The Oracle Facts I Wanted

Questions I Wanted Answers To At Oracle Open World

Unofficial Answers I Did Manage to Get

 

Before I meet with clients or software vendors, I take some time to develop: a number of themes to discuss; hypotheses regarding their business and business environment; and/or, projections around where their business may be moving.  Going into the Oracle Open World conference, I wondered about the following:

• Is Oracle Fusion becoming the next Microsoft Vista? Was Fusion becoming a hard to pin down solution with ever-shifting delivery dates?
• Can Oracle be genuinely innovative in its application software business?  Is Oracle attempting to buy innovation through acquisitions for the most part?  Will Oracle take a more aggressive approach to application innovation instead of pursuing a lot of technical innovation and some functional innovation around the periphery of its existing application products?
• Is the Oracle customer changing or has Oracle changed its view of what makes for a good Oracle customer?  Does the Oracle customer actually care about innovation other than technical innovation?  Are some groups of Oracle customers (e.g., PeopleSoft) happy with the pace of functional innovation occurring within Oracle?
• Where is the value in all of the Oracle rhetoric?  When you cut through the discussions of acquisitions, technology architecture, middleware innovation, virtualization and extensibility, will I hear anything that sounds like "Oracle will help its customers create shareholder value"?
• Who is Oracle worried about from a competitive perspective in the application space?  With SAP, other large aggregators (e.g., Infor), new entrants (e.g., Workday) and others working quietly in the background, which of these are clearly in Oracle's gun sights?

I did not receive direct answers to many of the above.  Access to Oracle executives was highly constrained for the Enterprise Irrregulars bloggers.  Furthermore, so many Oracle executives were well coached and stayed on message so well that one need only attend the first day's events to absorb virtually any material messaging that was to emanate from this conference.

As such, I and the other bloggers went straight to the customers and partners in attendance to hear their praise, concern and frustrations.

We learned that:

§         The definition of Fusion appears to be fuzzy.  Fusion for the most part defines the middleware components that are integral to Oracle's go-to-market strategy.  It is through the use of these infrastructure products that Oracle is replacing major pieces of its acquired application software portfolio.  The hope is that existing customers will be able to utilize their current applications indefinitely.  There is clear value in allowing customers to avoid costly conversions to an all new product line especially when the new product line does not offer enough functional differentiation to generate increased business value in excess of the migration cost.  That said, I can find no fault with this aspect of the Fusion strategy.  However, in discussions with senior partner executives and with customers of Oracle's applications, there is some concern, possibly significant, that Oracle customers are frustrated with the slow pace of development of an all new, consolidated, Fusion application product line.

§         With regard to innovations in the application software product line, customers should expect two forms of innovation for the foreseeable future.  Oracle will continue to embed more of the Fusion middleware into its acquired and legacy product lines.  Oracle will also continue to include smatterings of functional enhancements to each of its application lines as well as add additional industry/vertical functionality, too.  Exactly what Oracle is doing relative to building a single unified Fusion solution set of applications, was never made clear to me.  Briefings by two different Oracle executives listed a litany of enhancements to application products (e.g., G-log, Demantra, JDE Enterprise, JDE World, Siebel, Agile, Oracle E-Business Suite, PeopleSoft and others.  Highly innovative approaches to rethinking how businesses should use application software were not apparent.  In fact, Charles Phillips and I had a pointed exchange on that subject in a briefing he granted to the Enterprise Irregulars.

§         The Oracle customer is hard to pin down but it's clear to say that it represents a cross-section of the business software buying world.  There are examples to be found of customers who are very conservative, prefer to buy from market leaders like Oracle and are comfortable with a modest rollout of new technology innovations.  They are also present customers who prefer more rapid and innovative types of business and functional improvements.  Think of the PeopleSoft customer base here.  On average, it would appear that Oracle customers are relatively content with the company; however, in the margins, it may be the reverse that is true.  Oracle is clearly benefiting from high maintenance revenue and retention rates of its customers.  It is clearly doing enough to keep retention rates up but is it doing enough to give it long-term sustainable competitive advantage?  Time may tell more on that front.  Customer defections though may rise if application software users do not get more clarity around the future consolidated Fusion product line.

§         Value was clearly a missing in action component at this conference.  In one telling panel, five Oracle executives each recapped what they believed were the more critical messages for this year's show.  If I listened correctly, not one of the individuals used the word value.  After this panel, I approached an Oracle communications executive and relayed my concern about this to him.  Without compelling value propositions, net new sales of product in the marketplace will likely languish.

§         As to competition, it never came up.  It was irritating though to hear  claims like "world's best intellectual property, most complete end to end solutions". One of the Oracle execs admitted in a keynote address that many midsized firms possess approximately 1000 applications.  Large companies, he then added, may possess 10,000 applications. If that is true then it is hard to understand how Oracle can claim to have the most complete end to end solutions in six out of seven oil and gas companies or nine out of 10 of the largest professional services firms or all of the global 500 media and entertainment companies.  No one is better at turning marketing molehills into mountains than Oracle's marketing machinery.  But the reality is that the vertical industry solutions will need dozens if not hundreds of additional new applications before any discussion of complete end-to-end solutions is fundamentally true in the marketplace.

Bottom line:

Wall Street and technology buyers operate on two very different time frames.  Software buyers, such as those buying application software, evaluate a vendor on a 10+ year time frame.  Wall Street defines short-term in minutes or hours. Wall Street sees long-term only as far as the next quarter's financial results.

Wall Street should be pleased with Oracle's progress on its Fusion front today.  Its Oracle Unlimited program will keep maintenance rates up for the next couple of years.  High maintenance rates and a reduced urgency to create a single combined application product line should keep Oracle's R&D expenses in check and drive fat margins to the bottom line.

For Oracle's customers and prospects, they may experience a mixed bag of outcomes.  Some customers will get frustrated with the lack of a new Fusion product line and will begin to look elsewhere.  Customers are also sensing that real functional innovation is occurring in companies outside of Oracle. Buyers of technology like to go with leaders not fast followers or fast acquirers. I’m not sold that buying innovation is the best way to go in all cases.

For now, I believe it's fair to characterize Oracle as relatively successful in its technology innovations and less so in its applications.  Given the database roots of the company, this should be no major surprise to users of its products.