Oracle Claims The Worst Is Over And Turns To KISS For A Boost
2: The Implications
In June Oracle Corporation (NASDAQ: ORCL), the largest database
provider and one of the largest providers of software applications for
e-business, unveiled a new suite of online services aimed at capturing
the small business market. It also announced changes to appeal to its
larger customers, as well as its quarterly financial results.
is Part Two of a three-part article on recent Oracle announcements. Part
One contained the details of the announcements.
If one is to judge by the mere numbers depicting annual profit and growth,
he or she could conclude that Oracle had a satisfactory year. Oracle indeed
remains one of the largest and the most respected (or loved to be hated)
software companies, with an unbroken profitability track and a strong
balance sheet. However, it is apparent that the company is running out
of steam, and to attribute it solely to the slowing economy, simply will
not fly. Oracle must be feeling the effects of a 40% applications revenue
decline in the essential North American market, while the competition,
like SAP and PeopleSoft, reported significant growth (see
Remains One Of The Market's Beacons Of Hope and PeopleSoft:
Giving Fervent Hope To The Market And Jitters To The Competition).
Recent positive announcements of other companies that also compete in
Oracle's areas of enterprise applications, like Siebel, Manugistics,
IFS, and even resurrected Baan further add salt in the wound.
the Internet likely maintaining the enterprise applications market's growth
and given Oracle's international diversification (its applications software
did grow 24% and 42% in the EMEA and Asia Pacific markets respectively),
we expect Oracle Applications' prominence to continue. Still, its future
also remains burdened with challenges. Oracle seems to have started to
lose the perception war it had won a year ago - PeopleSoft seems to have
stolen the Internet mantra, IBM and Microsoft have been
disputing Oracle's invincibility in the database market and have forced
it to rethink its pricing strategies, while there is continued mixed perception
in regard to the 11i Applications suite.
the past, Oracle has traditionally been able to deliver just enough product
functionality in time to continue to sail the latest market waves. Oracle
has a reputation of releasing unstable software to early adopters, relying
on them to indicate the bugs and request patches afterwards, which would
in turn provide for more reliable subsequent releases to other users.
The 11i product release was no exception - over a few thousand patches
were reportedly requested by early customers and subsequently released.
Oracle deserves credit for sticking it out and for subsequently issuing
fairly stable product releases, however, the latest product release, 11i.4,
while apparently stable and much improved over its previous incarnations,
may suffer from the bad timing of the release. Namely, the customers'
weariness and wait-and-see attitude may have been exacerbated by both
the economic slowdown and the bad publicity of early 11i installations/migrations.
while Oracle may be able to provide the entire infrastructure for conducting
e-business and while it may have rounded up a portfolio of applications
for almost all aspects of e-business, it may also have overstretched itself
by trying to be "all things to all people". "The lone warrior" stance
has put it on a collision course with a number of formidable competitors,
and brought it to almost a pariah status in the market. While Oracle remains
adamant on its unitary 'one-stop-shop' tune, its competitors with currently
well performing applications can also tout strength in supporting integration
with other vendors or legacy systems on a wide range of platforms. Let's
face it, these vendors also tout their product portfolio breadth and tight
integration, and clandestinely wish to be the only vendor in the customer's
be fair, many vendors have also increasingly been encouraging their prospects
to minimize modifications and implement their software out-of-the-box
(in a 'plain vanilla' mode) regardless of the company size. Indeed, over
last two decades, applications vendors have garnered ever more out-of-the-box
functionality, which makes them suitable to satisfy the customer business
requirements without serious modifications.
players including Oracle currently offer dozens of applications that cover
a broad scope of business needs. They have also tailored their applications
for a number of vertical industries/markets. But, none of them, except
Oracle, will vocally advise their large corporate prospects to put up
with sub-optimal functionality (70%-80% of out-of-the-box functionality)
and to wait, possibly indefinitely, until the vendor can deliver needed
enhancements. This conspicuously resembles SAP's arrogant attitude during
its complacent period of the mid 1990s, which it publicly abandoned and
renounced at its SAPPHIRE user conference, acknowledging its inappropriateness
in the current market. As a result, SAP seems to have regained once stalled
momentum and to have overturned the market's bad perception. SAP's new
strategy was even publicly endorsed by former Oracle's president Ray Lane,
who has always been trusted by the market and credited with Oracle Applications
success in the past (see How
Detrimental Can a 2nd-In-Charge's Departure Be?), and whose departure
may partly be the reason for Oracle applications' recent dismal performance.
Thus, Oracle has to be willing to be more flexible and humble in terms
of increasing its products' openness and of reducing module interdependencies
if it is going to succeed in obtaining lucrative consulting projects.
It should also attempt to be more accommodating towards potential large
customers in terms of providing them with third-party and/or legacy applications
integration and with certain a level of customization. While nobody disputes
the attractiveness of simplicity, nobody can forsake flexibility at this
stage when individual products are still far from satisfying all the business
requirements of large global corporations. Also, large customers may take
issue with Oracle's insistence on using cut-and-dried best practices.
concludes Part Two of a three-part note analyzing recent Oracle announcements.
Part One contained the announcements.
Part Three continues with an analysis of the challenge of gaining competitive
advantage and the User Recommendations.