle is about halfway through an 18-month effort to wring $1 billion out of operating costs. "We're fortunate we have a CEO who wants to spend his time understanding how to do this."