November 2007
Oracle’s Applications Strategy—
What’s Your Five-Year Plan?
by Bill Swanton and Lee Geishecker
Oracle has bought 36 software companies, including 21 application and business
intelligence vendors, over the past three years. Its customers are rightly concerned
that the company could lose focus—to the detriment of their application
investments. So far, however, Oracle seems to be delivering on its promises for all
types of customers.
Enterprise Strategies Report
Acronyms and Initialisms
API
Application programming interface
HCM
Human capital management
B2B
Business to business
HR
Human resources
BI
Business intelligence
KPI
Key performance indicator
BOM
Bill of materials
LSP
Logistics service provider
BPM
Business process management
MDM Master data management
CPG
Consumer packaged goods
MRP
CPM
Corporate performance management
OLAP Online analytical processing
CRM
Customer relationship management
PDA
Personal digital assistant
CRUD Create, read, update, and delete
PLM
Product lifecycle management
EAM
Enterprise asset management
PM
Performance management
EPM
Enterprise performance management
SOA
Service-oriented architecture
ERP
Enterprise resource planning
UI
User interface
GRC
Governance, risk management, and
compliance
WMS
Warehouse management system
Materials requirements planning
© Copyright 2007 by AMR Research, Inc.
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Oracle’s Applications Strategy—
What’s Your Five-Year Plan?
by Bill Swanton and Lee Geishecker
Oracle is executing on a multilevel consolidation strategy designed to keep
customers happy and paying maintenance fees for their original products,
create a cross-sell opportunity with packaged integration, and deliver a
surprisingly functional next-generation Fusion Applications product.
The
Bottom
Line
Executive
Summary
Oracle has bought 36 software companies, including 21 application
and business intelligence (BI) vendors, over the past three years.
Companies that woke up one morning to find themselves Oracle
customers worry their product and support will change for the
worse. Long-time customers worry that the company will lose focus.
Our interviews with dozens of customers and Oracle executives show that, so far,
Oracle is successfully maintaining the existing customer base and delivering on its
Applications Unlimited promise to keep enhancing these products. Newly acquired
customers interested in only a single application and keeping their non-Oracle technology stack can continue as they were. Companies willing to more fully embrace Oracle’s
strategy have more options. From our research, we found the following:
• While some skepticism remains, Oracle’s multilevel strategy lets customers adopt a
stance that makes them comfortable.
• Oracle is delivering enough enhancements to existing applications to keep customers
reasonably happy.
• Oracle is dealing with its overlapping application portfolio by segmenting its target
market.
• Oracle isn’t forcing the adoption of Fusion Middleware, but more of its technology
will seep into every application.
• Application Integration Architecture (AIA) is the near-term opportunity for most
customers to get more value out of their Oracle investments.
• Fusion Applications are a direct descendent of E-Business Suite, are heavily influenced by Oracle’s other products, and will have net-new distributed order management functionality.
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
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• Oracle’s ever-changing BI and corporate performance management (CPM) strategy
has strong products, but will leave many customers having to deal with existing
investments in nonstrategic products.
• Industry-specific Global Business Units (GBUs) are focusing on integrating acquired
applications and seem slower to adopt AIA and Fusion technology.
• Edge applications and Siebel are natural cross-sells to the other application platforms, but Oracle dreams of using them to penetrate SAP’s installed base.
Companies should look at Oracle’s offerings and pick one of two strategies: either focus
on maintaining your current individual application investment as a standalone or start
adopting Oracle middleware and complementary applications. For companies following
the second strategy, Fusion Applications are an interesting option, but there is no need
to commit to them today.
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© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
While some skepticism remains, Oracle’s multilevel
strategy lets customers adopt a stance that makes
them comfortable
Despite the worst fears of many, few customers have made major changes in their application strategies because of Oracle’s acquisition of their product. The most common
complaints are the loss of influence over a product that was formerly owned by a small
company and long-time E-Business Suite stalwarts losing connections as Oracle reorganizes to absorb its acquisitions and staff its Fusion Applications strategy.
Oracle’s strategy has let its customers self-select into a role that makes them feel both
comfortable and content they are getting value from the ongoing Oracle relationship.
We are seeing these customers fall into five roles:
• Single product loyalist—Loyalists continue to focus on the same product and ongoing enhancements, sticking with the technology stack they have always used. They see
Oracle as essentially a consolidator that brings more stability for their product at perhaps
a higher annual maintenance fee. Many JD Edwards customers fall into this camp.
• Multiple product expansionist—The expansionists are starting to see the advantages
of buying more products from the same vendor and holding that vendor responsible for
the integration. Typical members of this group are E-Business Suite customers that are
looking at Siebel, Demantra, and G-Log as they expand their footprints.
• Industry specialist—Industry specialists entered the Oracle fold through its many
acquisitions in retail, communications, utilities, and financial services. Depending
on how many products they own, they may look to Oracle for integration. This
group included the least happy companies, specifically those pursuing a best-of-breed
strategy based on a different technology stack, such as from BEA Systems, IBM, or
TIBCO. Many are sitting on the fence until they understand the uptake of Oracle
technology by the industry business units.
• Best-of-breed opportunist—The opportunists have often chosen SAP as their backbone system and became Oracle customers because of the acquisition of products like
Agile, Demantra, G-Log, and Siebel.
• New architecture adventurer —We found no companies that are fully committing
to move to Oracle’s new Fusion Applications, but we expect it will take a rare breed.
Most existing customers will stick to the safety of their existing products, which
Oracle has promised to continue to enhance for some time to come.
Regardless of role, all the companies seem to appreciate the potential upside of the
Oracle strategy. After a few years of working with Oracle, they also see little downside
and are content to continue watching how the strategy evolves. In fact, once Oracle
accounts for over half of their enterprise applications footprint, most companies adopt
an Oracle-first policy of seeing if Oracle’s product meets their needs before investigating
other vendors. They like the idea of single vendor responsibility.
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
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Table 1: Oracle acquisitions, January 2005 to November 2007
Company
Date
Category/Purpose
PeopleSoft (including JD Edwards)
Jan-05
Core applications
Oblix
Mar-05
Middleware—identity management
Retek
Apr-05
Retail
TripleHop
Jun-05
Middleware—search
TimesTen
Jun-05
Communications—in-memory database
ProfitLogic
Jul-05
Retail—price optimization
Context Media
Jul-05
Middleware—content management
i-flex
Aug-05
Banking
G-Log
Sep-05
Best-of-breed application—logistics hub
Innobase
Oct-05
Open Source—database
Thor Technologies
Nov-05
Middleware—identity management, provisioning
OctetString
Nov-05
Middleware—identity management, virtual directory
TempoSoft
Dec-05
Best-of-breed application—workforce management
360Commerce
Jan-06
Retail
Siebel
Jan-06
Core applications—CRM
Sleepycat
Feb-06
Open source—database
HotSip
Feb-06
Communications—carrier-grade communications infrastructure
Portal Software
Apr-06
Communications—billing and revenue management
Net4Call
Apr-06
Communications—service delivery platform
Demantra
Jun-06
Best-of-breed application—demand management
Telephony@Work
Jun-06
CRM—CRM IP call center
Sigma Dynamics
Aug-06
Analytics—time-based data
Sunopsis
Oct-06
Middleware—data integration
MetaSolv Software
Oct-06
Communications—service fulfillment
Stellent
Nov-06
Middleware—content management
SPL WorldGroup
Nov-06
Utilities—customer care
Hyperion
Mar-07
Business intelligence / performance management
Tangosol
Mar-07
Middleware—extreme transaction processing
AppForge
Apr-07
Mobile applications
LODESTAR
Apr-07
Utilities—load analytics
Agile (including Eigner and Prodika)
May-07
Best-of-breed application—PLM
Bharosa
Jul-07
Middleware—fraud detection
Bridgestream
Sep-07
Middleware—identity management
Netsure Telcom Limited
Sep-07
Communications—network business intelligence and reconciliation
Logical Apps
Nov-07
Governance, risk management, and compliance
Interlace Systems
Nov-07
EPM—operational planning
Source: AMR Research, 2007
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© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Oracle is delivering enough enhancements to existing
applications to keep customers reasonably happy
Most customers feared that Oracle would put their product on life support, keep charging maintenance, and try to push them to Fusion Applications. It hasn’t worked out
that way. From a dispassionate financial point of view, these acquisitions only work if
Oracle keeps companies committed to the product and continuing to pay maintenance.
Customers are rightly griping that, in many cases, Oracle raised the software maintenance fees to its relatively high 22%, and spent much of that on new industries and
products. But all software vendors play this game to some extent.
As shown in Table 2, Oracle has fairly significant new functionality scheduled for the
next releases of all its major product platforms. This functionality, which is not groundbreaking, is based on demand for enhancements from the customer base. Oracle is being
responsive to the base by maintaining separate development organizations for each product family. Only in the BI and performance management (PM) space described below
do we see any evidence of significant products being put out to pasture.
Table 2: Application Unlimited—enhancement continues
Application
Next Release
E-Business Suite
12.1
Selected Areas of Enhancement
System maintenance tools, SOA enablement,
AIA PIPs, globalizations and localizations,
PIM for Retail, spare parts, demand signal
repository, price protection, manufacturing
transaction hub
Siebel
8.1
Self-service applications, Loyalty, AIA
PeopleSoft
9.1
Talent management, business process automation, EAM, enhanced procure to pay, AIA
JD Edwards
EnterpriseOne
9.0
AIA, localizations, order fulfillment workbench, kit processing, configurator, outbound consignment
JD Edwards World
Demantra
G-Log
Siebel CRM
On Demand
A9.1.2
7.2
7
15
Expanded use of Fusion Middleware, costing,
government contracts
S&OP enhancement
Global trade management, fleet management, AIA
Sales productivity applications, PDA support,
dashboards, AIA
Source: AMR Research, 2007
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
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Many are skeptical that Oracle can afford to keep these teams together and still build
Fusion Applications. It boasts about retaining a high percentage of the development
and support staffs in every acquisition, as well as staffing the Fusion Applications development with thousands of engineers. How does it make the numbers work? The argument goes like this:
• Acting as a consolidator, Oracle can take over a product, eliminate most back-office
and many sales personnel, raise maintenance fees, and essentially keep all of the
development and support people associated with the product. This consolidation
model is well proven in companies such as Infor.
• For each of its major platforms, including E-Business Suite, PeopleSoft Enterprise,
JD Edwards EnterpriseOne, and Siebel, Oracle has had a team building the underlying middleware and tools for a next-generation product. These efforts were consolidated into a single effort on Fusion Middleware, freeing up head count to staff the
Fusion Applications effort.
Over time, Oracle will shift more of its efforts to newer products, but we do not expect
them to kill off any products as long as there is a maintenance revenue stream coming
in. A prime example is the JD Edwards World product, with its imminent demise predicted for more than 10 years through three corporate owners. It is still supported and
enhanced to this day. Another example of Oracle’s continued support is Rdb, which
was acquired from Digital in 1994.
Oracle is dealing with its overlapping application
portfolio by segmenting its target market
Too many people assume that software companies only acquire others to get functionality for their core product. While such strategic acquisitions were the rule a few years
ago, Oracle is big enough to manage a portfolio. It may have multiple products that fit
a customer’s needs, but this can be worked out in the field based on the nature of the
opportunity and the resources at hand to close and service it. Table 3 lists the major
Oracle application platforms and how they are positioned.
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© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Table 3: Handicapping the major Oracle platforms
Platform
Key Roles
Target Market
E-Business Suite
Major back-office (ERP) platform
Large, global companies with
centralized IT strategies
Siebel
Major front-office (CRM) platform
Large CRM, especially call
centers
PeopleSoft
Lead for government and education
Comprehensive HCM and
lead enterprise-wide in government and education
JD Edwards
EnterpriseOne
Alternate back office (ERP)
Construction and facilities
management companies,
less-than-$500M manufacturing sites, food and beverage
(grower management)
JD Edwards World
Keep the base happy
Existing customer base
Hyperion
Corporate performance management, including consolidation, budgeting, and planning
Large companies
Source: AMR Research, 2007
Companies frequently complain about Oracle’s overlapping sales forces. As one executive told us, “I don’t have time to manage five strategic partnerships.” Though it is still
evolving, a customer is often visited by separate sales teams for the following:
• Database
• Middleware technology
• Back-office applications (E-Business Suite, PeopleSoft, JD Edwards)
• Front-office applications (Siebel)
• BI/PM technology (Siebel Analytics)
• BI/PM applications (Hyperion)
• Industry-specific applications (retail, communications)
• Overlay sales teams for specialty products (Demantra, G-Log)
Oracle claims it is increasing account coordination, especially for its larger customers.
We have yet to see this in effect. In reality, each of these sales teams has a number to
meet and will pursue it independently. We don’t expect this to be simplified any time
soon, given Oracle’s ongoing acquisitions and propensity to reorganize sales.
Figure 1 demonstrates Oracle’s extensive portfolio, though any one customer should
only be exposed to a portion of it if Oracle handles the segmentation correctly in the
field. The portfolio has four major segments:
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
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• Technology stack—Oracle was first a technology provider and then an applications
provider. Recent versions of applications like E-Business Suite are coordinating these
product lines better than in the past and delivering on the current version of technology products. While Oracle continues to support non-Oracle technology stacks for
acquired applications, such as IBM’s WebSphere, it is also trying to make more of
them run on Oracle technology, especially the database and application server. This
starts tapering off when it comes to the development tools, as most of the acquired
products had their own, such as PeopleTools. We expect Oracle to be very pragmatic
in determining what to adopt by product line.
• Enterprise performance management—The Hyperion acquisition and widespread use of Oracle Business Intelligence Enterprise Edition (OBI EE), a.k.a. Siebel
Analytics, across applications makes this the greatest area of change.
• Horizontal applications —The major platforms for Oracle target many industries.
E-Business Suite is the dominant back-office application, and Siebel the dominant
front-office application for large global enterprises. Pragmatically, PeopleSoft is marketed as high-end human capital management (HCM) for those wanting a separate
application. PeopleSoft also takes the lead in the education and government sectors,
where it had specialized functionality and a dominant share. Conversely, JD Edwards
is targeted at smaller or site-level manufacturing as well as niche markets for construction and food and beverage that require grower management. The Edge applications (described later) can be cross-sold across many platforms.
• Vertical applications —Trying to fit all industry-specific functionality into the core
horizontal applications was taking too long and adding complexity. Instead, Oracle
started buying up best-of-breed applications in particular target markets, forming
GBUs dedicated to these markets in retail, communications, banking, and utilities.
The long-range plan is to cross-sell the back- and front-office applications.
It is important to realize two things:
• These applications were acquired over three years, and it takes time for the overall
strategy to permeate the product. Oracle tends to remediate the applications initially,
in particular removing any open source components and then starting a slow process
to get the application to use more of the Oracle technology stack as an option.
• The company is extremely pragmatic in deciding how fast to make investments and
changes. It won’t do anything to alienate the customer base and may put off changes
if the product was recently upgraded. The main consideration will be market opportunity and demands from existing customers.
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© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Any given customer will only be interested in a portion of this portfolio based on size,
industry, and existing investments. Oracle’s challenge will be to articulate a segmentspecific view clearly to these customers so they understand their choices and opportunities. While the company will happily sell them anything, customers don’t want to
be the lone company with a particular array of products. They need to understand the
ones it treats as strategic combinations. Oracle still has a way to go to articulate this
message clearly in terms of industry-specific portfolios by company size.
Figure 1: Positioning of Oracle’s Application Portfolio
Banking
Communications
Utilities
Retail
MetaSolv
Horizontal
Apps
Net4Call
iFlex
PeopleSoft
Enterprise
Portal
Lodestar
SPL
Siebel CRM
Fusion
Applications
Services
E-Business Suite (EBS)
EPM
360Commerce
Retek
Edge Apps
Vertical
Apps
Education
and
Government
ProfitLogic
Real Estate
Construction
JD Edwards
EnterpriseOne
Manufacturing
Hyperion
Financial PM
Transactional
PM
Operational
BI
Technology
Stack
Native Dev Env (J2EE/PLSQL)
Oracle Application Server
Tools (BI Publisher, Ent. Mgr., AIA, UPK. etc.)
Oracle Database
Source: AMR Research, 2007
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
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Oracle isn’t forcing the adoption of Fusion
Middleware, but more of its technology will seep into
every application
Oracle has been reassuring companies that don’t use its middleware that it will continue supporting other technology stacks, such as IBM in the JD Edwards products
and BEA Systems in PeopleSoft Enterprise. For the single product loyalists, this should
enable them to maintain, but perhaps not expand their use of Oracle products.
Oracle, however, is also cross-pollinating many application platforms with supporting
technology for system management, analytics, and training. Examples of these tools are
shown in Table 4, clearly showing it is using some of the best aspects of its acquisitions
to improve them all.
This strategy should improve all applications, but it is unclear how this will affect customers using products outside the Oracle technology stack. In some cases, the tool is
being ported into an application’s underlying toolset. In others, application-specific content, such as analytics or support information, is being created for that application. This
may lead to the Oracle technology stack finding its way into any environment over time.
Table 4: Sample of cross-platform technology
Technology
Origin
Value
OBI EE
Siebel
Standard analytical models for various industries, with productized
extracts from applications.
BI Publisher
EBS
Formerly XML Publisher, decouples data extraction from formatting
and language for more flexible reporting and B2B messaging.
Enterprise Manager
Oracle RDBMS
Common systems management for database, middleware, and all
applications.
Application Integration
Architecture (AIA)
New
Application-independent integration strategy to allow loose coupling of multiple Oracle products.
Universal Productivity
Kit (UPK)
PeopleSoft
Online help and training tool.
WebCenter
Middleware
Unified user experience across multiple applications in context. For
example, get HR data from PeopleSoft Enterprise on the screen with
transaction data related to that employee from EBS.
Industry Models
PeopleSoft
Four-level business process models for 30 industries, 22 processes,
and 200 activity flows, which are application-product independent.
The fourth level is approx. 1,000 platform-specific activities and over
5,000 tasks. These models should drive more standardized implementations through Oracle Process Architect (IDS Scheer’s ARIS).
Source: AMR Research, 2007
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© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
AIA is the near-term opportunity for most customers
to get more value out of their Oracle investments
For the past 10 years, major enterprise software vendors have trumpeted the virtue of
buying an integrated applications suite from a single vendor because it avoided building and maintaining costly integration between best-of-breed packages. In the 1990s,
Oracle had tried the best-of-breed route with a group offering known as Oracle CPG,
bringing together six best-of-breed vendors for a dream suite aimed at consumer goods.
That effort soon collapsed as everyone realized the integrations between these components were version specific and all the vendors had to upgrade in lockstep for it to work.
So how is Oracle going to sell its new portfolio of best-of-breed applications? The
answer is packaged integration with a twist. Figure 2 shows Oracle’s Application
Integration Architecture.
Figure 2: Role of Application Integration Architecture (AIA)
E-Business
Suite (EBS)
Siebel CRM
Edge Apps
ABCS
ABCS
ABCS
Application
Business Connector
Services (ABCS)
Industry Reference Models
Process Integration
Packs (PIPs)
Based on Open
Application Group
Object definitions
Foundation Pack
ABCS
Fusion
Applications
Business objects and
services supported natively
by Fusion Applications
• 25 Enterprise Business Objects
• Basic Services
Oracle Fusion Middleware
ABCS
PeopleSoft
Enterprise
Siebel CRM
On Demand
ABCS
JD Edwards
EnterpriseOne
For ecosystem
to develop integrations
ahead of PIP availability
ABCS
Industry Apps
Source: AMR Research, 2007
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
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Oracle started with the Open Applications Group (OAG) business object documents.
This standard contains definitions for things like items, purchase orders, and customers
as part of an object-oriented framework. Oracle used these to define a standard set of
objects and services independent of any particular application that serves as a neutral or
canonical object that can be used to communicate between applications. The company
has identified approximately 100 of these and has detailed definitions for 25 so far.
Oracle’s final versions have been adjusted to better map them to all the different applications in the portfolio.
These object definitions have been packaged with basic create, read, update, and delete
(CRUD) services as the enterprise services Foundation Pack, which can be used in conjunction with Fusion Middleware to build integration scenarios. This package will be
made available to third-party developers and service provider partners to encourage an
ecosystem to grow around AIA technology. These object definitions will be consistent
with the service objects natively supported in the upcoming Fusion Applications product, so the near-term integration and longer term replacement product strategies are
closely coordinated and will support interoperability between older applications and the
new product.
Few customers want to build their own integrations, so Oracle is creating packaged
Process Integration Packs (PIPs) to do well-defined integration scenarios. (The name is
unfortunate, as the acronym is the same as RosettaNet’s Partner Interchange Processes,
which is a slightly different concept.) One early example is the Siebel CRM Integration
Pack for Oracle E-Business Suite Order Management, which covers a specific scenario
and products. Some of the early scenarios are listed in Table 5.
The Oracle PIPs are intended to deal with integration scenarios across multiple products,
typically an extended business process that is beyond the scope of any one of them. The
same group at Oracle is building a set of business process reference models. The top 3
layers cover 30 industry models, 22 high-level process flows, and over 200 detailed business processes that are common across all the applications. The next level down focuses
on individual activities and is application specific. This activity started at PeopleSoft
before the acquisition and has been expanded to the other Oracle applications.
All of the components discussed so far are application platform independent, a common language for all to speak. Each development group is building Application
Business Connector Services (ABCS) for each application to translate the common
object and services into specific internal objects and application programming interfaces
(APIs) to implement the services. These will have to be built out over time. While some
can be retrofit into existing application releases, others will require internal changes to
the application and will have to wait for a future release.
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© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Table 5: Application Integration Architecture priorities
Expected
Availability
Process Integration Packs (PIPs)
Siebel CRM On Demand Integration Pack for Oracle E-Business Suite
Available
Siebel CRM Integration Pack for Oracle E-Business Suite Order Management
Available
Siebel Call Center Integration for Oracle Adverse Event Reporting System
Available
Siebel CRM Integration Pack for Trade Promotion Management
Available
Siebel CRM Integration Pack for Banking Account Originations
Available
Siebel CRM Integration Pack for i-flex FLEXCUBE Account Originations
Available
Siebel Universal Customer Master Integration Pack for Oracle E-Business Suite and Siebel CRM
2008
Siebel CRM Integration Pack for Oracle E-Business Suite Order Management
2008
Oracle E-Business Suite Integration Pack for Demantra: Demand Forecasting
2008
Oracle E-Business Suite Price Protection for Oracle Trade Promotion Management
2008
Siebel CRM Integration Pack for Demantra: Trade Promotion Optimization
2008
Agile Integration Pack for Oracle E-Business Suite: Product Lifecycle Management
2008
Oracle Product Information Management Integration Pack for Siebel CRM and E-Business Suite
2008
Oracle Transportation Management Integration Pack for E-Business Suite
2008
Oracle Transportation Management Integration Pack for Siebel CRM and E-Business Suite:
Logistics Service Provider
2008
Siebel CRM Integration Pack for Oracle Communications Billing and Revenue Management:
Order to Bill
Available
Siebel CRM Integration Pack for Oracle Communications Billing and Revenue Management:
Agent Assisted Billing Care
Available
Oracle Communications Billing and Revenue Management Integration Pack for Oracle E-Business
Suite: Revenue Accounting
Available
Siebel CRM On Demand Integration Pack for JD Edwards
2008
Siebel CRM On Demand Integration Pack for Siebel On-Premise
2008
Oracle Retail Merchandising Integration Pack for EBS R12 Fin and PSFT 8.9 Financials
2008
Oracle Retail Merchandising Integration Pack for Oracle PIM Data Hub
2008
Oracle Retail Merchandising Integration Pack for Oracle Retail Stores and Oracle Transportation
Management
2008
Source: AMR Research, 2007
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
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There are two big advantages to this approach:
• If done right, the integration scenario encoded in the PIPs is independent of the
specific release of the applications at each end. So you could do an upgrade on your
E-Business Suite without having to also upgrade your Siebel front office.
• The integration scenarios should be independent of specific applications, allowing
them to be reused for a similar problem with different applications. For example,
most of the work needed to get Siebel orders to E-Business Suite would also apply to
get Siebel orders to JD Edwards EnterpriseOne. This should give Oracle some economy of scale to keep up with all the variations.
The AIA will satisfy customer demands for integration of acquired applications, while
creating a gradual migration path to the future Fusion Applications. The PIPs, combined with the business process management (BPM) tools in Fusion Middleware, will
give customers an opportunity to implement cross-functional business processes and
then create a unique competitive advantage on top of standard enterprise applications.
One thing that becomes apparent when looking at the list of planned PIPs is the
importance of Siebel in Oracle’s plans. Siebel is being positioned across almost every
industry and integrated with almost every other product. We expect this to be a major
part of Oracle’s cross-selling efforts.
Obviously, Oracle has to execute extremely well to monetize this strategy. It can’t let
creeping complexity derail the promise of easy business process improvement. It has
to keep a lid on the total cost of ownership, maintain software quality as it brings in
the new tools, and be wary of creating operational issues like excessive downtime for
updates or maintenance. But still, it has created one of the most compelling strategies
AMR Research has seen in quite a while.
For current Oracle customers, AIA is the space to watch. It will be the key to costeffectively applying other pieces of Oracle applications in your landscape. The trick will
be to understand where Oracle is making its investments and not get ahead of where it
has built standard PIPs to support the scenario you have in mind.
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© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Fusion Applications are a direct descendent of
E-Business Suite, are heavily influenced by Oracle’s
other products, and will have net-new distributed
order management functionality
Another myth about Oracle’s strategy is that it plans to combine the code bases of all
the products it bought into one product. Nothing could be further from the truth.
What it is instead doing is tapping the best ideas and designs from each product as it
builds new ones and, in some cases, redesigning the function if none of the products
did it well. Retention of the designers from all the products was critical here, in addition to creating cross-product process councils to discuss the ideas and guide development of Fusion Applications.
The best of the ERP and CRM data models
As shown in Figure 3, Fusion Applications draw on a variety of the applications Oracle
built or acquired. The E-Business Suite ERP data model and even large amounts of
core transaction processing code have been brought forward to Fusion Applications.
Especially in the core financials, this should make potential users far more comfortable than trying out a product built from scratch. Another key part of the data model
is E-Business Suite’s Trading Community Architecture (TCA), which models business
partner hierarchies for customers and suppliers. BI Publisher (formerly XML Publisher)
will be moving to Fusion as well.
While little actual code or data structures is coming from PeopleSoft Enterprise, the
ERP data model was extended by mimicking several useful organizational concepts.
These included organizing items into tree structures, such as people into organizational
charts, the ability to look at the data as of a certain date, and the SetID security construct. Oracle also drew on the PeopleSoft Enterprise user interface (UI) design and the
idea of using design patterns for consistency across functions as it reimplements most of
the UI with its WebCenter tool.
Another important concept from the PeopleSoft area is a pillar deployment strategy.
Fusion Applications will be distributed in at least three major pillars: ERP (finance and
supply chain), CRM, and HCM. While it can be deployed as a single instance with
all three, customers will also have the ability to set up three separate systems with prebuilt AIA integration between them. This flexibility allows changes and upgrades to be
decoupled between the pillars (for example, allowing the annual statutory upgrades to
be made to the HCM instance without affecting 24/7 supply chain operations).
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
15
Siebel is contributing the CRM data model, including sales and marketing objects such
as promotions, but not the core customer definition that is coming from TCA. Siebel
was stronger on consumers than B2B, so its householding concepts will be included in
the customer data model.
While little specific data models or code came from other applications, such as JD
Edwards EnterpriseOne, Oracle has systematically compared how various functions
were implemented in each product and picked the best ideas for Fusion Applications.
We expect EBS customers to be comfortable with the result, though Oracle still will
have to make a good case for them to upgrade.
Figure 3: Fusion applications genealogy
E-Business
Suite (EBS)
11.5.10
12.0
12.1
• ERP
• XML Reporting
• Transaction Code
• TCA
Fusion Middleware
Development
Environment
Fusion
Applications
PeopleSoft
Enterprise
Siebel
JD Edwards
EnterpriseOne
V1
• Tree Structures
• Date Effectivity
• SetID
• UI Design
• Pillar Deployment
8.x
9.0
AIA
• Business Objects
• Services
V2
• Siebel Analytics (OBI EE)
• CRM Data Model
• UCM Householding
9.1
8.0
8.1
8.9
9.0
All codelines of all
products were assessed
and functionality ideas
incorporated in Fusion
Applications design
Source: AMR Research, 2007
16
© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Strong initial functionality
Functionality will be critical to Fusion Applications adoption. Many of us assumed that
the initial version of the applications promised for 2008 would be a bare minimum,
such as just core financials and procurement. This would have been a credible footprint, mimicking many of the E-Business Suite implementations today and filling the
need for many of the new vertical industries Oracle is targeting with its GBUs. Oracle,
however, is planning much more functional coverage and even net-new functionality as
shown in Figure 4:
• The ERP pillar will be a fairly complete coverage of financials, procurement, inventory, and supply chain, but will not include manufacturing in the first release. It will
handle buying, selling, and moving material, but not creating new items through
MRP, bill of materials (BOM), and routings. Some specialized industry capabilities,
such as clinical trial support for the life sciences vertical, are also out of scope.
• While lack of manufacturing may seem a large impediment, Oracle is targeting the
manufacturing brand owners that are heavily outsourced and retailers with a new
distributed order management capability not present in the existing products. This
will let a single order be parceled out for fulfillment to multiple partners, warehouses,
and eventually internal plants, with full visibility to order status. Solutions to this
problem in the past usually involved customizations, nonintuitive internal sales order
processes, difficulty in invoicing, and lack of visibility. For many companies, this
single capability may be the biggest attraction of Fusion Applications when they consider upgrading.
• Manufacturing will be part of Fusion Applications version 2. Oracle is considering
making it a separate pillar, which would allow separate manufacturing instances
linked to a single global financial and supply chain instance. This would give more
options for downtime scheduling for 24/7 manufacturing operations.
• The CRM pillar will contain much of the Siebel horizontal functionality, but vertical-specific capabilities will be in future versions.
• The HCM pillar will contain most of the HR functionality customers expect from
PeopleSoft and E-Business Suite, but some of the other constructs, such as educationoriented functionality, will be in the future.
Figure 4 is just a rough picture of what is planned, based on conversations with Oracle
executives. The devil will be in the details, as companies discover whether their pet
features are in or out and whether a function was completely redesigned for the new
product.
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
17
Figure 4: Fusion Applications target broad functional parity in V1
V2
V1
V3
Data Hubs
Financials
Procurement
ERP
Pillar
Supply Chain
Dist. Order Mgmt.
Manufacturing
New Capability
Possibly Separate Pillar
EAM
CRM
Pillar
CRM
HCM
Pillar
HCM
Horizontal
None
Some
Vertical
Much
Most
More
Functional Parity versus EBS 12, PSFT 9.0, Siebel 8.0
Source: AMR Research, 2007
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© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Easier to use, maintain, and tailor…
Meeting or exceeding functionality is only part of the story. Despite the DNA from
other products, Oracle is doing a lot of things fundamentally differently, which will
make Fusion Applications attractive.
From an operational point of view, the pillar strategy and promise of downtime minimization improvements might be a good hook for IT groups at large global companies
that are feeling pressure to reduce scheduled downtime of business-critical systems. The
company is designing the product so that a patching session or upgrade starts with a
snapshot of the database and the bulk of the work is done offline. The existing release is
still running, and database stream technology is used to queue up ongoing transactions.
A much smaller downtime window is then used to flip over to the new code and converted data and bring it up to date with the transaction stream.
The pillar strategy will also allow companies to decouple parts of their landscapes for
easier maintenance as well as do patching and upgrades at different intervals. There is
also the potential for having some pillars as global single instances, while others may
be implemented regionally. Prebuilt AIA integration should still allow the benefits of a
global single instance.
Oracle has further improved its software development process, instilling more discipline
and quantitative tracking of quality indicators. This, combined with the use of declarative business rules, putting application logic in the objects and services instead of the
UI, and a better role-based security model, has reduced the duplication of code, which
led to errors in the past.
The UI is far more intuitive, with worklists and context-sensitive pop-up menus of
useful features available in most places, such as employee names, company names,
addresses, and dates. For example, you can quickly start an e-mail, chat with an
employee, or access financial information web sources about a company right from the
screen. Oracle is also adding Web 2.0 concepts like social networking as optional toolbars and extensively embedding BI portlets in the UI.
The company has a special team working to simplify setup, configuration, and administration of the applications. It is building in business-level key performance indicators
(KPIs) for measuring processes and monitoring the health of the applications. These
supplement more technical monitoring in Enterprise Manager, aiding the applications
team in maintaining service levels. A major goal has been to reduce the time and man
hours spent maintaining the system.
The BPM capabilities in Fusion Applications will be more extensive than in any other
suite we know of. Since Oracle externalized in BPEL much of the built-in workflow, it
will be easier for customers to create customized workflows to give them unique, competitive capabilities without customizing core product code.
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
19
…but it is still a sizeable upgrade project
Getting to Fusion Applications will be an interesting challenge. Here are some things
for companies converting from E-Business Suite to consider:
• The overhauled UI eliminates Oracle Forms in favor of WebCenter technology. If
you modified the UI—using Logical Apps to simplify the fields, for example—you
may have to redo these customizations. Any customized add-ons will have to be
redone, though Oracle claims there are tools to convert Oracle Forms into a skeleton
for a WebCenter UI that will need to be completed in the JDeveloper environment.
• With Oracle attempting to convert internal workflows from E-Business Suite to use
the BPEL Manager technology, workflow will change completely. Any Oracle workflow you developed will have to be redone. This also changes the existing built-in
E-Business Suite workflows, so the application may behave much differently.
• While PL/SQL will always be part of the mix, your technical team’s skills will
require a substantial upgrade. Java, WebCenter, and BPEL will become more important. Since these tools are already appearing in Fusion Middleware and are at the
center of AIA and E-Business Suite R12, existing E-Business Suite customers can and
should gain familiarity with them.
• With such a change in underlying technology, performance characteristics are likely
to be much different. Oracle and other enterprise applications vendors are already
seeing the use of Java increasing hardware requirements. Anyone converting to
Fusion Applications will need to perform extensive performance and scalability testing before going live, as the bottlenecks and tuning requirements are likely to be
completely different than they used to be.
• Even in the current products, Oracle is overhauling its BI strategy, using BI Publisher
(formerly XML publisher) for reporting and OBI EE (Siebel Analytics) for performance
management. Customers will need to reimplement essentially all of their reporting.
While Oracle is promising standard upgrade scripts to Fusion, we think this is going
to be a stretch. E-Business Suite customers may get a direct master data conversion and
some mapping of option settings, but they will still have to go through all the functionality and data with a fine-tooth comb. PeopleSoft and JD Edwards customers may
have to do more. In any case, moving to Fusion Applications is going to be closer to
a reimplementation—at best the equivalent of what companies go through when they
try to consolidate two separately implemented ERP instances. Oracle is promising to
transfer licenses for like functionality to reduce the cost, but this is a small part of the
budget of such an upgrade.
We are impressed with what Oracle is promising and see a lot to like about the new
Fusion Applications. For existing customers, the hurdle will be high to justify the cost
and risk of moving to them. At a minimum, Oracle will first have to prove the new
applications’ quality and scalability for large global companies.
20
© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Oracle’s ever-changing BI and CPM strategy has strong
products, but will leave many customers to deal with
existing investments in nonstrategic products
When Oracle announced its intent to acquire Hyperion in 1Q07, it shook the foundations of the CPM marketplace. The vendor most recognizably aligned to the finance
organization was now part of a provider that has software assets encompassing IT
architecture through a full range of business applications.
To best understand this ongoing direction, the situation must be put in context of the
customer’s existing investment:
• Firms using CPM components from existing Oracle product lines, such as E-Business
Suite, PeopleSoft, and JD Edwards, are covered under Oracle’s Applications
Unlimited policy, with existing products maintained, enhanced, and supported for
the foreseeable future.
• The same will hold true for Hyperion customers. There will be no forced migration
to new products in advance of customer demand. But these customers will demand
guidance and direction on what path makes the most sense given Oracle’s product
strategy.
The Hyperion brand remains, with its existing product line serving as the core of
Oracle’s CPM footprint going forward. This includes planning, financial management,
and strategic finance, along with financial data quality and hierarchy master data management (MDM). Hyperion’s online analytical processing (OLAP) engine, Essbase, is
also a core component of the CPM footprint as well as Oracle’s broader PM architecture.
The Hyperion products are augmented with operational BI applications, including a
financial analytics package built on OBI EE, its primary BI toolset. These applications
were part of Oracle’s Siebel acquisition in 2006 and will play an elemental role for business analytics in general. Hyperion’s BI products are also included in the BI suite for
organizations that currently utilize that product line.
Supporting architectures will certainly merge over time, but for now the components of
the CPM suite will be developed in parallel and integrated based on business requirement. It’s interesting to note that Hyperion-based CPM is part of Oracle’s Fusion
Middleware product line, not its application strategy. A dedicated sales and marketing
organization selling CPM applications into the finance organization has recently been
established.
A newly created profitability application is in the final stage of development and
expected to be released in the first half of 2008. Not enough details have been released
for us to comment.
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
21
Oracle’s go-to-market strategy is the enterprise performance management (EPM) system: the nexus of CPM, BI, enterprise applications, and supporting infrastructure. This
is completely appropriate for a company of Oracle’s scope, and it will certainly attract
buyers looking for a single provider from bottom to top. The company, which paid
dearly to acquire Hyperion, must finesse its market position to include both the EPM
system approach as well as its best-in-class legacy for CPM and BI.
Without more attention to this dual position, Hyperion risks being marginalized
by buyers as being only for Oracle Application users. Hyperion’s profound presence
across SAP’s customer base was a big plus for the acquisition, but it must be vigorously
defended, with an eye toward expansion. While Oracle has governance, risk management, and compliance (GRC) assets, they have yet to show up in its CPM product
strategy, something SAP and others will push aggressively.
In the end, Oracle has made the biggest bet on CPM and has the most to win or lose
based on its execution. Reputation goes a long way in the office of the CFO, but no
vendor can rest solely on its laurels. Proven expertise in a departmental sell in finance
gives Oracle a solid foundation for future CPM growth.
Table 6: Business intelligence and performance management strategy
Segment
Strategic
Deemphasized
Financial applications
(consolidation, budgeting,
planning)
Hyperion Financial
Management, Hyperion
Planning, Hyperion
Strategic Finance, Hyperion
Performance Scorecard
Enterprise Planning and
Budgeting (EPB), Oracle
Financial Analyzer (OFA)
Analytical frameworks
OBI EE (Siebel Analytics)
EBS Daily Business
Intelligence
Core BI tools
Oracle BI Tools, Hyperion BI
Tools, Hyperion Essbase
Disparate tools from other
acquisitions
Source: AMR Research, 2007
22
© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Industry-specific GBUs are focusing on integrating
acquired applications and seem slower to adopt AIA
and Fusion technology
Oracle’s GBUs in the retail, communications, utilities, and banking industries are being
given a high degree of autonomy to penetrate these markets. Many of these units are
led by executives who came to Oracle with the acquisition of a key industry application
and, in some ways, act like they are still running their own companies. Oracle’s executive management intentionally gave them this autonomy to avoid the common problem
of top talent from an acquisition leaving as soon as their contract expires as well as to
create accountability.
You can see this in how the unit behaves in the market. For example, companies surveyed with both retail products and ERP products note the difference in how the strategy is described depending on to whom they are talking. Some customers complain
they haven’t been able to get a coherent roadmap though they’ve been asking for it for
over 18 months.
A look at the roadmap shows that the GBUs seem to be concentrating on getting their
own houses in order before jumping into the Fusion Applications game. Retail is still
busy bringing Oracle-based technology into each of its acquired products and integrating them as a retail suite as a major focus of its version 13 in 2008. Wider adoption of
AIA and an integrated back office is in the release beyond that, tied to work on a retail
business process model. Communications seems to be adopting AIA a bit more aggressively.
Customers in industries covered by the GBUs should understand the sequence and timing of the integration of the various Oracle products they are considering. Many will
still be like best-of-breed, standalone products for a year or more, even though Oracle’s
functional coverage maps make them appear as part of the same suite. If the product
meets your needs and the integration is adequate, that’s fine, but don’t assume more
than can be delivered.
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
23
Edge applications and Siebel are natural cross-sells
to other application platforms, but Oracle dreams of
using them to penetrate SAP’s installed base
As mentioned earlier, Siebel is a natural cross-selling opportunity that seems to be positioned in many different places. Oracle has also acquired a series of applications that
don’t fit neatly into any GBU or product platform, but will be attractive to many (see
Table 7). For the most part, these are best-of-breed applications that found their way
into Oracle and other vendor accounts. They also tend to be fairly modern architectures, so they aren’t candidates for radical replatforming to Fusion Middleware.
Organizationally, Oracle has grouped responsibility for the products in a group called
Edge Applications, which includes Demantra, G-Log, and Agile. While it may not be
branded this way, it is an apt description since these products can be sold around the
edge of its major assets. Each product will have an overlay sales force to help account
teams position these specialty products.
Oracle’s ownership should increase the market for these products, seeing how most had
to focus their sales efforts on large companies in North America and Europe because of
resource constraints. Oracle’s global sales capability should create new opportunities, and
its resources will accelerate plans the software vendors couldn’t accomplish on their own.
For example, Agile was unable to capitalize on a natural opportunity for high-tech in
Asia as an independent company, but those plans are front and center under Oracle.
Oracle is also planning to use these products to penetrate SAP accounts, as many of
them had sold to SAP customers before the acquisition. The most important outcome
of this will be standard integrations, but Oracle will have to resist trying to force
Fusion Middleware into these accounts—at least in a visible way. While there is certainly a best-of-breed opportunity in SAP accounts, we hardly think that Oracle will
be able to use that to a dominant position within them. It will be just another way to
annoy a rival while making money.
24
© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Table 7: Oracle Edge applications
Product
Notes
APS (Demantra, Numetrix)
Network design, demand management, sales and operations planning, production scheduling. Well-developed integration approach prior to AIA as part of
Oracle’s SCM Suite strategy. Moving to AIA in future.
Transportation
Management (G-Log)
Plan better WMS integration and features for Logistics Services Providers (LSP)
planning. Existing point-to-point integration with EBS and EnterpriseOne.
Extensive AIA plans for EBS, Siebel, and Retek. Replaces EBS Transportation
Management and Transportation Planning.
Agile PLM (A9)
Asian language support is a major development focus. Delivered on Oracle
Application Server for most customers prior to acquisition. Replaces EBS’s Oracle
PLM (but not PIM). Existing third-party integrations will be replaced with AIA.
Agile Advantage
SMB and On Demand solution.
Agile PLM for Process
(Prodika)
Recipes and specification management for CPG and retail. .NET based and no
plans to change yet, but will be offered on Oracle database. Oracle acquisition
should provide resources needed for this product to grow.
Agile e6 (Eigner and
Partner)
Targeted at engineer to order and complex products.
Source: AMR Research, 2007
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
25
Recommendations
Oracle’s acquisition spree has created a complex organization and a constantly evolving
strategy that is hard for even the analysts to follow. Oracle customers need to pay close
attention and build their own five-year strategies for their relationships with Oracle.
This requires understanding the products that may affect your landscape, their roadmaps, and your evolving business needs. The key will be to identify key decision points
in the future for buying additional product lines, upgrades, or shifts to new products.
This plan will differ for each type of Oracle customers:
• Single product loyalist—Continue on your way and upgrade as you see the functional need. Be on the lookout for a divergence of interests, such as a tailing off of
enhancements or pressure to switch technology stacks. If this should occur, you
should evaluate the option of dropping maintenance or getting it from a third party
and developing a new long-term strategy.
• Multiple product expansionist—You have the most to gain from Oracle’s strategy.
Understand the difference between the “marketecture” and the delivered integration
capabilities. The danger here is getting ahead of the packaged integration capabilities
and having to bear the cost of the old best-of-breed approach. Hold Oracle responsible for the integrations and any rework needed to get your initial implementation
onto standard product.
• Industry specialist—Focus on things controlled and promoted by the GBU for the
near term. Assess how fully the GBU buys into full Oracle strategy before expecting
it to take responsibility for wider integration of Oracle’s products. Make your desires
clear, though, to drive prioritization of this work.
• Best-of-breed opportunist—Nothing much has changed, other than you have a
stronger company behind your software. To the extent that Oracle is providing integrations, evaluate other Edge products if they fit your needs.
• New architecture adventurer —May you live in interesting times. Right now it
is hard to imagine too many existing Oracle customers fitting the risk-and-reward
model for Fusion Applications.
26
© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
For most existing customers, Fusion Applications are a future option, with no need
to commit to it now. Smaller GBU customers that need to replace ancient back-office
systems are probably the best initial bet, as well as new customers. If you are interested
in the technology and can take the risk, you can probably negotiate hard with Oracle.
They are going to need references—the bigger, the better—to get Fusion Applications
to take off.
Oracle has come a long way since the 18-month fight to take over PeopleSoft. It has
developed a rational strategy to satisfy its customers while making money. We see few
downsides for any customer type and some fairly compelling upside opportunities. It
will take an ongoing comparison of your business strategy and Oracle’s execution to
maximize the value.
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
27
Notes
28
© 2007 AMR Research, Inc.
Enterprise Strategies Report | November 2007
Notes
Enterprise Strategies Report | November 2007
© 2007 AMR Research, Inc.
29
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