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Oracle’s Applications Strategy—
What’s Your Five-Year Plan?
by Bill Swanton and Lee Geishecker
Our interviews with dozens of customers and Oracle executives show that, so far,
Oracle is successfully maintaining the existing customer base and delivering on its
Applications Unlimited promise to keep enhancing these products. Newly acquired
customers interested in only a single application and keeping their non-Oracle technol-
ogy stack can continue as they were. Companies willing to more fully embrace Oracle’s
strategy have more options. From our research, we found the following:
• While some skepticism remains, Oracle’s multilevel strategy lets customers adopt a
stance that makes them comfortable.
• Oracle is delivering enough enhancements to existing applications to keep customers
reasonably happy.
• Oracle is dealing with its overlapping application portfolio by segmenting its target
market.
• Oracle isn’t forcing the adoption of Fusion Middleware, but more of its technology
will seep into every application.
• Application Integration Architecture (AIA) is the near-term opportunity for most
customers to get more value out of their Oracle investments.
• Fusion Applications are a direct descendent of E-Business Suite, are heavily influ-
enced by Oracle’s other products, and will have net-new distributed order manage-
ment functionality.
Companies should look at Oracle’s offerings and pick one of two strategies: either focus
on maintaining your current individual application investment as a standalone or start
adopting Oracle middleware and complementary applications. For companies following
the second strategy, Fusion Applications are an interesting option, but there is no need
to commit to them today.
Oracle’s strategy has let its customers self-select into a role that makes them feel both
comfortable and content they are getting value from the ongoing Oracle relationship.
We are seeing these customers fall into five roles:
• Single product loyalist—Loyalists continue to focus on the same product and ongo-
ing enhancements, sticking with the technology stack they have always used. They see
Oracle as essentially a consolidator that brings more stability for their product at perhaps
a higher annual maintenance fee. Many JD Edwards customers fall into this camp.
• Multiple product expansionist—The expansionists are starting to see the advantages
of buying more products from the same vendor and holding that vendor responsible for
the integration. Typical members of this group are E-Business Suite customers that are
looking at Siebel, Demantra, and G-Log as they expand their footprints.
• Industry specialist—Industry specialists entered the Oracle fold through its many
acquisitions in retail, communications, utilities, and financial services. Depending
on how many products they own, they may look to Oracle for integration. This
group included the least happy companies, specifically those pursuing a best-of-breed
strategy based on a different technology stack, such as from BEA Systems, IBM, or
TIBCO. Many are sitting on the fence until they understand the uptake of Oracle
technology by the industry business units.
• Best-of-breed opportunist—The opportunists have often chosen SAP as their back-
bone system and became Oracle customers because of the acquisition of products like
Agile, Demantra, G-Log, and Siebel.
• New architecture adventurer —We found no companies that are fully committing
to move to Oracle’s new Fusion Applications, but we expect it will take a rare breed.
Most existing customers will stick to the safety of their existing products, which
Oracle has promised to continue to enhance for some time to come.
Regardless of role, all the companies seem to appreciate the potential upside of the
Oracle strategy. After a few years of working with Oracle, they also see little downside
and are content to continue watching how the strategy evolves. In fact, once Oracle
accounts for over half of their enterprise applications footprint, most companies adopt
an Oracle-first policy of seeing if Oracle’s product meets their needs before investigating
other vendors. They like the idea of single vendor responsibility.
As shown in Table 2, Oracle has fairly significant new functionality scheduled for the
next releases of all its major product platforms. This functionality, which is not ground-
breaking, is based on demand for enhancements from the customer base. Oracle is being
responsive to the base by maintaining separate development organizations for each prod-
uct family. Only in the BI and performance management (PM) space described below
do we see any evidence of significant products being put out to pasture.
Over time, Oracle will shift more of its efforts to newer products, but we do not expect
them to kill off any products as long as there is a maintenance revenue stream coming
in. A prime example is the JD Edwards World product, with its imminent demise pre-
dicted for more than 10 years through three corporate owners. It is still supported and
enhanced to this day. Another example of Oracle’s continued support is Rdb, which
was acquired from Digital in 1994.
Companies frequently complain about Oracle’s overlapping sales forces. As one execu-
tive told us, “I don’t have time to manage five strategic partnerships.” Though it is still
evolving, a customer is often visited by separate sales teams for the following:
• Database
• Middleware technology
• Back-office applications (E-Business Suite, PeopleSoft, JD Edwards)
• Front-office applications (Siebel)
• BI/PM technology (Siebel Analytics)
• BI/PM applications (Hyperion)
• Industry-specific applications (retail, communications)
• Overlay sales teams for specialty products (Demantra, G-Log)
Oracle claims it is increasing account coordination, especially for its larger customers.
We have yet to see this in effect. In reality, each of these sales teams has a number to
meet and will pursue it independently. We don’t expect this to be simplified any time
soon, given Oracle’s ongoing acquisitions and propensity to reorganize sales.
Figure 1 demonstrates Oracle’s extensive portfolio, though any one customer should
only be exposed to a portion of it if Oracle handles the segmentation correctly in the
field. The portfolio has four major segments:
MetaSolv ProfitLogic
Education Net4Call Lodestar 360Commerce
and iFlex Retek Real Estate
Vertical Portal SPL
Government Construction
Apps
Edge Apps
PeopleSoft Siebel CRM JD Edwards
Horizontal Enterprise EnterpriseOne
Fusion
Apps Applications Manufacturing
Services
E-Business Suite (EBS)
Hyperion
EPM Financial PM
Transactional
PM
Operational
BI
This strategy should improve all applications, but it is unclear how this will affect cus-
tomers using products outside the Oracle technology stack. In some cases, the tool is
being ported into an application’s underlying toolset. In others, application-specific con-
tent, such as analytics or support information, is being created for that application. This
may lead to the Oracle technology stack finding its way into any environment over time.
So how is Oracle going to sell its new portfolio of best-of-breed applications? The
answer is packaged integration with a twist. Figure 2 shows Oracle’s Application
Integration Architecture.
Application
Business Connector Industry Reference Models Fusion
Services (ABCS) Applications
Process Integration
Packs (PIPs)
Business objects and
services supported natively
Based on Open Foundation Pack by Fusion Applications
Application Group • 25 Enterprise Business Objects
Object definitions • Basic Services
For ecosystem
Oracle Fusion Middleware to develop integrations
ahead of PIP availability
ABCS ABCS ABCS
PeopleSoft JD Edwards
Industry Apps
Enterprise EnterpriseOne
These object definitions have been packaged with basic create, read, update, and delete
(CRUD) services as the enterprise services Foundation Pack, which can be used in con-
junction with Fusion Middleware to build integration scenarios. This package will be
made available to third-party developers and service provider partners to encourage an
ecosystem to grow around AIA technology. These object definitions will be consistent
with the service objects natively supported in the upcoming Fusion Applications prod-
uct, so the near-term integration and longer term replacement product strategies are
closely coordinated and will support interoperability between older applications and the
new product.
Few customers want to build their own integrations, so Oracle is creating packaged
Process Integration Packs (PIPs) to do well-defined integration scenarios. (The name is
unfortunate, as the acronym is the same as RosettaNet’s Partner Interchange Processes,
which is a slightly different concept.) One early example is the Siebel CRM Integration
Pack for Oracle E-Business Suite Order Management, which covers a specific scenario
and products. Some of the early scenarios are listed in Table 5.
The Oracle PIPs are intended to deal with integration scenarios across multiple products,
typically an extended business process that is beyond the scope of any one of them. The
same group at Oracle is building a set of business process reference models. The top 3
layers cover 30 industry models, 22 high-level process flows, and over 200 detailed busi-
ness processes that are common across all the applications. The next level down focuses
on individual activities and is application specific. This activity started at PeopleSoft
before the acquisition and has been expanded to the other Oracle applications.
All of the components discussed so far are application platform independent, a com-
mon language for all to speak. Each development group is building Application
Business Connector Services (ABCS) for each application to translate the common
object and services into specific internal objects and application programming interfaces
(APIs) to implement the services. These will have to be built out over time. While some
can be retrofit into existing application releases, others will require internal changes to
the application and will have to wait for a future release.
The AIA will satisfy customer demands for integration of acquired applications, while
creating a gradual migration path to the future Fusion Applications. The PIPs, com-
bined with the business process management (BPM) tools in Fusion Middleware, will
give customers an opportunity to implement cross-functional business processes and
then create a unique competitive advantage on top of standard enterprise applications.
One thing that becomes apparent when looking at the list of planned PIPs is the
importance of Siebel in Oracle’s plans. Siebel is being positioned across almost every
industry and integrated with almost every other product. We expect this to be a major
part of Oracle’s cross-selling efforts.
Obviously, Oracle has to execute extremely well to monetize this strategy. It can’t let
creeping complexity derail the promise of easy business process improvement. It has
to keep a lid on the total cost of ownership, maintain software quality as it brings in
the new tools, and be wary of creating operational issues like excessive downtime for
updates or maintenance. But still, it has created one of the most compelling strategies
AMR Research has seen in quite a while.
For current Oracle customers, AIA is the space to watch. It will be the key to cost-
effectively applying other pieces of Oracle applications in your landscape. The trick will
be to understand where Oracle is making its investments and not get ahead of where it
has built standard PIPs to support the scenario you have in mind.
While little actual code or data structures is coming from PeopleSoft Enterprise, the
ERP data model was extended by mimicking several useful organizational concepts.
These included organizing items into tree structures, such as people into organizational
charts, the ability to look at the data as of a certain date, and the SetID security con-
struct. Oracle also drew on the PeopleSoft Enterprise user interface (UI) design and the
idea of using design patterns for consistency across functions as it reimplements most of
the UI with its WebCenter tool.
Another important concept from the PeopleSoft area is a pillar deployment strategy.
Fusion Applications will be distributed in at least three major pillars: ERP (finance and
supply chain), CRM, and HCM. While it can be deployed as a single instance with
all three, customers will also have the ability to set up three separate systems with pre-
built AIA integration between them. This flexibility allows changes and upgrades to be
decoupled between the pillars (for example, allowing the annual statutory upgrades to
be made to the HCM instance without affecting 24/7 supply chain operations).
While little specific data models or code came from other applications, such as JD
Edwards EnterpriseOne, Oracle has systematically compared how various functions
were implemented in each product and picked the best ideas for Fusion Applications.
We expect EBS customers to be comfortable with the result, though Oracle still will
have to make a good case for them to upgrade.
• Tree Structures V1 V2
Fusion
• Date Effectivity
Applications
• SetID • Siebel Analytics (OBI EE)
• UI Design • CRM Data Model
• Pillar Deployment • UCM Householding
8.x 9.0 9.1
PeopleSoft
Enterprise
8.0 8.1 All codelines of all
Siebel products were assessed
8.9 9.0 and functionality ideas
JD Edwards incorporated in Fusion
EnterpriseOne Applications design
Figure 4 is just a rough picture of what is planned, based on conversations with Oracle
executives. The devil will be in the details, as companies discover whether their pet
features are in or out and whether a function was completely redesigned for the new
product.
V1 V2 V3
Data Hubs
Financials
Procurement
ERP Supply Chain
Pillar
Dist. Order Mgmt. New Capability
EAM
CRM
Pillar
CRM Horizontal Vertical
HCM HCM
Pillar
None Some Much Most More
Meeting or exceeding functionality is only part of the story. Despite the DNA from
other products, Oracle is doing a lot of things fundamentally differently, which will
make Fusion Applications attractive.
From an operational point of view, the pillar strategy and promise of downtime mini-
mization improvements might be a good hook for IT groups at large global companies
that are feeling pressure to reduce scheduled downtime of business-critical systems. The
company is designing the product so that a patching session or upgrade starts with a
snapshot of the database and the bulk of the work is done offline. The existing release is
still running, and database stream technology is used to queue up ongoing transactions.
A much smaller downtime window is then used to flip over to the new code and con-
verted data and bring it up to date with the transaction stream.
The pillar strategy will also allow companies to decouple parts of their landscapes for
easier maintenance as well as do patching and upgrades at different intervals. There is
also the potential for having some pillars as global single instances, while others may
be implemented regionally. Prebuilt AIA integration should still allow the benefits of a
global single instance.
Oracle has further improved its software development process, instilling more discipline
and quantitative tracking of quality indicators. This, combined with the use of declara-
tive business rules, putting application logic in the objects and services instead of the
UI, and a better role-based security model, has reduced the duplication of code, which
led to errors in the past.
The UI is far more intuitive, with worklists and context-sensitive pop-up menus of
useful features available in most places, such as employee names, company names,
addresses, and dates. For example, you can quickly start an e-mail, chat with an
employee, or access financial information web sources about a company right from the
screen. Oracle is also adding Web 2.0 concepts like social networking as optional tool-
bars and extensively embedding BI portlets in the UI.
The company has a special team working to simplify setup, configuration, and admin-
istration of the applications. It is building in business-level key performance indicators
(KPIs) for measuring processes and monitoring the health of the applications. These
supplement more technical monitoring in Enterprise Manager, aiding the applications
team in maintaining service levels. A major goal has been to reduce the time and man
hours spent maintaining the system.
The BPM capabilities in Fusion Applications will be more extensive than in any other
suite we know of. Since Oracle externalized in BPEL much of the built-in workflow, it
will be easier for customers to create customized workflows to give them unique, com-
petitive capabilities without customizing core product code.
Getting to Fusion Applications will be an interesting challenge. Here are some things
for companies converting from E-Business Suite to consider:
• The overhauled UI eliminates Oracle Forms in favor of WebCenter technology. If
you modified the UI—using Logical Apps to simplify the fields, for example—you
may have to redo these customizations. Any customized add-ons will have to be
redone, though Oracle claims there are tools to convert Oracle Forms into a skeleton
for a WebCenter UI that will need to be completed in the JDeveloper environment.
• With Oracle attempting to convert internal workflows from E-Business Suite to use
the BPEL Manager technology, workflow will change completely. Any Oracle work-
flow you developed will have to be redone. This also changes the existing built-in
E-Business Suite workflows, so the application may behave much differently.
• While PL/SQL will always be part of the mix, your technical team’s skills will
require a substantial upgrade. Java, WebCenter, and BPEL will become more impor-
tant. Since these tools are already appearing in Fusion Middleware and are at the
center of AIA and E-Business Suite R12, existing E-Business Suite customers can and
should gain familiarity with them.
• With such a change in underlying technology, performance characteristics are likely
to be much different. Oracle and other enterprise applications vendors are already
seeing the use of Java increasing hardware requirements. Anyone converting to
Fusion Applications will need to perform extensive performance and scalability test-
ing before going live, as the bottlenecks and tuning requirements are likely to be
completely different than they used to be.
• Even in the current products, Oracle is overhauling its BI strategy, using BI Publisher
(formerly XML publisher) for reporting and OBI EE (Siebel Analytics) for performance
management. Customers will need to reimplement essentially all of their reporting.
While Oracle is promising standard upgrade scripts to Fusion, we think this is going
to be a stretch. E-Business Suite customers may get a direct master data conversion and
some mapping of option settings, but they will still have to go through all the func-
tionality and data with a fine-tooth comb. PeopleSoft and JD Edwards customers may
have to do more. In any case, moving to Fusion Applications is going to be closer to
a reimplementation—at best the equivalent of what companies go through when they
try to consolidate two separately implemented ERP instances. Oracle is promising to
transfer licenses for like functionality to reduce the cost, but this is a small part of the
budget of such an upgrade.
We are impressed with what Oracle is promising and see a lot to like about the new
Fusion Applications. For existing customers, the hurdle will be high to justify the cost
and risk of moving to them. At a minimum, Oracle will first have to prove the new
applications’ quality and scalability for large global companies.
To best understand this ongoing direction, the situation must be put in context of the
customer’s existing investment:
• Firms using CPM components from existing Oracle product lines, such as E-Business
Suite, PeopleSoft, and JD Edwards, are covered under Oracle’s Applications
Unlimited policy, with existing products maintained, enhanced, and supported for
the foreseeable future.
• The same will hold true for Hyperion customers. There will be no forced migration
to new products in advance of customer demand. But these customers will demand
guidance and direction on what path makes the most sense given Oracle’s product
strategy.
The Hyperion brand remains, with its existing product line serving as the core of
Oracle’s CPM footprint going forward. This includes planning, financial management,
and strategic finance, along with financial data quality and hierarchy master data man-
agement (MDM). Hyperion’s online analytical processing (OLAP) engine, Essbase, is
also a core component of the CPM footprint as well as Oracle’s broader PM architecture.
Supporting architectures will certainly merge over time, but for now the components of
the CPM suite will be developed in parallel and integrated based on business require-
ment. It’s interesting to note that Hyperion-based CPM is part of Oracle’s Fusion
Middleware product line, not its application strategy. A dedicated sales and marketing
organization selling CPM applications into the finance organization has recently been
established.
Without more attention to this dual position, Hyperion risks being marginalized
by buyers as being only for Oracle Application users. Hyperion’s profound presence
across SAP’s customer base was a big plus for the acquisition, but it must be vigorously
defended, with an eye toward expansion. While Oracle has governance, risk manage-
ment, and compliance (GRC) assets, they have yet to show up in its CPM product
strategy, something SAP and others will push aggressively.
In the end, Oracle has made the biggest bet on CPM and has the most to win or lose
based on its execution. Reputation goes a long way in the office of the CFO, but no
vendor can rest solely on its laurels. Proven expertise in a departmental sell in finance
gives Oracle a solid foundation for future CPM growth.
You can see this in how the unit behaves in the market. For example, companies sur-
veyed with both retail products and ERP products note the difference in how the strat-
egy is described depending on to whom they are talking. Some customers complain
they haven’t been able to get a coherent roadmap though they’ve been asking for it for
over 18 months.
A look at the roadmap shows that the GBUs seem to be concentrating on getting their
own houses in order before jumping into the Fusion Applications game. Retail is still
busy bringing Oracle-based technology into each of its acquired products and integrat-
ing them as a retail suite as a major focus of its version 13 in 2008. Wider adoption of
AIA and an integrated back office is in the release beyond that, tied to work on a retail
business process model. Communications seems to be adopting AIA a bit more aggres-
sively.
Customers in industries covered by the GBUs should understand the sequence and tim-
ing of the integration of the various Oracle products they are considering. Many will
still be like best-of-breed, standalone products for a year or more, even though Oracle’s
functional coverage maps make them appear as part of the same suite. If the product
meets your needs and the integration is adequate, that’s fine, but don’t assume more
than can be delivered.
Organizationally, Oracle has grouped responsibility for the products in a group called
Edge Applications, which includes Demantra, G-Log, and Agile. While it may not be
branded this way, it is an apt description since these products can be sold around the
edge of its major assets. Each product will have an overlay sales force to help account
teams position these specialty products.
Oracle’s ownership should increase the market for these products, seeing how most had
to focus their sales efforts on large companies in North America and Europe because of
resource constraints. Oracle’s global sales capability should create new opportunities, and
its resources will accelerate plans the software vendors couldn’t accomplish on their own.
For example, Agile was unable to capitalize on a natural opportunity for high-tech in
Asia as an independent company, but those plans are front and center under Oracle.
Oracle is also planning to use these products to penetrate SAP accounts, as many of
them had sold to SAP customers before the acquisition. The most important outcome
of this will be standard integrations, but Oracle will have to resist trying to force
Fusion Middleware into these accounts—at least in a visible way. While there is cer-
tainly a best-of-breed opportunity in SAP accounts, we hardly think that Oracle will
be able to use that to a dominant position within them. It will be just another way to
annoy a rival while making money.
Product Notes
APS (Demantra, Numetrix) Network design, demand management, sales and operations planning, produc-
tion scheduling. Well-developed integration approach prior to AIA as part of
Oracle’s SCM Suite strategy. Moving to AIA in future.
Transportation Plan better WMS integration and features for Logistics Services Providers (LSP)
Management (G-Log) planning. Existing point-to-point integration with EBS and EnterpriseOne.
Extensive AIA plans for EBS, Siebel, and Retek. Replaces EBS Transportation
Management and Transportation Planning.
Agile PLM (A9) Asian language support is a major development focus. Delivered on Oracle
Application Server for most customers prior to acquisition. Replaces EBS’s Oracle
PLM (but not PIM). Existing third-party integrations will be replaced with AIA.
Agile PLM for Process Recipes and specification management for CPG and retail. .NET based and no
(Prodika) plans to change yet, but will be offered on Oracle database. Oracle acquisition
should provide resources needed for this product to grow.
Oracle has come a long way since the 18-month fight to take over PeopleSoft. It has
developed a rational strategy to satisfy its customers while making money. We see few
downsides for any customer type and some fairly compelling upside opportunities. It
will take an ongoing comparison of your business strategy and Oracle’s execution to
maximize the value.