Stalled Oracle Fumbling For A Jump-Start Kit Part 3: Market Impact

Market Impact

Oracle may be getting very uncomfortable with how its protracted disappointing revenue results (possible the worst in a decade) jeopardizes its No. 2 position in the applications market. It seemed all but inconceivable over a year ago that PeopleSoft could be so close to snatching the No. 2 position from Oracle.

The sluggish economy is becoming a lame excuse for Oracle's revenue slump, as it also appears that many of Oracle's problems, particularly in the applications business, are attributable to self-inflicted wounds. Those include the initial poor quality of the 11i application suite (as reflected by an enormous number of bug fixes released so far), and problems with product service & support, muddled pricing models, and not very feasible integration to other products. Indeed, Oracle's third quarter sales and net income are down compared to the previous quarter, in contrast to many rivals (e.g., SAP, Siebel, PeopleSoft, J.D. Edwards, Baan, Manugistics, Intentia, IFS, etc.) that have not only stemmed sequential declines in sales (if they had it at all), but are also anticipating a more prosperous year of trading ahead.

It is likely that in part Oracle has become the victim of its own success of overselling its product over a year ago. Oracle cannot afford to gamble any longer with its customers' willingness to entrust it to support their complete applications, infrastructure and service requirements. The time for trustworthy leadership and spotless execution within Oracle is long overdue. It is apparent that having set its sights on transforming itself into a total e-business solution provider, Oracle has painfully realized that it takes much more commitment and execution than a well-espoused marketing lip service. Furthermore, Oracle's marketing is also out of sync with current buying patterns. Oracle still stubbornly emphasizes the "end-to-end" nature of its applications suite at a time when customers are more cautious about unwieldy monolithic applications, and many prefer instead to buy software that addresses specific, more digestible requirements.

This is Part 3 of a 4-part examination of recent Oracle announcements.
Part 1 and Part 2 detailed the announcements.
This Part begins a discussion of the Market Impact.
Part 4 makes User Recommendations.

Oracle Strengths

To be fair, Oracle still holds the worldwide No. 2 enterprise applications vendor position. There are nearly 12,000 customers in over 90 countries (on multiple languages and localized versions) and over 10,000 Oracle employees dedicated to the applications business, including approximately 4,000 developers and over $300 million applications-related R&D expense in 2001. Also, the company remains a leading provider within large corporations in the communications, financial services, manufacturing, pharmaceuticals, healthcare, transportation, and in high-tech sectors. Oracle remains a true IT powerhouse with fingers in many pies other than database, such as application servers, and development tools, which ranks it as an enterprise infrastructure provider, together with SAP, IBM at a higher and, and Microsoft at the lower end of the market.

Oracle's sweet spot, however, is still predominantly enterprises with over several dozens thousands of employees. Additionally, the company markets its E-Enterprise 11i suite direct into the original equipment manufacturers (OEMs) and Tier 1 automotive, high tech, aerospace and defense (A&D), general engineering and process industries, as well as complex project-driven sectors of engineering and construction. As for manufacturing styles, Oracle caters for almost every setup from engineer-to-order (ETO) to flow manufacturing and on to mixed mode and process industries.

The company has also been increasingly reaching to the mid-market lately. In the US, it has even introduced the Small Business Suite aimed at companies with only 10 employees up, and that version is anticipated for release elsewhere in the world some time during 2002.

As for its products and services arsenal, Oracle offers one of the broadest ranges of business applications and technology for almost the entire realm of e-business. Oracle Applications 11i e-business suite, launched over 18 months ago, exhibits not only a web-centric architecture built on standards with Java 2 Enterprise Edition (J2EE), but also the new functional scope of enterprise systems, far beyond traditional ERP. The suite, now at version 6, covers the buy side (e-procurement), inside the four walls enterprise operations (i.e., core ERP including financials, human resources (HR), business intelligence (BI), project management, manufacturing with advanced planning & scheduling (APS)), the sell side (CRM including call center, field sales, sales force automation (SFA), service & support, configuration management, order management, marketing campaigns, contract management, etc), and enterprise asset management (EAM).

There is also a considerable supply chain management (SCM) suite covering demand planning, supply chain planning (SCP), supply chain event management (SCEM), and inventory optimization. Moreover, the portfolio also caters for collaborative business-to-business (B2B) e-commerce, across the holistic supply chain for buying/selling and product development, all through Oracle Internet Exchange suite, which also includes aspects of product lifecycle management (PLM). Overall, it involves 135 totally integrated modules with still upcoming additional specific vertical functionality for a claimed 19 industries. All above have a potential for functional depth to the point of best, or one of the best, in many segments worldwide. Additionally, Oracle's strategy includes its own in-house developed mobile technologies, which it expects to see increasing use in the future.

However, although the above offering is formidable, it has lacked true differentiating, groundbreaking traits compared to competitive offering. The fact remains that it is still the best-attuned offering (in terms of pricing, vertical extensions, customizability, professional service approach, etc.) to the needs of large, Oracle-technology-religious enterprises, or for 'greenfield' sites. It appears that a real magic bullet to attract smaller enterprises or enterprises with a bundle of disparate technologies and partners is yet to be produced.


Currently, one cannot find many compelling reasons for a midsize enterprise to go for Oracle as opposed to, e.g., Microsoft Great Plains, or Navision. Rarely, if ever, has any company been able to provide a product portfolio that is on the cutting edge in more than a limited number of applications. While Oracle has a stalwart database and application server and its back-office applications are also well respected in certain vertical markets, its above new product enhancements may offer some value to its current customers, but will not likely help Oracle leapfrog competitive offering.

The company seems to have long been in a hapless search for a 'magic touch' that would differentiate its product offering. Unfortunately to Oracle, its attempts in that regard have largely been small steps in the right direction, many of them been often revisited and/or revised in the process.

Its recently unveiled 'Daily Business Close' concept with the idea of total visibility of any line of business (LOB) parameters, with drill downs, 'no exceptions', and daily closure may represent a remarkable achievement, due to the company's ability to run all of the application modules with one unified data model and one database, which should vouch for one instance of 'the truth' for everything without inconvenient batch updates, integration and data synchronization issues. Still, it is questionable whether this feature should be a compelling order winner.

Oracle also continues to ring changes around its mantra of standard, pure vanilla, all-encompassing enterprise applications. Although it is not yet giving up on being a single vendor solution, it has at least recently modified advice to users is an incremental, 'slice-by-slice' phased approach to deployment. This may indicate Oracle's grasp of the reality that a vast majority of its customers are only upgrading some components of the suite. The idea to build out from core enterprise business process automation to other more sophisticated outward-facing processes would be generally attractive if the ultimate target was not to replace all current systems with Oracle's e-business suite. Although this may be a compelling proposition to 'greenfield' sites (and how many of these are still out there?), many enterprises might remain skeptical or unimpressed when faced with the complexities of integrating with multiple legacy enterprise systems and more recent third-party, best-of-breed applications investments.

Oracle will have repeatedly realized with a heavy heart that the vast majority of real-world IT departments are a concoction of all sorts 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. Oracle, in its mission to conquer the B2B e-commerce and back office needs of the corporate world, has introduced a very large all-encompassing solution suite. While it may still hope to dominate the back office, not many companies will adopt such a broad solution platform solely from Oracle. Rather, they will adopt only those functionally strong components that readily integrate to other, legacy solutions. Therefore, Oracle's recent endorsement of open technologies such as Java may allow customers to readily adopt only those solutions that fit their needs and that quickly integrate with their existing infrastructure.

This concludes Part 3 of a 4-part examination of recent Oracle announcements.
Part 1 and Part 2 detailed the announcements.
This Part begins a discussion of the Market Impact.
Part 4 makes User Recommendations.

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