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By Julian Goldsmith, 23 July 2007 12:54

COMMENT

Oracle created a global financial services business unit in June to bring together a number of assets and acquisitions under one umbrella. Globally, the unit employs 12,000 staff, offering 300 products and supporting 8,000 customers.

Ashwin Goyall, Oracle vice president of industry strategy and marketing for financial services, estimates that the software giant has less than 10 per cent market share of the financial services sector. He estimates the value of the market to be around $500bn a year and even if his unit improved that share by a couple of percentage points it would be a big step for the company.

silicon.com caught up with him in the offices of Oracle's iFlex unit, based in Canary Warf, London.

silcon.com: what are the biggest concerns coming from your customers at the moment?
Goyall: It's a more global market. You might be attacking a local market, but you are still competing globally. Customers have information at their fingertips. They are more informed and less likely to be loyal. Channels to market are increasing - mobile banking and ATMs. We see four business objectives. Competitive differentiation - this means there is a lot of pressure to bring products to market more quickly. Customer intimacy - to sell to customers more effectively. Improving cost efficiency is always high on the list. Compliance requirements have increased, with initiatives like Basel II, MiFID and SEPA.

From an IT perspective, the question is how do we align our products with these drivers? It's about establishing links with service providers and system integrators and setting up programmes for financial services organisations to establish a roadmap with them and see what the journey is going to look like. Our business model is maturing so that we are more of a business partner to our customers. This relationship has differed from – say - three years ago when we were seen by these customers more as just a database vendor. Now the conversation is with the business side of the house.

What impact did that switch have on the way Oracle does business?
The need to have this conversation was the driver in our acquisition strategy. Growing the organisation in this respect was one of the hardest things to do. Our engineers weren't used to dealing with the business side of our customers regularly. For instance, iFlex has 9,000 employees. There was no way we could grow that fast organically.

Acquisitions are difficult propositions. You need to put processes in place to make them go smoothly. The business model has matured at Oracle. We've spent a decade refining the process we use to integrate acquisitions smoothly. For instance, we've reduced 80 general ledgers to one globally.

Taking on so many new people with experience of other cultures, has that changed Oracle's own corporate culture in any way?
I came from Siebel, which had a different culture and what I found immensely healthy was the willingness to adapt the corporate culture if there was a better way of doing something. As Oracle has moved out of the back office in its product set and moved into the front office, they've found that these front office applications are much less generic and you have to adopt a range of approaches specific to that customer or sector. The formation of the global business unit is taking this approach to the next step. The unit has its own products, sales, services and marketing.

Now that you are dealing with businesspeople rather than techies, what are their biggest concerns?
A lot of demand from the business side of the house is about trying to determine whether we have provided a particular sort of solution before. They are asking 'Am I the first?'. Our acquisition strategy has given us the people who have solved the problem already. It gives us credibility in the market. We are dealing with the most risk-averse industry. They don't like to have to deal with multiple suppliers. With us they know they only have one throat to choke if anything goes wrong - they can tell us, 'Oracle, you own the problem. Now solve it for us.'

What do you see changing in the next five to 10 years, in terms of business trends?
Of the four drivers we've identified, cost efficiency is always going to be on the radar. The most tactical driver at the moment is compliance. This driver is really causing anxiety and today it's the new competitive initiative. Financial services organisations are putting a lot of money into each compliance programme. We are offering a framework that allows companies to get scale out of their compliance initiatives by allowing them to modify them, rather than have to launch a new initiative for each new regulation.

Geographically, what would you say were the biggest differences in financial services markets across the world?
There are local variations, but the trends are roughly the same all over the world. One of the common variations between the developed and developing markets is that developing countries are much more advanced in technology for core banking. The mature markets are taking a wait-and-see approach in transforming their legacy systems. But it's imminent. I would say that the US is probably lagging behind in transforming core banking systems, which will put US financial organisations at a disadvantage in the global market. It is an arms race. Our first significant banking customer, People's Bank, is transforming core systems right now. It will take a couple of triggers like that to produce a domino effect in the US market.