Oracle has been generating so much news lately that I'm reluctant to write about it. At this rate, this column may look terribly out of date by the time you read it. Such is the price of latency in business processes.
Back in November, when we were assembling our year-end issue, I wrote that PeopleSoft, the global number-two vendor in enterprise applications, had evidently thwarted Oracle's attempt at a hostile takeover. PeopleSoft had just instituted its "Customer Assurance" program and, while international regulatory bodies delayed Oracle's action, PeopleSoft's stock price continued to rise well above Oracle's initial bid. By late December, just after the issue shipped, the picture had changed. Oracle had raised more money and its bid. Now Oracle is attempting to change the makeup of PeopleSoft's board, while PeopleSoft is fighting back by moving up its annual shareholders' meeting.
Historical evidence shows that the stock value of a company making an acquisition is likely to drop after a takeover and stay suppressed for years afterward. And the ever-increasing bids, $9.4 billion at press time, translate into an ever-delayed return on investment. So, why is Oracle still so relentlessly pursuing acquisition of PeopleSoft?
"The whole enterprise software market marches toward a very rapid commoditization process. The value to the customer, which translates to the economic value to the company, is always at the highest point in the functional stack," says contributing editor Joshua Greenbaum, principal of Enterprise Applications Consulting. The biggest margins, in other words, are in the applications rather than in the underlying DBMS or development tools. So, while Oracle often sells the DBMS and tools into a PeopleSoft or SAP enterprise application implementation, it gets the least from the deal.
Greenbaum was a journalist covering databases when Oracle started its applications business in the 1980s, and broke the story about Oracle's first applications being a "dismal failure." He says now, however, "From a functionality standpoint, 11i today is a very powerful application." But perhaps because of Oracle's rocky start in the applications business, it hasn't been able to achieve optimal market penetration in that area.
Beyond the contentious takeover story, Oracle also made news about its products. At Oracle Apps World in San Diego, the company announced the Customer Data Hub. Similar in purpose to SAP's Master Data Management, the new product is supposed to make it possible for an enterprise to get an up-to-date view of a customer, combining data from a variety of customer data sources.
My phone company might want to try this type of product. Just today, a salesperson called to notify me that DSL is now available in my neighborhood. I'd already received notification in the mail weeks before, ordered the service, and installed it. The sales organization is operating on old news, wasting money, and looking silly because of latency in the company's data integration processes or lack of integration altogether. Generically, the real-time rationalization of customer records that the Customer Data Hub supports is called customer data integration, or CDI, and it's exploding on the enterprise application scene. It's a relatively inexpensive way to get more value out of a disappointing CRM implementation. For practical pointers on how to create CDI in your enterprise, read the lead feature in this issue, page 20. If you've already deployed a CDI system, write to us at [email protected] and let us know about your experiences.