Changing the Game by Simplifying IT
Innovation is a two-edged sword. CIOs are chartered with increasing automation and supporting new business ventures, yet each new project introduces another layer of complexity. Over time, these successive layers inhibit progress and stifle the IT group’s ability to move the enterprise forward. The more complex the IT environment becomes, the less room there is for innovation.
According to Gartner, in 2012, the average organization will spend 63 percent of their IT resources to run the business, 21 percent to grow the business, and 16 percent to transform the business.1
Sonny Singh, senior vice president of the Oracle Industries business unit, believes the answer is to rethink the fundamental building blocks of IT. For the last several decades, companies have been buying different components of the technology stack from different vendors, assembling the pieces into custom systems, and hiring specialized IT staff to maintain the resulting hardware and software infrastructure. These custom systems lead to fragmented environments—commonly called application silos—that are difficult to synchronize, let alone keep running smoothly.
By tackling complexity and simplifying IT, CIOs buy more time and resources to create value for the business. Even a modest shift in IT spending toward growing or transforming the business can help. Unfortunately, according to a recent article in MIT Technology Review, 70 to 90 percent of today’s companies aren’t even close to leveraging IT in this way.2
Oracle’s strategy for simplifying IT is based on three fundamental tenets:
Lojas Renner, the second-largest department store chain in Brazil, is seizing the opportunity to meet escalating demand for consumer goods among Brazil’s growing middle class. It’s been a huge challenge for the IT team, which must accommodate steady growth from 134 stores to 254 stores over a four-year period. Eyeing the road ahead, Leandro Balbinot, CIO at Lojas Renner, realized that his firm would never achieve profitable growth by relying on the company’s existing IT systems. Lojas Renner had amassed a huge volume of retail data and its outmoded IT architecture couldn’t keep up. In addition, managers weren’t able to use the data to plan for demand at the individual store level. Inventory costs escalated because they couldn’t always tell which stores sold more SKUs in one category and which sold more in another.
That’s when Balbinot and his team turned to Oracle for help. After careful deliberation, they chose Oracle’s suite of retail and enterprise applications, delivered as a service through Oracle On Demand. He believed this SaaS strategy would allow Balbinot’s IT team to focus on growing the business rather than on maintaining and upgrading their internal systems, applications, and processes. In addition, utilizing on-demand applications would accelerate the process of deploying information systems at new stores.
He was right: relying on this cloud solution has had the desired effect of increasing innovation while reducing complexity. With integrated demand planning, replenishment, merchandise planning, pricing and promotions capabilities, management can create a single forecast for the entire enterprise. In addition, the merchandise staff can measure customer behavior and modify product offerings based on local tastes. Lojas Renner has been able to accurately meet market demand and reduce markdowns by as much as 20 percent. This, in turn, has lowered inventory costs and enabled buyers to focus on the right products for each store. The Oracle Retail applications helped Lojas Renner increase gross margins by two percent in one year and achieve profitable growth.
Such stories are quickly becoming the rule rather than the exception. With Oracle On Demand and Oracle Cloud applications, customers don’t have to buy the hardware and other physical infrastructure to support these applications, or hire a team of IT experts to keep complex systems online. They simply purchase applications on a subscription basis, often via a month-to-month arrangement. And because Oracle controls the underlying infrastructure, CIOs can avoid the massive capital investments typically associated with installing and maintaining new business systems.
Oracle is simplifying IT not only with its many on-demand and cloud-based applications, but also by engineering hardware and software to work together, upending the longstanding industry practice of cobbling together information systems from different components. As the infrastructure vendor, Oracle supplies not only the application software, but also the hardware, database and middleware technology to power these complete solutions. Oracle also has comprehensive solutions for cloud security, integration and management to enable customers to plan, deploy and manage their own private clouds. Because Oracle owns all elements of the hardware and software stack that powers the cloud, customers can easily scale their information systems. The provisioning and load balancing processes dynamically adjust computing capacity based on current and anticipated usage.
The beauty of these services can be summed up in a word: simplicity. With Oracle’s wide array of cloud services, deployment models, and engineered systems, CIOs can ramp up quickly with less risk, so they can meet their business goals without embarking on a major IT project.
“From software to hardware and applications to disk, there’s a synergy that starts in the engineering process,” Singh explains. “It’s the understanding that the whole is greater than the sum of the parts, and it’s the idea behind Oracle’s integrated technology stack—hardware and software engineered to work together in a way that’s never been done before.”
Managing complex IT environments consumes resources that could otherwise be used to move the business forward. The more complex the IT environment is, the less room there is for innovation—and the harder it is to achieve the agility necessary to respond to a dynamic business environment. In many cases, reversing this trend and reducing overall costs is a three step process:
Standardize – By limiting the number of hardware platforms, software configurations, and IT services your business supports, you can reduce the amount of time and money required to procure, provision, and install different IT resources and you can eliminate the complexity of maintaining heterogeneous systems. Standardizing on a common set of building blocks lets your IT organization rapidly deploy predefined configurations. Instead of hiring people with knowledge of a specific computing or storage platform, you can build a workforce with common, interchangeable skills—a workforce that can deliver effective and cost-efficient IT services.
Consolidate – For many organizations, consolidation is the first step on the path to cloud computing. New hardware technologies and Engineered Systems offer more computing power in less space, making it possible to reduce the server and storage footprint without adversely affecting performance. You can consolidate operating systems, databases, and applications to simplify overall manageability. You can even consolidate different types of workloads onto a single server. The improved operational efficiency you get from consolidating components in your data center helps you eliminate duplication and streamline resource management—resulting in significant cost savings. Engineered systems offer a foundation for resource sharing and an ideal platform for virtualization.
Enable “Shared IT”– Any time you have a server dedicated to a single operating system and application, you inevitably end up with an under-utilized asset. With Oracle virtualization and clustering technologies, IT organizations can pool hardware and software into shared resources that can be allocated as needed to balance supply and demand and to maximize the utilization of resources. Replacing the physical silos in your data center with shared virtual resources means you can easily add computing, storage, and networking capacity—instead of extra hardware—when workloads change. This is a natural foundation for a private cloud, and less hardware means less data center space and less energy used.
By engineering every layer of the stack, Oracle enables extreme integration across different dimensions.
Oracle provides a complete technology stack in which hardware and software are engineered to work together -- from applications through middleware and databases, and all the way down into servers and storage.
1“IT Metrics: IT Spending and Staffing Report, 2012,” January 2012.
2“Using IT to Drive Innovation,” Erik Brynjolfsson, MIT Technology Review, 2011