Vendor Summary
Founded
in 1977 and headquartered in Redwood City, CA, Oracle Corporation is the No.1
database software vendor with approx. 50% market share, and is the world's second
largest independent software company (after Microsoft). Oracle is also the second
largest ERP vendor (after SAP) with $2.1 billion revenue in 1998 (approx. 12%
of global ERP market), and 6000 installations worldwide. It maintains a presence
in 145 countries, with more than 50% of its revenue derived from the international
market. The Company's revenues increased from $3 billion in 1995 to $8.9 billion
for fiscal 1999 (See Oracle Corporation Annual Results Chart). The Company's
software products can be categorized into three primary product families: Server
Technologies, Application Development and Business Intelligence Tools, and Business
Applications. The Server Technologies family of products consists of distributed
database servers, connectivity products and gateways. Application Development
Tools consist of software products capable of building database applications
for deployment in both client-server and web environments. Business Applications
consist of over 45 software modules for financial management, supply chain management,
manufacturing, project systems, human resources and front office applications.
Business applications are available in more than 30 languages and run on a wide
range of hardware and operating systems. Oracle is one of the first software
companies to implement the Internet computing model for developing and deploying
enterprise software across its entire product line. The Company went public
in 1986 and currently trades on NASDAQ.
Fig. 1
Vendor Strengths
-
Outstanding
ERP market position (28% license growth in last quarter), excellent financial
situation ($1.3 billion net profit, $2.3 billion cash balance), sustained
investment in R&D (11% of revenue, 13% of workforce), strong management
team and direct sales force, large predictable service business (See enclosed
charts).
-
Trendsetter
in pioneering the notion within ERP of tapping into complex corporate information
through Web browser; recently launched Oracle Business OnLine applications
leasing initiative.
-
Very
competitive in ERP functionality and in price/performance ratio; its very
broad product portfolio has been attained both through strategic acquisitions
and internal product development.
Fig. 2
Vendor Challenges
-
The
Company has a history of management decisions that have earned it the reputation
of "vaporware" leader (See Hoover's Online Company Profile). Recent
failure of Network Computer (NC) initiative and Satellite Training initiative
might be a forewarning of recidivism.
-
Product
portfolio, achieved through a number of recent acquisitions (Datalogix,
TSC, Geodan, Tinoway, Versatility, Concentra) may see delays and costs resulting
from resolving integration issues.
-
Bitter
and relentless competition on concurrent fronts against the other software
giants, some of them still formally partners (Microsoft, SAP, Siebel) may
lead to a lack of focus on execution in ERP applications.
-
Regarded
as late entrant in ERP arena, still trailing main competitors in HR functionality
(SAP, PeopleSoft) and in manufacturing functionality (SAP, Baan, J.D. Edwards);
projected release of new enhanced supply chain suite for the end of 1999
could be significantly late to market (70% probability).
Fig. 3
Vendor Predictions
-
Steady
annual Oracle applications growth (20%-30%) in 1999, higher than those of
main competitors, however, toppling SAP's ERP market share remains very
tall order (10% probability within 5 years time).
-
CRM
and strategic procurement will be significant contributors to Oracle Applications
sales revenue (up to 35% within next 3 years), overthrowing Siebel in CRM
arena may be achievable within 3 years time (55% probability).
-
Oracle
Business OnLine has a potential of reaching 15%-25% of total Oracle applications
sales revenue within next 5 years (70% probability).
Vendor Recommendations
-
Target
Small-to-Medium Enterprises (SME) market segment with the entire product
portfolio of component applications, mainly through Oracle Business OnLine
option and through distributors' channel.
-
Use
direct sales force to expand business in existing customer base, by offering
enterprise applications beyond traditional ERP solutions (Front-Office,
Business Intelligence, Supply Chain, E-Commerce) and Vertical Industry-Specific
products.
-
Remain
committed to speedy new product introductions, particularly to enhanced
supply chain suite, by maintaining R&D budget for next year on at least
10% of sales revenue.
-
Exercise
sales, marketing and administrative cost cutting by 10%-15%, in order to
maintain profit margin expansion; Improve sales force efficiency (particularly
in terms of pre-sales client scripted scenario system demonstrations quality)
to bring revenue per sales employee in line with the rest of ERP market
(See ERP Vendors Revenue per Sales Employee Chart).
User Recommendations
-
Worth
considering in vast majority of business applications - attractive product
portfolio, with outstanding global service and support.
-
Very
strong contender in enterprise applications within following industries:
utilities, service providers, financial institutions, public sector, flow
manufacturing.
-
If
Oracle is the final choice, the following are some useful suggestions for
future clients:
-
Provide
for future incorporation of new applications components by bundling
them into contract now at negotiated license fees.
-
If
Oracle Business OnLine seems attractive as a low-cost solution now,
negotiate the possibility of switching to conventional consulting and
support, in case the remote outsourcing option is unsuccessful.