Oracle Makes A U-Turn At The 'All Things To All People' Exit

Oracle Makes A U-Turn At The 'All Things To All People' Exit
P.J. Jakovljevic - September 24, 2001

Event Summary

In a surprising move for many, Oracle Corporation (NASDAQ: ORCL), the largest database provider and one of the largest providers of software applications for e-business, has reportedly reversed its erstwhile stubborn strategy on avoiding integration of other vendors' software with its 11i E-Business Applications line. In a briefing with InformationWeek in late August, Mark Barrenechea, Oracle senior VP of application development, said integrating the company's applications with others' software has been "very difficult" and that Oracle was changing its strategy to allow customers to more easily integrate applications from other vendors.

Oracle will therefore publish the Applications Programming Interfaces (APIs), data definition languages, and data schemas for its 11i suite to ease integration to its product in a version of the applications due to ship in September. This is a sudden U-turn, and it could have a major impact on Oracle customers who have been waiting for Oracle's software products to match the features and functions of the best-of-breed (BOB) applications that they already own. It is also the kind of move analysts and users have been advocating to vendors in this era of multiple systems for a wide range of needs. Barrenechea said the company realizes that customers and potential buyers may not be willing to forego supply chain management (SCM), customer relationship management (CRM), or other applications they already use in order to install 11i for financials, manufacturing, and other functions.

As recently as February, Oracle pleaded with 11i users that the product offered them everything they need "if not everything they want" and advised potential customers to deploy 11i and wait for any needed functionality rather than trying to integrate software from other vendors. Now, Oracle will release its APIs and schemas to anyone who buys the upcoming release, scheduled for this fall, including competitors who may use them to do their own Oracle integration.

Barrenechea said Oracle would rely on feedback from customers and systems integrators to determine if they need to release additional integration information. Oracle will also turn to a network of system integrators in order to ensure that customers correctly use the APIs and schemas. Still, the company maintains consultants' attempts to connect Oracle applications to other vendors' software frequently results in malfunctions. Barrenechea says the company stands by that admonition, warning that customers who rewrite Oracle code to modify the applications run the risk of changing them so much that upgrades, enhancements, and bug fixes will not work.

Market Impact

The news should be no big surprise considering Oracle's actions in the past. Despite its inclination to thrive on a moderate amount of controversy and to fly a number of trial balloons, Oracle, nevertheless, has been a pragmatic company, and it has often modified its strategy and tried another tack, with more or less candidness about 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. Oracle simply could not afford any more dents on its embattled image.

The perception that Oracle had won the battle for dominance has slipped. Only a year ago, the company seemed to have won the battle. Now, PeopleSoft seems to have stolen its Internet thunder and has been on a strong comeback trial. IBM and Microsoft have been disputing Oracle's invincibility in the database market and have forced it to rethink its pricing strategies. SAP has meanwhile regained any previously lost ground owing to its slow adoption of the Internet and has also become the proponent of interconnectivity. Meanwhile there is lingering mixed perception in regard to the quality of the Oracle 11i Applications suite as well as the public fallout with its applications user group (OAUG).

Oracle seems to be waking up to the reality that the greater part of real-world IT departments are a medley of enterprise applications - trading exchanges, Supply Chain Management (SCM), e-collaboration with business partners, Product Lifecycle Management (PLM), Customer Relationship Management (CRM), and a number of other components of e-business require disparate systems to work together. Therefore, Oracle has to play with the other kids in the neighborhood, as it is unlikely that the high-end market is going to buy Oracle's integrated solution mantra - flexibility and differentiation are still the notions more valued in these environments.

The fact remains that most of Oracle's potential large customers already possess heterogeneous solutions for their overall business requirement, at least because most of them also have a significant man-hours of legacy code in place that they do not want to throw away. Even in an unlikely scenario of these customers deciding to replace existing components with Oracle's, Oracle would face a challenge of integrating with other vendors' software. It is not likely to expect that all trading exchange participants, for example, will be using the same ERP backbone. Modern ERP systems must, therefore, provide a feasible way to hook up to the exchange.

Oracle has overstretched itself by trying to be "all things to all people". This almost autistic stance has put it under siege by a number of formidable competitors, and brought it to almost a pariah status in the market. To be fair, other vendors also tout their product portfolio breadth and tight integration, and clandestinely wish to be the only vendor in the customer's organization.

Moreover, 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. They have also tailored their applications for a number of vertical industries/markets. But, none of them, except Oracle, have vocally advised 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 gets around to delivering needed enhancements.

Thus, Oracle's eventual willingness to be more flexible and humble in terms of increasing its products' openness and of reducing module interdependencies and the product's monolithic nature is commendable, and should help it succeed in obtaining more projects. 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. It would not be a surprise to see Oracle modify its adamant stance of 'no modifications' too, at least in the high end of the market. Oracle's move should also drive a slew of similar announcements from competitors and best-of-breed vendors that have been remiss in products' ease of integration. Additionally, enterprise application integration (EAI) vendors may feel the revenue pinch in the long run.

User Recommendations

Oracle's new mindset as well as the general promise of leading vendors' interconnectivity should be regarded favorably. In reality, you will probably have some best-of-breed components in your overall systems because it is very rare for a single vendor to meet 100% of a company's needs. You should strive to minimize the total number of vendors in your total business solution, though. Also, cast a skeptical eye as Oracle candidly admits this integration gimmick is merely a "bridging strategy" to accommodate customers that are not ready to ditch competitors' components at this stage. Therefore, question the long-term viability of your current best-of-bread solution involving Oracle products, given that the company does not provide pre-built interfaces to third-party products and does not have a strong track record in this area.

On a more general note, question the short-term reality of all vendors' interconnectivity plans. Since most ERP products were traditionally not devised to integrate externally, do not expect real-time external integration except for an inquiry level via portals in the short term, despite some vendors' exuberance.

Smaller companies with a need to automate many administrative (e.g., financials, human resources, customer relationship) chores should still 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. While TEC has always endorsed the "let the best applications component win in each individual selection case" mantra, in case of opting for a multiple vendor solution ensure the system's stability and unhampered high-volume transactional throughputs, as well as the main contact to call in case one vendor's portal is unable to invoke other vendors' applications. After all, Oracle's caveats and words of caution might turn out to be more beneficial to some users despite the fact that the above have not necessarily been driven by altruistic concerns.

For more information on the best-of-breed rationale, see Single Source or Best of Breed - The Debate Continues.

comments powered by Disqus