ORACLE’S GURU ON WHY THE BACK OFFICE IS NOW THE NEW FRONT OFFICE
The biggest challenge businesses face now is staying relevant. The world is changing faster than ever before and computer technology and Internet have been the key drivers behind this rapid change. It is only now in the human history we are hearing of taxi companies owning no cars, retailers owning no inventories and world’s most popular media company creating no content. These are a new breed of enterprises that thrive in a new business reality, propelled by digital transformation. Mirror Business, which attended Oracle Openworld 2019, in Singapore recently, caught up with Oracle Asia Pacific Saas Leader – Office of Finance, Operations and Digital Supply Chain Guruprasad Gaonkar to find out why business organisations need to embrace digital transformation and how to get the formula right. Based in Singapore, Guru is responsible for Oracle’s digital transformation orchestration across industries for the Office of Finance (CFO), Operations (COO), Information Technology (CIO) and Digital Supply Chain. In this role, he heads the ERP and Digital Supply Chain teams for Asia Pacific markets, namely Australia, New Zealand, Southeast Asia and India. In two years from now, Guru believes that a big differentiator separating highly successful CXOS from others will be the ability to operationalise and execute the company strategy based on data-driven insights. He is also passionate about identifying and sharing trends in all areas of Digital Finance, Operations and Supply Chain. Guru and his team work with CFOS, COOS and business leaders to deliver transformative approaches that enable organisations to transform and modernise their enterprise. Here are excerpts from the interview.
First of all, could you elaborate a little bit on how Oracle is different from other computer technology vendors out there?
Oracle is a quite a well-known brand in terms of what we offer across the board. Specially in the application space, we have realised that there is huge opportunity for us to lead and define the market. That is why Oracle switched completely to cloud.
If you compare us to many other vendors out there, we do not go and tell the customers that we can offer the same software on prem or put it on cloud or put it as a Saas. We are saying that there is only one model—the Saas model— from an application’s perspective. So we have only plan A and the reason is we believe that is what the market needs.
What is Oracle’s strategy to deliver this model to its customers?
Well, there are three things. Number one is standardisation. All those capabilities that people need, irrespective of the line of business they are in, can be standardised. If 10 people are using it and 10,000 people are consuming it, then that can be standardised.
Second, when you standardise something, how do you industrialise this—meaning how we can let people subscribe to the same service? Of course Saas has become an adoption model for that. These two are pretty much in our control, which is basically how we produce our software and how we distribute it.
The third aspect is what we call driving adoption. How do we get industries and businesses to continuously adopt new capabilities? This is where things could get tricky. Everyone is now talking about Machine Learning and Artificial Intelligence, Blockchain, etc. We think this is like the fashion industry. If you don’t talk about it, then you are no longer relevant.
So, how do we get into fashion? First, it was important to have some space, which is very unique to us. If we went with just a tool set, then we would have been compared to any other vendor out there. If we went with just platforms, then again we would be compared with similar vendors.
Our unique proposition is not just tools and platforms but we embed or natively built applications using these technologies. When we look at our HR capabilities or our financial capabilities, they are natively built on Machine Learning or Artificial Intelligence. This is how we are driving adoption. This is the Oracle strategy in a nutshell.
OK. But what does this mean to the market?
We actually see huge traction for what we have to offer to the market, specially with the digital natives because it is no brainer for them. If you talk about Grab in Singapore or Myntra in India, it was a no brainer for them because their native model is cloud. When it comes to back office functions, such as HR, finance and procurement management, they actually look for something standardised so they could subscribe to them.
So, for them too it is a no brainer. Then we looked at industries, which were heavily disrupted by digital transformation, like the telcos and financial services and retail companies. These are sectors, which are heavily disrupted by digital transformation so they need to change their models to adopt. So, for them to look at us, again it is a no brainer.
We also saw that—specially if you are an organisation and you take advice from Deloittes of the world or KPMGS of the world—guess on what do they run their own finances. It is Oracle. So, we have seen significant traction starting with natives and now it is transforming to every other industry that we can think of adopting Saas.
The way we are going next in terms of our strategy is, if you look at PNL, we have a huge installed base coming from our last 40 to 45 years of operations. We have realised that we are collecting a lot of support dollars from these organisations.
One of the primary responsibilities was how do we convert this installed base to Saas. This is where we launched this programme called ‘Soar’. This is where we put a programme together to help these customers to make decisions in terms of business case and as well as to de-risk the journey. We started this last year and we are seeing a phenomenal success rate.
What key challenges do organisations face when they embark on this digital transformation journey you are talking about?
There are a few interesting points I should mention here. We actually don’t get anyone now asking ‘why cloud’. The most frequent question we are getting now is ‘when cloud’. The way we visualise this transformation is with the help of what we call internal and external clocks.
The internal clock is your own ability to change your organisation and external clocks is how much you are pushed to change your organisation. We have these organisations, which are very high on the internal clock and probably pretty low on the external clock. We see these organisations trying to innovate on the edges.
There is this Vietnamese logistics company, which is one the fastest growing in that country. They said let’s look at Internet of things as a way for them to drive the logistics business. That is innovating on the edges. Then we have certain customers who are high on both clocks. They are actually looking for transformation.
Getting back to your questions, what challenges we see – it is all about how these businesses go about this transformation. Whether do they want to do it on the edge or they want to do the full transformation.
What is there for small and mediumsized companies in emerging markets to undertake this digital transformation?
The best thing we have seen in the emerging markets is that businesses in these markets don’t need to go with legacy. If you talk about the organisations in Singapore, they have to let go legacy and move to something new. The number one is, the business case needs to fit in.
The second is the risks need to be covered because they are moving form old to new. In emerging markets, we don’t see this challenge because number one there is no risk. But of course the challenge remains on the business case.
Now with Saas, that business case is solved because the point of entry for you is based on how much you want to subscribe to. Usually how much you want to subscribe to is a percentage of what you’d make as a business model. I would say it has accelerated them to making decisions rather than stop them from making decisions.
In Sri Lanka, apart from banks and financial institutions, what are the other organisations and industries utilising Saas and other Oracle applications to transform business?
Let’s talk about Virtusa, which is a global brand Sri Lanka has created in the professional services industry. If you look at the professional services business, what’s the product? It’s the people. Virtusa actually saw that this business model is going to change. They understood that they need to shift from just professional services to product-tied services, which means to get into high margin business from low margin business.
When they shift their fundamental business model, which is exactly what we did, going from capex to opex, finance and HR became the new front office for the board in terms of how you look at strategy, how you look at revenue realisation and how you really build your business model. This is where Virtusa looked to us to help them build this capability, to standardise back office and how to run their finance and HR functions.
Why is this emphasis on HR and finance?
If you go by pure operational view, it is probably the most boring part of the discussion. The only relation between HR and finance is payroll. But if you are changing your business model—we changed our business model and therefore, let’s take our organisation as an example.
We changed our business model from selling software in a way to actually being a services company, which means that how we hire people and how we translate that strategy to that person we hire, become very critical. Of course, the board decides the strategy but how does that strategy translate into operational execution?
According to our analysis, 47 percent of your operational expenses are people. So, when you look at that and when you see the relation between HR and finance functions, you need to make that 47 percent effective. So, that’s the ethos behind bringing finance and HR together. That is the primary linkage.
Do you mean to say back office functions such as HR and finance are now coming into the forefront, defining businesses how they operate?
Well, I live in a space of HR, finance and supply chain. The word that is used to describe this in the past is back office. I’ve just looked around and thought who is the CEO of our company? Safra Catz. What did she do in the past? She was the CFO. OK interesting.
Then I looked at some of the other companies out there and their leaders. Most of them were CFOS in the past. Then I was thinking weren’t they leading back office functions? The world is moving towards a situation where back office is the new front office of the board, which means that these are the people who are actually leading the businesses while they actually come from back office functions. This is where the world and businesses are moving.
We frequently see despite the initial excitement, the digital transformation journey of many organisations slows down halfway. Why is that?
When you are talking about digital transformation, you are talking about more like a start-up mode because within the organisation you are the one who is going to disrupt the company. So, how do you actually survive and how do you become attractive to investors internally is by delivering success. This is where we have stepped up our efforts in delivering that success.
The way we’ve seen digital transformation translating into success for our customers is helping our stakeholders in finance, procurement and HR by going live as early as 20 weeks. So, they can show success coming out from this initiative. We have in fact banned the word transformation; we actually call it upgrade.
It’s like you are being upgraded from Economy to Business Class and then from Business Class to First Class. Getting back to your question, we’ve seen that wherever people have put in a four or five-year transformational project, it is slowing down because they are not seeing success in the first year. That fundamentally has been the problem.
How do you see world and businesses transforming with Machine Learning and Artificial Intelligence?
If you look at finance as a function, the head count structure will come down at least by 50 percent. If you put finance functions in a pyramid, there are a lot of people doing transactions. But when there is Machine Learning and Artificial Intelligence, why do you need people to settle payroll and payments? This is called lights out finance.
You don’t need people anymore. Second is when we talk about what is the role of CFO is going to be if Artificial Intelligence and Machine Learning are going to do many of these jobs. We believe that CFO is going to play the role of strategic advisor and enabler. If you look at the role of CIO, we believe that they will still be called CIOS but not as chief information officer but as chief innovation officer.
We do not see any role that will exist, which has anything to do with automation or business processing. We see most of these roles being taken over by software. That’s how we see the world.
With all this happening, cyber security stands paramount. What is Oracle’s take on this?
Let’s look at this way. Do you live in a gated community or live by yourself? Do you think you have better access to security features living by yourself or in a gated community? Obviously, a gated community, right? So, we represent that gated community. Because we have many customers who’d be able access to the same security instead of they trying to do it themselves.
The fact that these many customers rely on us and have access to our security features we have more capacity in terms of funding to give them those capabilities. Yes, we take cyber security very seriously because that is going to be the core of how we operate our business and because we are the only company in applications, coming from a background of database, infrastructure and cloud, who is uniquely positioned to bring the security right from the database level to an infrastructure level and then to an application level.
Every other company out there in the applications space has come from applications to cloud. But we have come from databases to applications. That is where I think we are uniquely placed having understood every aspect of security than any other organisation.