Oracle has been avidly practising what it preaches and is not shy about telling the world. The message about the $1bn of savings it has made through using its own e-business software has been trumpeted relentlessly in its advertising campaign.

But reaching the next $1bn is proving tougher than the world's second biggest software group expected. The US economic slowdown has sent a shudder through industry - especially the highly volatile technology sector - and caused many companies to put their spending plans on hold.

"We've got a good chunk of the second billion," says Jeff Henley, the affable 55-year-old chief financial officer of Oracle. Productivity is still improving through greater automation and centralisation of business processes, but sales have fallen short of expectations.

So Oracle will have to wait until next year before its annual savings move up to $2bn. It has already raised operating margins to 35 per cent and needs to reach 40 per cent if this sum is to be attained. But this is not now likely to happen until early 2002.

"That's our goal. We can never predict anything with certainty because we weren't predicting a US slowdown last year, either."

Even so, Mr Henley, does not seem too fazed by the sudden change in the IT market. In contrast to some other US companies, such as Cisco, Sun Microsystems and Hewlett-Packard, Oracle is taking the slowdown pretty much in its stride.

"By the fall or the end of the calendar year, we ought to see the US economy picking up again and people less cautious," he says. "I think this calendar year, 2001, will prove to be a tough year for us, one in which we won't enjoy the kind of earnings growth we've had.

"But hopefully, we won't go backwards, we'll have some degree of growth and then a lot better growth, more normal growth in 2002." In its third quarter to February, Oracle's earnings grew by 16 per cent to $583m, well below what it had hoped. Revenues were only 9 per cent higher at $2.67bn.

For the fourth quarter, it has indicated zero growth in earnings - although there was growing concern last week on Wall Street that a revised estimate was imminent.

"I'm hoping this next calendar year, 2002, we'll be back to revenue growth in excess of 20 per cent and earnings growth back up to probably 25 to 30 per cent," says Mr Henley.

While Oracle sees no sign of improvement in the business climate, it also sees no reason to think the current pain will be unduly prolonged. The company is basing its lack of extreme pessimism on the fact that the average US slowdown lasts no longer than 12 months.

Mr Henley believes, too, that non-US markets look likely to avoid the worst of the economic malaise. Oracle's performance in Asia and Europe has held up well, he says.

Despite the seemingly endless travails of the Japanese economy, he says business in Asia is "buoyant". In Europe, which he visited a few weeks ago, he sensed more optimism than in the US, though business trends in all markets are extremely hard to read at this confused time.

In the view of Neil Herman, enterprise software analyst at Lehman Brothers, the US investment bank, Oracle will struggle for a while as the economy remains weak and price competition intensifies on the database side, notably from IBM. But in the long term, "Oracle will be able to weather the storm".

Next year will see a renewed upturn in the software market, Mr Herman says. With its dominant market share, "Oracle remains the leading player in the database market".

The company is also pushing hard in the applications software market where it is up against companies such as SAP and PeopleSoft.

Despite the disillusionment caused by multiple dotcom failures, Mr Henley is convinced the e-business message is still getting through loud and clear.

"In Europe, business people really do believe in the internet," he says. "I think it's the same in the US." Most people understand that the dotcoms had a flawed business model. "It's not that the internet does not have tremendous potential. From everything we know, interest is unabated and there's still very strong interest in supply chain management, CRM [customer relationship management], and all these things, but people are just being a little more cautious."

Oracle has been preaching the virtues of simplicity. Having moved beyond its origins in database software - still accounting for nearly a third of revenues - it now offers customers a full suite of e-business software.

This is aimed at making software installation and integration as fast and simple as possible for purchasers. "We try to help customers simplify their environments, get rid of some of the complexity of IT, address cost of ownership and speed. We think that's a really compelling story for customers, because IT is expensive."

In a slowing economy, companies are keen to keep costs down and act as quickly as possible. "People say: 'Gee, I know it's a great idea, but if it takes me 18 months, then I just can't afford it right now'. You say: 'No, we can get you running in 90 days'."

Mr Henley says customers will respond if they can see the benefits. "We think that'll help stimulate demand a little bit." However, Oracle needs an upturn in the economy for demand to really take off again.

In the third quarter, its applications sales - covering software for financial, manufacturing, supply chain, personnel, marketing and other functions - grew by 25 per cent. This was well down on the 66 per cent growth experienced in the second quarter, when total earnings rose by 62 per cent.

Announcing these figures in December, Larry Ellison, Oracle's outspoken, high-profile founder and chief executive, said: "Our applications business is strong and getting stronger."

Lehman's Mr Herman says Oracle is on the right lines with its one-stop e-business applications approach. But it still has some way to go, especially in the supply chain and CRM areas. "Rome was not built in a day - neither will Oracle's applications be."

Now, Oracle is pounding out its message harder than ever to persuade more companies to invest as clouds gather over the economy. It has had some big successes, such as Compaq, the PC maker, and UK-based Barclays Bank. Mr Henley also singles out the power division of General Electric of the US.

Oracle is determined to emerge from the business storms in better shape than its rivals. "Many of our competitors are going backwards right now. So if we can hold the margins and hold the profits up at these high levels, we think that'll be a good accomplishment."

The company hopes to be able to keep job losses to around 800 people, or 2 per cent of its 40,000-strong workforce, though some analysts doubt that they will be able to do this. "It's basically because we were already under good control," Mr Henley says.

"We were getting so many efficiencies, we weren't ramping up our hiring a lot." That, he adds, is the result of the remorseless adoption of global e-business techniques within the company. Now, the pressure to convince outsiders of the need to do the same is stronger than ever.