"One on One: An Interview with Greg Tennyson" By Julie S. Roberts, Winter 2004, Vol. 40, No. 1, p. 2
Journal of Supply Chain Management Copyright © February 2004, by the Institute for Supply Management, Inc.
Julie S. Roberts
Interview by Julie S. Roberts, writer for Inside Supply Management®
Greg Tennyson is vice president, corporate procurement and travel for Oracle Corporation headquartered in Redwood Shores, California. Tennyson has responsibility for global strategic sourcing of indirect materials, logistics and travel. Oracle has created a global single instance of the ERP applications, globalized financial business processes and embraced e-business technology, allowing the procure-to-pay (P2P) process to be optimized and automated. The P2P transaction savings to Oracle is approximately USD $4-6 million. More importantly, technology has allowed the purchasing team to bifurcate strategic from tactical purchasing roles and responsibilities, and the change in structure has allowed the team to increase its cost savings and avoidance by over 100 percent. Tennyson received his MS in management from St. Mary's College and has over 20 years' experience in the purchasing and contracts field in the manufacturing, defense contracting and services sectors.
The Journal of Supply Chain Management: Please describe the offshoring of transactional purchasing responsibilities at Oracle.
Greg Tennyson: Oracle has had a significant presence at the offshore location in Bangalore, India, since the early '90s, and our efforts have been to (1) build a 24/7 "follow the sun" development and support model (resources are available 24 hours a day, seven days a week in the same time zones in which there is daylight); (2) take advantage of the incredible talent pool that exists at the offshore location; and (3) develop what is one of the fastest-growing domestic markets. Oracle started the transformation process approximately five years ago by developing a single instance of our ERP applications and a standard, global way of doing business. Then, as a part of the global process project and global single instance creation, we also formed three regional shared service centers. We migrated business processes from the operating unit into its respective shared service center, and we've operated this way for a few years. So, for example, the procure-to-pay (P2P) process follows the same global process regardless of where the requisition was created. The only exception is validated local legal and tax implications. All employees see the same view of Oracle's self-service applications, and transactions are processed by one of three shared service centers in accordance with the global P2P business process. Our globalization efforts have been a major achievement. Oracle has created a virtual back office using the Internet and our applications. With this, we realized that we could place the transactional responsibilities anywhere in the world, and it would be transparent to the user and the business. We saw potential to create further efficiencies and economies of scale by offshoring the transactional responsibilities — placing the responsibilities in an abundant, talented labor market, and as a secondary concern, in a more affordable, less expensive location.
The Journal: Do Oracle employees perform the offshore transactional responsibilities, or does an outsourced company perform them?
Tennyson: At Oracle, the term "offshore" means insourcing the requirements in a different geographic location. So in this offshoring transformation, Oracle resources carry out the responsibilities in a central geographical location.
The Journal: How did Oracle set up the offshore team, and what are the team's responsibilities?
Tennyson: First, we began by analyzing the transactional responsibilities and what could move. We then built employment profiles and identified the skill sets and education necessary to perform the responsibilities. We looked at the global processes that we'd documented and identified what additional documentation was necessary to move the responsibilities. So we took the institutional knowledge, enhanced the documentation as necessary, and are in the process of moving transactional responsibilities offshore. The responsibilities span across revenue and general accounting functions including tactical purchasing. The transactional responsibilities make use of Oracle's e-business suite. For instance, requisitions are generated online and routed electronically through workflow for spending approval. As we've embraced technology, the offshored team can now review requisitions, create purchase orders, contact suppliers, review supplier information, negotiate price and payment terms, verify quantity, descriptions and item numbers, and then place the order electronically with the supplier. The creation and maintenance of electronic catalogs within Oracle's Internet procurement product will eventually move offshore as well.
The Journal: What are some of the benefits of offshoring transactional responsibilities?
Tennyson: The additional centralization has allowed us to enhance our control of the purchasing process. In other words, corporate governance improves because of the institutional knowledge that is centrally placed. This transformation is an opportunity to enhance and/or improve your controls. There are also greater efficiencies, economies of scale, and the benefits from relying on a talented workforce of a global economy. Another benefit of further defining business processes is the head start we had for the Sarbanes-Oxley corporate governance requirements.
The Journal: What success factors are required for this type of organizational transformation?
Tennyson: Communication is critical both internally within the shared service centers and with the stakeholders — essentially addressing all affected parties. The internal communication is to ensure resources stay engaged through the project, and to Oracle's benefit, we have a very professional, invested workforce. The shared service center employees want the project to be successful. The communication with the stakeholders reassures them that the transformation will be transparent. Effective planning is another success factor, but it's more than just the ability to myopically follow a plan. The ability to be flexible and allow for change is also important. Reasonable timelines are part of a successful plan, and documentation is a critical factor — having the institutional knowledge and making sure that it's documented and used in the processes.
The Journal: What else has been done to facilitate the transformation?
Tennyson: Part of the planning we've done includes a baseline of performance expectations. We've also developed metrics to manage performance, and we'll conduct periodic audits to ensure that the offshore location is performing to expectations. We'll have frequent follow-up management meetings to ensure that expectations are being met.
The Journal: What are some of the obstacles to this type of transformation, and how can the organization overcome them?
Tennyson: How do you transfer years of institutional knowledge? That's definitely a challenge. The individuals involved have done an excellent job of further documenting business processes and creating if/then statements to document institutional knowledge, training materials, etc. Beyond that, another challenge is the cultural differences. Between the offshore location and each of the respective locations that it will service, how do you address the cultural differences? Another challenge is making the process truly transparent to the stakeholders. To tackle some of these issues, we've relied on our experience with globalizing processes and creating a single instance within our ERP environment. Also, about a year ago, we started to move some of the transactional responsibilities offshore. So we started small and learned from those projects — the successes, the challenges, what works and what doesn't. We've incorporated those lessons into this much larger project involving the movement of even more transactional responsibilities.