Analysts at Morgan Stanley & Co say Oracle Corp’s applications business is in danger of slipping from the number two position behind SAP to number three behind PeopleSoft Inc, with Baan Co coming up fast. Moreover Oracle’s application business hasn’t been able to leverage as well as it should, given the fact that 60% of the world’s non-mainframe data is kept in its databases and yet applications are where Oracle will look to for an increasing source of revenue as the database market itself matures. Certainly Oracle’s applications business has lagged the growth of other vendors and has been much more volatile, oscillating between 96% and 7% year-over-year growth in the last four quarters. It’s not a product problem so much as a lack of sales strategy or senior management focus. Moreover delivery dates and architecture decisions haven’t been as predictable as competitors focused only the applications business although all the leading vendors routinely miss ship dates. It says Oracle’s also been unable to synchronize technology release across the divisions to ensure that the latest versions of the applications are built with the latest version of the tools.
Stretched thin
President and chief operating officer Ray Lane has been the catalyst to transform Oracle to a broader, more strategic supplier with a consistent message focused on solutions rather than discrete products and Morgan Stanley, which thinks Oracle is about halfway through its transformation, observes what we are seeing are symptoms of the transition. Oracle is well along the last two transformations (one global message and network computing focus) but still fine tuning its formula for becoming a strategic supplier with a broader product line. The company is said to have 4,800 application customers and stores a majority the data in non-mainframe world, but Oracle is running four very complex businesses – database, tools, consulting, and applications – and any management team would find it difficult to provide each with the right level of focus to compete with independent suppliers in each area while retaining an integration solution message. The management team is simply stretched thin.
Unbundle
Release 11 of Oracle applications, due to ship in early May, will make oracle the first application vendor to make every function available to customers via a web browser. The architecture is reported to include a workflow engine enabling customers to build in approval cycles for processes without resorting to a third party product. Morgan Stanley says the product supports the latest release of the Oracle database but not the most current release of Oracle tools. A traditional fat client is an option in the 10.7 applications release but hasn’t determined if this option will be include in release 11. The bank’s analysts also reckon that Oracle will have one of the first packaged applications to use Java across all tiers; client, application server, and database server. It’s also adding more data warehousing features to release 11 to enable customer to mine the transactions they’ve collected. It looks as if Oracle is going to unbundle certain application modules like SAP has done, so that changes can be made as required rather than simultaneously with the rest of the applications suite. Release 11 is said to include a more generalized architecture with a rules engine instead of one-off versions for each country.
Just-in-time
Oracle is shipping nine front office applications including sales order entry, service, sales and marketing, customer care, and call center products. Morgan Stanley says it will integrate its telephony server with employee data in its human resources systems to do skill-based call routing. For product configuration, Oracle is expected to offer on-line configuration via a web site or integration with third party configurators such as Calico, Trilogy, and Concentra. Front office products cost $2,500 per user for the sales module as well as the service module. The Compensation module is $35,000 per server plus $100 per sales representative. Morgan Stanley says Oracle Financials 11 includes a new global consolidation system to allow customers to utilize multiple general ledgers for consolidated reporting and support for European Economic and Monetary Union accounting. Release 11 also includes a just-in-time Flow Manufacturing feature and extended supply chain capabilities supporting incoming forecasts from the salesforce over the web. The bank says that unlike most competing products, one memory-based engine does the planning across all manufacturing methods without recalculations. It works with Manugistics and I2 software.
