The Inside Story On Oracle's Deal To Acquire Agile Software

Around the time Agile Software CEO Jay Fulcher first met Oracle President Charles Phillips, the Berlin Wall was falling, big hair was in, and U2 was the hot new band.

As a software salesman for SAP, Fulcher would bump into Phillips, a software industry analyst, at trade shows. Fulcher got to know Phillips better when he left SAP in 1996 to become VP of sales at Red Pepper, a supply chain software company. By that time, Phillips was covering both Agile and Red Pepper as an analyst for Morgan Stanley, which took Red Pepper public.

Phillips, of course, later became president of Oracle. And Red Pepper was later bought by PeopleSoft, which was acquired by Oracle under Phillip's direction. Fulcher in the meantime had moved on to Agile. Now Phillips has moved in to take Agile for his own, orchestrating the $495 million planned acquisition of the company. Fulcher marvels over the full-circle pattern of the relationship, partly resulting from software acquisitions. "I've been lucky enough to work with and spend a lot of time with Charles over the last 20 years," Fulcher said in an interview with InformationWeek.

With Agile, Oracle plans to strengthen its presence in both supply chain management and enterprise resource planning. "Agile offers a very strong product lifecycle management solution that companies can use to differentiate from competitors and properly and cost effectively innovate products," said Jon Chorley, VP of supply chain execution at Oracle, in an interview. "We believe the combination of Agile's ability to do that together with Oracle enterprise applications is a great combination to differentiate Oracle from other companies."

Like, um, SAP? Of course, Chorley said. At least 40% of Agile customers use enterprise software applications from Oracle, the executives say, although a good number use SAP. Oracle isn't crazy enough to think it can necessarily use Agile to get SAP customers to switch their ERP or supply chain apps over to Oracle. But that doesn't stop Chorley from taking potshots.

"SAP customers have probably gone through a long and costly implementation of SAP," Chorley said, and aren't likely to throw that all out. Instead, he said, they're looking for a third-party vendor to better manage product innovation. "With Agile you have a solution that's superior to [SAP PLM] that plays nicely in the sandbox of SAP," he argued, yet added: "If someone is looking at a full ERP implementation, that's great, too." SAP customers already using Agile include Coca-Cola, Heinz, Conagra, Symbol, Tyco, and Lucent, Chorley said. (Phillips was not available for an interview Wednesday.)

Chorley and Fulcher cited two trends that's growing interest in product-lifecycle management: the move of PLM beyond the CAD engineer's domain, and outsourcing. "The idea here is to change the conversation from how do I mange my CAD system and design to how do I out-innovate my competition," Chorley said. "That requires a PLM approach that brings everybody in the business into the process to efficiently and productively bring a product to market."

For example, stiffer laws regarding the use of hazardous materials in manufacturing requires companies to design for compliance, and that requires more types of business users to get involved in product lifecycle management. "In many ways Oracle can now reshape some of the dialogue around PLM to go far beyond engineers and manufacturing people to include people in finance and purchasing roles," Fulcher said.

Product lifecycle management has also become more important as businesses increasingly tap contractors, both near shore and offshore, to manage product development and manufacturing, Chorley noted. Agile has been most successful in high tech, life sciences, and consumer goods, which he said are three very important industries to Oracle.

The acquisition is expected to close in July.