Executives at John I. Haas Inc., a producer of hops and hops products, were drowning in data -- receiving reports regularly from four manufacturing plants and 25 warehouses.
Top executives at the company's headquarters in Washington, D.C., had to build spreadsheets and make calculations while on conference calls, said Kyle Lambert, vice president of information solutions at Haas.
An Oracle database and application server customer since 1996, Haas was in need of new technology at a time when the company was also looking to reduce expenses in the IT department. Haas turned to Oracle's outsourcing unit for the answer to the company's technical woes. But Haas hit an obstacle right away.
"Our first challenge was getting over the hurdle of people saying that we would lose control of our servers," Lambert said. "That message was coming from operational managers and executive management, but it was easily put to rest" once Lambert pointed out that few of the executives who were complaining had ever seen the company's servers.
After trying to migrate to the Oracle E-Business Suite unsuccessfully for 18 months, the company turned to Oracle's consulting business to complete the migration and host the suite on Oracle servers located in Austin, Texas. Lambert said his small IT staff was too geographically dispersed and lacked the technical know-how to complete the E-Business Suite migration themselves.
Within six months, Oracle consultants, working remotely with the IT staff at Haas, had imported Haas' data into the Oracle databases in Texas.
"We weren't implementing too many new business flows, and we were not trying to change processes much from our Oracle 9i environment," Lambert said. "If we were trying to do that, then our transition could have been more difficult."
Because of the outsourcing contract, Haas eliminated two IT jobs.
The layoffs, coupled with increased efficiencies, resulted in an annual savings of $180,000, beginning in 2001, Lambert said.
However, those cost savings come with some drawbacks, said Lance Travis, an analyst with Boston-based AMR Research.
Companies risk losing flexibility and control when they outsource applications and database management, he said.
"What you lose when you go to this on-demand, hosted model is the flexibility in customizing your applications," Travis said. "In the new Oracle model, they're treating the whole thing as software and management as a service."
Oracle provides the same automation, management and business continuity services that EDS and IBM Global Services do, Travis said. Obviously, Oracle differs from those business-process outsourcers because they manage only Oracle products.
Under the pricing model for Oracle outsourcing, customers that use Oracle's data center in Austin, Texas, pay $150 per month per user. Organizations that want Oracle to manage the software from their sites pay $90 a month. These prices are in addition to licensing fees.
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