The e-business transformation: FROM CFO TO CEO, FINANCE IN AN INTERNET ECONOMY.

The internet. It's the largest, most powerful and most accessible communications network on the planet. A tool so important in today's ultrasophisticated business environment that corporate leaders are harnessing its global reach and power to alter the technology, processes - even the very structure and culture - of their organizations. In other words, they're making the e-business transformation.

Sun Microsystems, a leading manufacturer of internet hardware and software development tools, is a case in point. Sun, an $11.5 billion company with offices in 150 countries, is using a full spectrum of internet opportunities to eclipse expenses, power up its strategic planning initiatives and heat up overall profitability.

You won't find a dot.corn in their name, but it's in their vision, "to dot.com the world," which includes transforming themselves into an e-business. According to Andy Laverty, a director of Sun's operations in the Americas and the man in charge of Sun's financials, dot.comming their own internal finance and accounting processes has already meant millions of dollars to the company's bottom line. These benefits have come in the form of 30% savings on accounting transaction costs, 75% on travel and expense processing costs and some $50 million in additional savings through internet-based procurement.

Transforming into an e-business means more than consumer-based buying and selling on the internet. "E-commerce as we know it is small potatoes when compared with how much businesses will electronically trade with each other," says Jeff Henley, executive vice president and CFO at Oracle. "Business-to-business e-commerce in the U.S. alone is estimated to exceed $1 trillion in 2003. That's ten times larger than business-to-consumer e-commerce. When companies transform into e-businesses, their strategic partners will have to be online, too. Large companies and entire industries will form electronic business communities. If you're not connected, you won't survive and thrive."

The internet turns today's best-practices paradigm upside down. An e-business enables both internal and external focus, with internet technology touching all aspects of the enterprise. Customers, suppliers and employers are all online, have better information and have the tools to be more efficient by orders of magnitude.

Sun's experience in cutting costs reflects a trend across companies that are transforming into e-businesses. Carlson Companies is also dishing up new ways for its subsidiaries to do business. Carlson is a multifaceted travel, marketing and hospitality services conglomerate based in the U.S., with $22 billion in global systemwide sales. It is known by consumers through its familiar brands, which include Radisson, Regent and Country Inns & Suites hotels; T.G.I. Friday's restaurants; Radisson Seven Seas Cruises; Carlson Wagonlit Travel, Thomas Cook Travel and many less-familiar names.

Carlson implemented Oracle Financials as the cornerstone of a newly launched shared services company, chartered with achieving efficiencies, reducing costs and unifying global business processes among Carlson's brands, which employ 165,000 people in more than 140 countries.

"The goal of every company is to improve the bottom line, and Carlson is discovering that one of the fastest and most effective ways to create a lasting impact is to streamline internal processes," says Oracle's Henley. "In fact, reengineering internal operational efficiencies is the first step in a company's transition into a true e-business."

As a leader in e-business transformation, Oracle offers the only integrated enterprise business solutions for finance, travel management, projects, treasury, manufacturing, supply chain, HRMS and customer relationship management that run exclusively on corporate internets and the Web.

"We're in a new economy," says John Wookey, senior vice president of Oracle Applications. "We will see more change in the way we do business in the next three years than we've seen in the last 30, and it's going to happen using the internet."

Sun's dot.com momentum underscores the key role of an organization's finance department in bringing about business change. And that requires innovative leadership. It means capitalizing on global opportunities, driving enterprise profitability and building a smarter business.

Capitalizing on Global Opportunities

The internet's global reach means companies can capitalize on business opportunities anywhere in the world more efficiently, without increasing IT costs or creating yet more fragmented business information. In the process, the ideal e-business will consolidate global operations on a single data center, establish new best practices under a shared service-center model of business operations and more easily meet the regulatory and statutory requirements presented in global commerce. Like Sun, Honeywell and Carlson, companies will turn to Oracle Financials to knock down borders that, until now, have limited the scope of their business.

Sun launched its e-business strategy in Europe in an effort to centralize its European operations. "We wanted to improve the quality of our finance processes, reduce our cycle times and reduce costs," says Ian Cunningham, Amsterdam-based director of Financial Shared Services for Sun's European, Middle East and Africa (EMEA) operations. "We set a goal of reducing costs by a third in three years, and we accomplished that."

Sun targeted three initial processes for shared services: vendor payables, employee expense and travel reimbursements, and fixed asset planning and accounting processes, and eventually went global with them. The company set up four shared service centers - Sun calls them Accounting Service Centers - around the globe, and began standardizing business practices in all four. The first step was to migrate all centers to Oracle Financials, which Cunningham says made it easier to centralize and standardize the key processes.

"We have certainly achieved standardization in each time zone," says Laverty. "The next major challenge is for standardization on a global basis. This is the vision that will enable us to take dot.comming ourselves to the next level."

While the internet eliminates operational barriers, the emergence of the euro tears down trade barriers. The euro zone represents the largest single currency region in the world. With a gross domestic product of $8 trillion and over 300 million people, it accounts for nearly 20% of total world trade.

Finance leaders can't ignore this opportunity and need to develop strategies for capitalizing on the euro. "At Sun, we viewed the adoption of the euro as a strategic initiative rather than simply attempting to comply with legislation," says Cunningham. Since rolling out a harmonized pan-European price list for its computer systems operation last January, Sun has increased its focus on pan-European marketing and product programs, and has been able to transact with customers and vendors in euros to support business needs. "It is great to have a system that supports our euro initiatives at the pace the business needs. Oracle allows companies to adopt a euro transition strategy that best fits their time Name and resource requirements," adds Cunningham.

Driving Enterprise Profitability

Even as companies transform into e-businesses, the fundamental business drivers - increasing sales, improving internal efficiencies and boosting profits - still apply. But they happen in more dramatic ways as the internet challenges old processes and inspires finance to find efficiencies and cost savings where they didn't, and couldn't, exist before.

Take the trend of shifting labor-intensive administrative functions to self-service. "By transitioning to self-service internet procurement, our Global Supplier Management group is now able to focus less on clerical purchasing activities and more on vendor management," says Laverty. This enabled Sun's global purchasing group to increase its annual cost savings target from $50 million to $100 million, an additional $50 million savings for Sun that isn't possible without internet applications.

A shift to self-service processing for travel and expense approvals and claims has cut Sun's processing cost per claim by 75%. "Our ultimate goal is to achieve volume neutrality through standardization, to be able to process more with the same resources," adds Laverty. "We're seeing more intangible cost savings and benefits, too, because we're able to manage travel expenses more effectively with more accurate and timely information."

Honeywell, another U.S.-based company, is also leveraging the power of the internet to drive enterprise profitability. Honeywell is the world's leading provider of control technologies for buildings, homes, industry, space and aviation, with resources of $8.4 billion and more than 57,000 employees in 95 countries. In the past, Honeywell relied heavily on people power and brute strength to analyze business profitability. Today the company is using several Oracle Applications - Financials, Projects, Supply Chain Management, Internet Procurement and Self-Service Expenses - to streamline operations. Honeywell estimates saving about 60% of administrative costs - some $3 million annually - from self-service employee expense reporting alone. In procurement, the company has realized significant savings by eliminating 50% of the required purchasing steps.

Building a Smarter Business

One of Sun's aims in shifting to centralized European operations was to take the complexity out of all European countries from a finance and administrative point of view. "But this was not driven purely by cost savings," says Cunningham. "We also wanted to improve the competitiveness of Sun's finance organization by increasing the quality and speed of data to our organizations to make ourselves more competitive globally."

And it worked. Sun was able to reduce its global close from 30 days to four when the new shared Accounting Service Centers created the critical mass and process improvements needed to execute faster. In the old days, it took a month to amass the necessary data; now, when the quarter ends, all subsidiaries transmit key information to the U.S. within three days, and finance completes worldwide consolidation on the fourth day.

The transformation has created almost instantaneous business intelligence for Sun's 5,000 cost center managers around the world. Key data is immediately published and accessible, literally at their fingertips, via the corporate intranet. A few keystrokes brings them a new depth of financial information in a bank statement-like report of expenses, accounts payable, fixed assets and personnel charged to their cost center. The report's comprehensive nature enables them to drill down into specifics and print out reports in a variety of configurations, depending on their needs.

"Our managers love it," says Sun's Laverty. "The comments I hear are, 'We should have had this years ago; this is what I've always wanted from our financial analysts, but they never had time to give it to me.' Overall, we get better quality reporting and it happens a lot faster.

"The really big benefits are intangible and they're very difficult to quantify," adds Laverty. "If you have access to better management information, you can make better decisions. But how do you quantify those millions of decisions that help you become a more robust, more competitive company?"

Carlson Companies had a similar goal in moving to a single financial management system: to provide world-class business intelligence across the enterprise. Prior to Oracle Financials, each of the companies had its own silo-like system. Today the company operates in a shared service-center mode, consolidating business operations to exploit economies of scale, reduce complexity and enforce consistent business practices and, in the process, gain the most information at the lowest cost.

"Our vision was to move our transaction processing to a highly efficient Oracle Financials environment so that our finance people can be liberated from focusing on managing transactions and instead spend their time on strategy," reports Walt Erickson, president of Carlson's new Shared Services company. "And we intend to save substantial money in the long run. A powerful and flexible system is required to make that vision a reality."

But if information is the gold standard of successful e-businesses, customer focus is the reason why. "It's what you know about what a customer is thinking and how fast you can act on it that will separate the fittest in this business evolution," says Oracle's Wookey. "And this is happening at a revolutionary speed."

As it expands its e-business initiatives throughout its enterprise, Carlson will be utilizing Oracle to provide the platform to manage customer data efficiently behind a powerful consumer interface.

"The strategic information we plan to mine will help us identify our best customers in each market segment and analyze how best to serve them," adds Marilyn Nelson, chairman and CEO of Carlson. "We plan to extend the reach of strategic information beyond the boundaries of the corporate headquarters, and put it in the hands of key field managers, so that every Carlson brand will have the right customized information to optimize its performance."

Compete or Get Beat

"The internet adds muscle to the competition, which was brutal to begin with," says Oracle CFO Jeff Henley. "No one knows yet exactly how its impact will play out in the coming years, but one thing is certain: companies that position themselves to leverage its power will survive and thrive. Those that don't, won't. The internet has replaced client/server computing became it's simpler, cheaper and provides better information. And finance is one of the key functions to make it happen. As the department harnesses the internet to create stronger, smarter administrative operations, it frees up more time to focus on analytical issues. Finance is moving from number crunching to setting strategic objectives."

Companies like Sun, Carlson and Honeywell are already adapting to the new internet economy. Their finance departments recognize both the threats and the opportunities inherent in this global technology, and they're poised to lead the e-business transformation. From a finance perspective, it still comes down to three key aspects: capitalizing on global opportunities, driving enterprise profitability and building a smarter business. And as the world leader in e-business tools and solutions, Oracle remains the vendor of choice for the top Fortune 500 companies.

"We're a company planning to spend more than a billion dollars on technology by the early years of the next millennium," says Rex Carter, CIO of Carlson. "Our need for technology partnerships that are deep and results-oriented has led us to products such as Oracle."

SUN ECLIPSES INTERNAL EXPENSES

By shifting to internet-based finance and accounting processes on a global scale, Sun Microsystems has saved millions. The numbers tell the story.

* $50 million saved through internet-based procurement

* 30% saved on accounting transaction costs

* 75% saved on travel and expense processing costs

* 38% saved on global invoice processing costs

* 30% saved on payroll costs

Source: Sun Microsystems

WANT TO TRANSFORM YOUR BUSINESS INTO AN E-BUSINESS?

Access Oracle's proven e-business expertise - right from your office or home. Be sure to register for Oracle's iSeminars, which are held online about key topics nearly every day. Several financial iSeminars occur monthly, offering thorough analysis and solutions in areas like Strategic Finance, Balanced Scorecard, Activity based Management, Business Intelligence, Internet Procurement and Projects.

To register for an Oracle iSeminar, go to http://www.oracle.com/ebusiness/events/efficiencies/. For even more information on how to transform into an e-business, call [phone], ext. 26563.

Oracle Corporation is the world's leading supplier of information-management software, and the world's second-largest independent software company. With annual revenues of over $9.1 billion, the company offers database, tools and application products, along with related consulting, education and support services, in more than 145 countries worldwide.