Oracle's Stack Is Engineered For Investors, Not Customers
Applications strategy is the antithesis of integrated, a hairball of products born of a mergers-and-acquisitions strategy.
This disconnect, this dystopic vision, becomes even more ironic when you add Fusion Apps to the mix. Here's a new suite that has to be sold in parts to customers using other, older parts of the Oracle product mix because selling it as a suite would expose its severe limitations in terms of industry-specific functionality.
With integration as the starting point, you'd think Oracle would engineer the integration between Fusion Apps and the key products in the suite to be a no-brainer for the customers. Wrong. Coders, start your engines: Oracle Fusion Apps require the customer to do the majority of the integration work in order to make the products work with the rest of the Oracle stack. Sure, they are building the integration points--there are 10 or 15 available today as Fusion goes GA--but how that piecemeal approach to the core requirement of integration helps control customer costs and deliver customer value is beyond me.
I'm not even sure it delivers customer value either. Interestingly, I spent much of Open World button-holing applications customers and asking them if they were planning on upgrading to the Exadata/logic/lytics strategy. The answer was universal--not now. When I asked them why, it was because they couldn't see the value in such a migration, not when they were up to their eyeballs upgrading and integrating their apps. And when I asked them when they might consider such a move, the answer boiled down to the following: when Oracle gives me a clear ROI strategy for migrating that I can take to the board. And when I asked Oracle for evidence of this strategy, the answer was simple, there is none.
One Oracle exec whom I asked did discuss an ROI strategy, but his answer was basically about the ROI for Oracle. (Sound bite: running on Exadata lowers Oracle's support costs. Translation: investors get even better margins.) And while I was promised that this ROI strategy would be revealed to me when it was available, I'm not holding my breath.
Because in the end Oracle's roll-up the best of breed strategy has never been about better TCO for the customers. It's been about optimizing the sales opportunity for Oracle's incredibly effective sales machine, while bringing smaller, inefficient software companies under the razor-sharp cost-cutting eye of Safra Catz. There is certainly a fair amount of consideration about customer choice in the strategy as well--they have many truly best of breed apps in the portfolio--but that has increasingly fallen prey to the requirement for delivering more red meat--in the form of profit margins--to an extremely avaricious investor community hell-bent on looking out for number one.
That hunt for profit margins is now all the more acute because of the strain that the Sun acquisition has put on those margins. Safra Catz is now on the record for two quarters promising that the company will soon get back to its former, pre-Sun, margin glory, with little specific guidance on when that will actually happen. Hence the real focus of Open World, which was one big, fat commercial for Exa-everything. Sure, there were plenty of keynotes about things like clouds and apps, but there was no mistaking what Larry was really selling: engineered hardware systems. And there is no mistaking the almost frantic urgency in the subtext to that message: we won't make good on our promise to Wall Street if the customers don't start buying more hardware.
The shame of it all is that the applications team and their products, the above notwithstanding, are some of the best of the best. The core products continue to evolve nicely, Fusion Apps like Distributed Order Orchestration and Talent Management are pretty cool. I even like what Larry is saying about the cloud and multi-tenancy (it's not the be-all and end-all of cloud computing, despite the orthodoxy of the much of the SaaS market). But the way that Oracle has now slotted its applications strategy into the larger investor strategy, and effectively forced customers, particularly apps customers, to bear the financial and complexity burdens of a strategy designed primarily for the investors, is more than a shame.
Where does this all lead? There are definitely apps customers who could benefit from engineered systems, but I think a more agnostic, customer-choice hardware model fits the needs of modern businesses best. Meanwhile, Oracle's acquisition of best of breed vendors will run into a more rapidly shifting mobility-based user experience revolution that is already under way, and already making new user experiences like those in Fusion Apps look old and tired by comparison.
And therein lies a big risk for Oracle's investors and customers alike. SaaS and PaaS make it much easier to slot in best of breed than ever before, and new development environments make it easy to build new SaaS-based apps more quickly than ever before (Kenandy built its ERP apps using Salesforce's APEX in months, not years).
Meanwhile, customers are under pressure to genuinely lower costs in a demonstrable way, and that means more attention to TCO in software and hardware, even if their vendors try to hide the true cost of their systems and pretend that, as Oracle claims, it's time for a hardware refresh because the vendor says so.
All this means that as Oracle is forced to carry this enormous legacy portfolio forward, and as its Fusion Apps continue to be hamstrung by a lack of vertical and geographical specificity, the risk that Safra won't make good on her promise to Wall Street increases.
Right now, Oracle's case to its customers on the value of engineered systems looks too much like the case it's making to Wall Street. Until that changes--if it can change--Oracle is headed down a path that at best lacks customer-centricity and at worst is genuinely customer hostile. Engineered systems can be useful, but only as long as they are engineered for the right reasons.
Josh Greenbaum is principal of Enterprise Applications Consulting, a Berkeley, Calif., firm that consults with end-user companies and enterprise software vendors large and small. Clients have included Microsoft, Oracle, SAP and other firms that are sometimes analyzed in his columns. Write him at firstname.lastname@example.org.
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