Oracle is nearing completion of a six-year project of moving its internal legacy applications to Oracle ERP Cloud...
and its other SaaS enterprise platforms. The Oracle cloud migration has coincided with the vendor's transition to being a cloud provider, but has also been essential in enabling it, according to Group Vice President Paolo Juvara.
"The initial charter was on the billing system," Juvara said. "We moved from a model where everything was sold on a perpetual licenses basis to a model where we were selling on a subscription basis with a recurring revenue stream, plus a number of additional services."
Not surprisingly, the saga mirrors many customers' Oracle cloud migration stories in its pacing and major plot developments. For example, hybrid cloud ERP has been an important bridge, along with the cloud-to-on-premises integration challenges it entails.
The Oracle cloud migration has involved gradually moving business processes, starting with smaller tactical moves of financial reporting, talent management and marketing in 2012 through 2014 -- "things that surrounded our E-Business Suite on-premises infrastructure" Juvara said. And it has moved onto shifting more foundational systems: core HR and ERP, first to Oracle HCM Cloud in mid-2016, then Oracle ERP Cloud January 2018.
"At the moment, everything is running in the cloud, with a few exceptions," namely accounts receivable, order management and analytics, Juvara said.
The Oracle cloud migration has had a strong champion in CEO Safra Catz. "She clearly recognized ... and was very clear with her entire organization that, given the volumes we would be facing in the cloud, there was no way that we could continue to operate with our existing processes, and no matter how uncomfortable that change was, [it] was inevitable for the success of the company," Juvara said.
Mark Hurd, Oracle's other CEO, seems happy with how it is turning out. "Migrating Oracle's business to cloud has delivered profound results," Hurd said in response to emailed questions. "We run our business faster and more efficiently -- and it costs less to do so and enables us to take advantage of ongoing applications innovation. That's not just the promise of cloud, it's the reality."
Oracle cloud migration managed on two fronts
The group that Juvara leads, Oracle Applications Labs, has the dual mission of developing applications that take advantage of emerging technologies and implementing and operating the software that Oracle uses internally. It has been leading Oracle's digital transformation since the late 1990s, he said, when the vendor consolidated all of its systems on a single global instance of E-Business Suite (EBS). In that time, the labs have also managed system integrations for Oracle's 150-plus acquisitions.
Around 80% of the roughly 1,500 lab employees handle standard IT functions, such as custom development and traditional implementations, while 20% focus on development, according to Juvara, who arrived in late 2012.
The labs make a point of giving Oracle the exact versions of the SaaS applications that customers get. "We want to use our own experience to ... validate that the products are functional and scalable and do meet the needs of an organization with the complexity of Oracle," Juvara said. "Of course, also we want to use the Oracle use case to test new technologies [and] new ways of doing things."
He gave as an example an expense-reporting app that employs a chatbot. Oracle CTO Larry Ellison showed it at the recent OpenWorld conference in a tongue-in-cheek demo of his submission of a $418.18 dinner for two at a Silicon Valley restaurant that he owns. "That was a result of some of the things that we have been doing within my organization, and there are many other examples in machine learning and other areas," Juvara said.
Most of the output of the innovation side of Oracle Applications Labs consists of extensions that run on the vendor's platform as a service. Juvara said staff employs the PaaS to develop and test new, custom Adaptive Intelligent Applications, the machine-learning-based apps Oracle has released in the past two years to automate specific business processes on the enterprise SaaS applications.
"We are developing algorithms and validating that those algorithms are delivering the business value that we are expecting," he said. A separate Adaptive Intelligent Applications team turns them into packaged products. "When [a packaged app] becomes available, we throw away our custom extension and we replace it with what is available out of the box. In a way, we are not doing anything that our customers will not be able to do themselves."
Ye olden days of cloud
It is hard to remember now, when the vendor's marketing seems all-cloud, all the time, but Juvara arrived when Oracle cloud migration was not a given. "In 2012, we had not yet come to the conclusion that we needed to move all of our systems into the cloud," he said.
Having kicked off SaaS Fusion accounting when two more SaaS applications, Taleo Recruiting and Eloqua marketing automation -- both from acquired vendors -- were deployed in the ensuing two years, Oracle was betting big on the same hybrid model many customers were implementing at the time. But by late 2014 and 2015, "we came to the conclusion that we needed to move everything to cloud," Juvara said.
Paolo Juvaragroup vice president, Oracle Applications Labs
"We started this journey thinking, perhaps a bit naively, that selling services to the cloud, at least from a system perspective, was primarily around supporting a new model of revenue recognition." So the labs built a custom subscription-management SaaS application that integrated with order management and accounts receivable in EBS. The packaged version for Oracle ERP Cloud came out at the 2013 OpenWorld, he said.
It turned out to be just the first layer of the onion. Besides needing accounting systems that could handle the shift from selling long-term licenses for on-premises software to monthly or annual SaaS subscriptions, Oracle had to learn to serve cloud customers, who tend to want more standardized offerings and pricing and rapid turnaround of orders. Oracle's software marketing and contracting processes would also need overhauling.
The service- and sales-quoting process became the next priority. At first, the labs considered updating them on EBS. One possible model is the EBS Service Contracts module the Oracle support business used to manage its annual subscriptions.
"We discovered very quickly that the nature of the business is actually entirely different," Juvara said. "The support model is entirely around predictability and consistency. A very high percentage of our support contracts get renewed year after year as is. In the cloud business, we have a lot of variances. It's a lot more dynamic."
The custom on-premises EBS software was too slow, labor-intensive and fragmented, anyway. Rewriting it in SaaS looked to Juvara like a major opportunity to streamline. So, starting in 2015, the labs developed software released to customers the following year as Oracle CPQ Cloud. With the old system, sales reps could handle 9% of the quotes themselves, and the rest required assistance from the back office. With the SaaS application, "currently 95% of our quotes are generated by the sales reps," Juvara said.
CPQ Cloud generates the offer document and pushes it to the customer, who then approves it on a web portal. "Once the customer approves it, the order is automatically booked, and nobody needs to inspect it, touch it or review it," Juvara said. "We have dramatically improved the deal velocity for our cloud business as a result of that."
Oracle cloud migration faced the usual challenges
The challenges of moving so much of the business to SaaS will sound familiar.
Integration is a major one because the shift to hybrid cloud brought new complexities, Juvara said. "Everything was in a single system globally, all lines of business, everything was on an E-Business Suite. We certainly had a few B2B integrations with our supply chain customers, but we didn't really have a lot of application-to-application integration."
Once everything is in the cloud, the integration picture "will be the same as before," he said. "But in between, throughout this transformation, we had to build a lot of integrations between systems."
The SaaS accounting app needed to tie back to the EBS general ledger. Moreover, financial information about employees -- for calculating cost centers, for example -- remained in EBS while the operational aspect of managing employees was now in Oracle HCM Cloud. And CPQ Cloud needed to talk to EBS order management.
"We weren't used to that," Juvara said. "That was a challenge for us because we had to learn how to operate these integrations. We had to learn a lot of best practices [for] monitoring that we didn't have before. Every integration is a potential point of failure, so you need to manage them in a different way, from an operational standpoint."
Change management was another challenge, as the Oracle cloud migration brought cultural resistance from people reluctant to let go of systems that for years had made them successful in their jobs, according to Juvara. "It was difficult for people to let go of the systems [in both] the IT organization and the various lines of business. There was a need to recognize that business processes needed to change [and] needed to be simplified. There was a lot of pushing from my side in terms of trying to convince both my organization and different lines of business that these things were absolutely necessary."
Meanwhile, the nature and culture of the entire company had to change. For one thing, a company that historically relied on a strong field organization needed to staff Oracle Digital, a new inside-sales organization that works remotely on deals that require faster execution.
Oracle is also undergoing the same massive generational shift as its customers, partly because of a concerted effort to hire people straight out of college. "Today, I think 40% of our employees are millennials, so they have very, very different expectations," Juvara said. It means Oracle Applications Labs has had to turn in-house systems for transactions and recordkeeping into vehicles for communicating with employees. Updates of recruiting, onboarding, training, expense reporting and procurement systems were part of it. "Everything needed to change to be easier, faster and project an image of modernity and progressive thinking."
Final steps in a business transformation
Developing SaaS versions of the EBS order management and accounts receivable modules are the missing components next on Juvara's list. But a big one yet to move to the cloud is Oracle's global business intelligence infrastructure.
"As we moved the transactional system to cloud, we have made the conscious decision to try to leave the analytics as stable as possible, so we have integrated from cloud into our legacy on-premises warehouse," Juvara said. "But we also want to move that to cloud," and to a data warehouse built on the new Oracle Autonomous Database, taking advantage of the new technology to rebuild and redesign all of Oracle analytics.
"With the cloud products like ERP Cloud [and] HCM Cloud, there is embedded analytics -- the Oracle Transactional Business Intelligence -- but there is always a need for more sophisticated analysis -- period over period, blending of data across multiple systems or multiple business functions -- for which there is still a need of a warehouse," Juvara said. "That is another big piece that we are working on."