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January 19, 2006

Oracle blows halftime whistle on Fusion

Oracle Corp co-president Charles Phillips said that the company's Fusion Applications project, which ties together the best features of business software products picked up in a series of high-profile takeovers, is more than half complete and remains on track for a full release in 2008.

By CBR Staff Writer

Speaking to a full house packed tightly into San Francisco’s City Hall on Wednesday evening, Phillips said that the hardest parts of Fusion have been done.

Oracle is halfway to Fusion. And the first half was the toughest part, Phillips told the assembled throng of 1,800 customers, analysts and media. We’re proud of that and feel very confident of where we are today.

Phillips said the company is on schedule to deliver new and upgraded Fusion Applications components in 2006 and expects to push out the a full suite of Fusion applications to customers in 2008.

Phillips also insisted that Fusion no longer be called a project but a new product release. We want to drop the word project because it sounds exploratory. We’ve already got so much out there, he said.

He urged customers to think of Fusion as a brand new product consisting of integrated enterprise applications that they can upgrade to from their current application deployments, whether they be PeopleSoft, JD Edwards or Oracle.

CEO Larry Ellison had been scheduled to speak at the event, which had all the glitzy hallmarks of an Oracle show, but had to withdraw at the last minute after a bout of flu. But Phillips, who has spearheaded the Fusion initiative, more than adequately filled his shoes.

Its been almost a full year since Oracle first started using the term Fusion to describe an overarching strategy for bringing together acquired software gained through its 2003 acquisitions of JD Edwards & Co, PeopleSoft Inc, Retek Inc and soon to be acquired Siebel Systems Inc with Oracle’s E-Business Suite.

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Fusion will take what Oracle calls the best features of these applications and combine them into a unified set of SOA-based enterprise applications that to help companies automate key business processes like accounting, human resources and customer and sales force management.

The move is aimed at challenging rival business software makers SAP AG, Microsoft Corp and newcomer Inc. Oracle is banking on Fusion stopping thousands of existing JD Edwards and PeopleSoft and customers switching over to rival platforms like SAP.

Walldorf, Germany-based SAP has made no bones about courting new business from Oracle and PeopleSoft customers. Over the past year it has engaged in an aggressive campaign aimed at capitalizing on the uncertainty over Oracle’s plans for integrating its various software buys.

Hence the event was clearly an attempt by Oracle to ally the doubts of nervous customers. With potentially millions of dollars of lucrative annual maintenance revenue on the line, the timeliness of Fusion’s delivery is seen as critical.

Wall Street and many investors have remained skeptical of the Fusion strategy and have kept Oracle’s stock price in check between the $12-14 per share range for the past year. Oracle’s applications business has been historically weak.

After seeing its core database market mature, the company has spent around $19bn over the past couple of years on buying rival application providers, including Siebel Systems Inc last year, and smaller software firms to boost its share of the business applications software market.

CEO Ellison had earlier stated that he wanted his company to be the number one or number two player in every market segment it dabbles in. Oracle is hoping that the Fusion suite will convince Wall Street that he’s on the right track to achieving this goal.

Wednesday’s rapid fire, two and a half hour event in San Francisco was also packed with product detail and showcase demos. Phillips and other senior Oracle executives took time to reiterate the positioning of Fusion and dove deeply into the main technology components which comprises of Fusion Applications and Fusion Middleware built on an common underlying blueprint for application development.

Fusion is the next generation architecture that we will put into our products going forward, Phillips said.

He pointed out that the Fusion enterprise application suite effectively takes best practices from all of the major applications under Oracle’s wing and creates a single enterprise suite.

Oracle has also created Fusion Middleware, which Phillips stressed is available now, to create a single development environment, using one set of tools so that if PeopleSoft or JD Edwards customers wanted to upgrade to Fusion, they could do so using the same technology.

Phillips said its has around 625 customer references using Fusion Middleware today and that both PeopleSoft and JD Edwards applications have been certified to work on it, allowing data to be shared between them.

Phillips also emphasized that Fusion is a standards based product that would help companies to build their next generation of business applications on a neutral, Web-based platform that allows for easy integration.

No one’s ever done this before. Standardization has happened at other layers, like the network and the database, but not at the application layer, he said.

And because its standards based, [Fusion] can be used to integrate other [non-Oracle] applications as well, Phillips added, claiming that several companies were using the software to integrate SAP with other enterprise systems as well.

Conceptually, at least, Fusion is in many ways similar to SAP’s NetWeaver platform which also seeks to make SAP’s applications more easily adaptable by designing them as modular business services that tie into business processes.

The difference is that Oracle faces the challenge of having to stitch together several overlapping application suites bought from different companies while at the same time retaining customers.

Phillips said the company had worked closely with customers in developing the Fusion blueprints and is confident that 80% of Oracle’s customers will be eligible to upgrade to the first version of the product. He also added that these customers will also find Fusion products containing functionality that existed in earlier application versions, as well as new features coming from other applications.

John Wookey, Oracle’s senior vice president of applications development, expects the company to roll out pieces of the new Fusion architecture in upgraded versions of Oracle’s three major application suites as early as this year.

All work on the Fusion suite is expected to be wrapped up by 2008, at which time JD Edwards and PeopleSoft customers will be able to upgrade to Fusion. Wookey added that Oracle would make the upgrade path will be made as smooth as possible.

We made a commitment about how to support our customers and over the past year we’ve made fabulous progress. But at the same time we haven’t lost focus on delivering components and upgrades to our current products, he said.

Wookey however cautioned customers to look hard at extensions and customizations done in their older applications before upgrading to Fusion and said that Oracle will provide a tool to track customizations before upgrades are made.

Those features may be in the standard functionality built into the [Fusion] product, he said.

Phillips also took an opportunity to dispel what he called some of the myths being bandied about by competitors and analysts, many of whom regard Fusion as a risky unprecedented venture.

This is just a new product; we do it all the time. We’ve done this before, Phillips said in an attempt to clear confusion over what Fusion entailsand prove the doubters wrong.

Myth one. We’re not merging code [between PeopleSoft Enterprise, JD Edwards World applications and Oracle E-Business Suite] here. We don’t have to do that. It’s a new product that takes learns from the old applications. We’re taking a superset of ideas forward and embedding them in one product.

Myth two. We’re not starting with a blank sheet of paper or rewriting all of the applications. Nothing could be further from the truth. We’re starting with the industry’s best data model [E-Business Suite] which is supporting the Fusion application suite.

Curiously Oracle made no reference to the impending $5.85bn Siebel acquisition during the event’s proceedings. Shareholders will vote on the merger on January 31 and Oracle expects the deal to close soon thereafter. Oracle is expected to provide detailed guidance on the financial impact of the merger.

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