Oracle Claims The Worst Is Over And Turns To KISS For A Boost Part 3: The Challenge of Gaining Competitive Advantage

Oracle Claims The Worst Is Over And Turns To KISS For A Boost

Part 3: The Challenge of Gaining Competitive Advantage
P.J. Jakovljevic - July 12, 2001

Event Summary 

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.

This is Part Three of a three-part article on recent Oracle announcements. Part One contained the details of the announcements. Part Two began an analysis of the Market Impact. This part continues the analysis and adds User Recommendations.

The Challenge of Gaining Competitive Advantage 

The question is "where can any one gain the competitive advantage and differentiation if all the peers are using the same business processes?" Therefore, as other established players will have made every effort to deliver integrated hybrid bundles of best-of-breed point solutions, it is unlikely that the high-end market is going to buy Oracle's integrated solution mantra - flexibility and differentiation are still the words more valued in this environment. The fact remains that most of Oracle's potential large customers already possess heterogeneous solutions for their overall business requirement; most of them also have significant man-hours invested in legacy code they are not willing to throw away. Even in the unlikely scenario of these customers deciding to replace existing components with Oracle's, Oracle would face a challenge of integrating with other vendors' software.

Oracle, however, has been a pragmatic company, and it will likely modify its strategy and try another tack, although not necessarily publicly acknowledging it. Departing from the controversial processor power unit pricing or from its initial insistence on hosting servers for its customers are good examples of the company listening to the market buzz. It would not be a surprise to see Oracle modify its adamant stance of 'no modifications', at least in the high end of the market. Just do not expect Oracle to port its applications to other database platforms.

The fact that Oracle's database still maintains the lion share amongst the SAP or Siebel customer base despite these vendors announcing IBM DB2 as their primary database may indicate the strength of the product. It is not completely inconceivable to see some Oracle-technology 'religious' users opting for going for Oracle Applications due to their seamless integration to the database and due to a strong development environment, on condition that Oracle commits to delivering the needed product enhancements within a reasonable period of time. Some components of the Oracle 11i suite may already provide a good fit for some industries without the need for any modifications, as illustrated in the above customer case studies. However, Oracle will have to maintain much closer ties with its customers and to listen to their voices, which has not been the case yet despite encouraging steps to bridge the gap with the independent Oracle Applications User Group (OAUG) (for more information, see Oracle (Finally) Learning and Applying Its Own CRM).

On the other hand, Oracle's 'one-stop' shop mantra should be a compelling message for the lower-end of the market. We were made aware of Oracle's success within the mid-market with its Fast Forward Flows programs. The fact that first-time Oracle users experienced smooth 11i implementations may be encouraging for other prospects, too. Smaller and fledgling enterprises often have undeveloped or sub-optimally developed processes and, therefore, they might benefit from leveraging Oracle's experiences in refining these and might find the Oracle Small Business Suite attractive. One should expect more fine-tuning iterations of this strategy in the future though, since the magic formula of the applications hosting success (in terms of pricing, service level agreements (SLA), etc.) has not yet been discovered. But, the move is strategically wise - it is better to fight Microsoft's bCentral offering on its ground before it comes to the enterprise market with its recent acquisition of Great Plains (see Microsoft And Great Plains - A Friendship That Turned Into A Marriage). The move is also a counteractive measure to SAP's and PeopleSoft's apparent onslaught on the lower-end of the market (see SAP Claims Big Gains In The Low-End Battleground and PeopleSoft Joins The Hunt For SMEs).

As a summary, increased competitive pressure on many fronts, and lingering mixed perceptions about the 11i Applications suite, leaves Oracle at a crossroads for sustaining the momentum it had the last year. Should 11i.4 demonstrate maturity and should Oracle start orchestrating its product releases in smaller, more manageable chunks and improve relationships with OAUG, system integrators and consulting partners, Oracle's prospects will continue to be rosy, although probably less glowing than a year ago. Oracle product strategy, marketing and execution will have to be clear and spot on though. To that end, look for Oracle's more aggressive 'the turnkey e-business' message (and a tacit soul-searching continuation) for some time to come.

User Recommendations 

It remains to be seen how the market will take the new Oracle products. The company disposes with gigantic resources and will keep on trying to find new ways to capture the market. The scope of Oracle offerings is attractive and compelling at first sight as an e-business provider must be able to address all major aspects of a company's business. But, one should observe how well Oracle's sales and service force can demonstrate the benefits of its Internet architecture-based products and fast-track implementations to the prospect or customer.

Smaller companies with a need to automate many administrative (e.g., financials, human resources, customer relationship) chores may benefit from evaluating Oracle Fast Forward Flows or Oracle Small Business Suite. But, make sure to carefully read the fine print on the contract to discern all the probable limitations and exclusions.

Despite reported improvements in 11i stability, beware of possible functional gaps and implementation issues. Existing users of earlier Oracle's instances should diligently inform themselves about their peers' experiences. Potential customers should vigorously demand a reference site with a similar company profile. In any case, insist on an SLA that will unequivocally identify either Oracle or its implementation partner responsible for fixing any glitches.

More comprehensive recommendations for both current and potential Oracle users can be found in Oracle Applications - An Internet-Reinvented Feisty Challenger.

This concludes a three-part article on recent announcements by Oracle. For details on the announcements see Part One. For an analysis of the Market Impact, see Part Two.

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