Over 80pc of IT spend is just keeping the lights on – Oracle co-CEO Mark Hurd

30 Sep 2014

Oracle co-CEO Mark Hurd

SAN FRANCISCO – Businesses everywhere are now faced with the task of digital transformation, says Mark Hurd, Oracle’s co-CEO, who warns this is a near impossible task since most legacy IT systems are 20 years old.

Speaking at Oracle’s annual OpenWorld shindig Hurd, who shares the CEO role with Safra Catz after founder Larry Ellison decided to take on the task of being CTO of the company he founded, Hurd warned that the CIO role is going to be one of the toughest jobs in IT.

As CIOs strategically position themselves to be chief digital officers spearheading the transformation of their enterprise, the reality is budgets aren’t being matched with this ambition.

“We have launched 161 new cloud applications,” Hurd said, indicating the company’s intention to straddle the three pillars of cloud – software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS). This is a deft move on Oracle’s part, one that separates it from obvious competitors like Amazon in IaaS and Salesforce.com in terms of SaaS.

“We believe price and performance are the same: you get twice the performance at only half the cost. This is the greatest depth and breadth of products ever to be announced at OpenWorld.”

Despite the evolution of technology Hurd said that the world is changing dramatically.

The digital transformation agenda

“We are seeing a data explosion. Cloud, social, mobile, we are seeing more sophisticated consumers thanks to the age of mobility. This is affecting where you live and how you work. Graduates today work and communicate differently. When I left college I didn’t have a smartphone. Now you have all these tools that didn’t exist before and all have to be managed in the context of IT.”

While the challenges of integrating IaaS, PaaS, and SaaS in the context of mobile, social and cloud seem immense, Hurd urged CIOs to think of their task in the context of people.

“The world of the next 10 years is going to be all about people. They are going to work the way they want to work, buy the way they want to buy. They want it on their mobile phones, they want it when they want it.

“The problem is today’s applications are 20 years old,” Hurd said pointing to legacy IT systems used by businesses, hospitals, banks and governments.

“How do you make this work? 75pc of (legacy) applications have been modified. They are pre-social media and pre-cloud. All of these applications are expected to deal with the realities of today’s world, which is probably not possible.

“80pc of IT spend is spent keeping the applications working. They are inflexible and not appropriate for the task at hand.

“Big companies have to keep running – buying, selling, closing the books. They don’t have time to start again. How do you move to a standard, easily provisioned system with the backdrop of the current state of needing to keep the business running?

“There are no CEOs giving CIOs unlimited chequebooks. The CIO’s job is to fix all of this. IT budgets are flat, if not down.

“I think being a CIO is probably the toughest job out there,” Hurd said, drawing a metaphor of a CIO rowing a boat with plenty of people with megaphones shouting orders.

“A lot of people are telling one worker what to do. The CIO is getting coached and is under a lot of pressure from business colleagues, vendors and suppliers.”

Hurd said that the CIO is under pressure to keep up with today’s world and integrating legacy systems and new technologies in cloud, social and mobile into a cohesive strategy.

“With more competitors these problems get harder. The IT agenda is different but the fundamental problems are the same, how do I transform with all these constraints.”

Innovative thinking, critical edge

The issues described by Hurd were explained by Tim Theriault, the CIO of US pharmacy giant Walgreens which serves 8m customers a day.

“We have three agendas: the transformation of our stores to provide new experience for customers; loyalty programmes to understand what local stores across the US should have; and finally a personal relationship with customers across mobile and social. We are investing in mobile analytics to get insights we have never been able to do before.”

Theriault said that this is being done against the backdrop of the roll out of flu shots and clinical examinations occurring in stores as well as Walgreens going global in terms of a merger withy Alliance Foods.

“Our company will be the largest purchaser of drugs in the world with 380 distribution centres in 20 countries. We are investing but doing more with less. Our IT budget is actually down but we see opportunities that we could never imagine before.”

Theriault’s advice to other CIOs is not to scrimp on security. “Security is fundamentally important. It protects patients and customers’ information.

“While retooling your core systems you need to be mindful and ensure the data is reliable and available for customers and employees.”

Jane Miller, CIO of General Electric also highlighted the challenge. “We are seeing the emergence of the industrial internet. The challenge is to marry software with hardware to bring better and different solutions to customers.

“The strategy should be about simplification – your infrastructure needs to be fast and you need to give people mobile apps and other ways to connect. CIOs ned to operate a core set of processes at scale and at the same time be able to innovate at the edge.

“We like SaaS plays a lot because it means we can standardise processes at scale and in a fast way.”

She said that GE has invested in internal services over the cloud to leverage other providers’ scale. “We can scale quickly and on the infrastructure side we have invested in big talent.”

The CIO of Proctor & Gamble Fillipo Passerini said that the challenge CIOs face is making sure IT stays relevant to the business.

“It requires a fundamental approach. We have to deliver consumer products that will serve people better in terms of needs and wants. It requires a lot of innovation and for us a supply chain that has to work well.

“We serve 4bn customers on this planet. Our supply chain has to work. We have to bring innovation from the lab to the store and accelerate that.

“Over the past few years we have made a big effort to make IT relevant to the business. It is critical that IT in our organisation doesn’t become a commodity, rather we need to find an instinctive way to create value.

“Digital technology has never been more relevant and critical to the business. The difference between line of business and IT has become very slight. Our agenda is to transform the way business is done. It is not about keeping the lights on.

“CIOs need to think about creating value in different ways,” Passerini said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years