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Oracle: 'spend less, know more'
How can we be number two and doing so badly?
Last week's Oracle Apps World conference brought a host of announcements that indicate that the vendor is executing on its plans, writes Fran Howarth of Bloor Research.
Oracle was able to point to significant take-up of its outsourcing, iLearning and mid-market offerings, showing that, as predicted, Internet business applications have moved from the early adopter stage to mass-market maturity. This was reflected also in enhancements announced to its own products, most notably product lifecycle management and collaborative project management capabilities.
Many have criticised Oracle, saying that its applications lacked the functionality of other products on the market. But Larry Ellison, Oracle's CEO, was quick to answer criticism during a question and answer session that it was faltering in the applications space. He pointed out that Oracle holds the number two position in the enterprise business applications market. "How can we be number two and doing so badly?" stated Ellison.
But the main message that was drummed home in the keynote speeches was that companies need to rationalise their investments in order to better run their businesses. Speaking under a theme of "Spend less, know more", Ellison pointed out that the main problem is data fragmentation. He stated: "Y'all bought too many databases."
Does this mean that Oracle is trying to cannibalise its own business? After all, Oracle has long been known as a leading database vendor and openly states that it intends to hold on to a leading position going forward.
Rather, the message from Oracle is that databases and applications are more closely related that is recognised in the market. But the reality today is that applications are often compartmentalised, each running from its own dedicated database. In addition, many companies run their global operations on a national basis, making it all but impossible to gain a clear view of operations across the enterprise.
For Oracle, it is of prime importance that companies sort out their information sources first - before they start bolting applications on top. Companies need to think about the database layer in their operations to ensure that all parts of their operations are working from the same information. For example, customer relationship management systems cannot be fully effective if customer information is held in one data repository, whilst what they are buying is held in a separate order management system.
And Oracle is taking its own medicine: not only is this approach reflected in its 11i release, but it has also been putting its own house in order. Ellison admitted that it used to have hundreds of databases, fragmented along country and functional lines, with the result that the vendor used not to be able to even effectively count its customers.
Now, with only a few databases worldwide and with the aim of reducing this yet further, Oracle has a daily view of its operations - how it is performing, what the service request to sales ratio is - allowing it to use its computer assets to show how good a job it is doing, or not, and to compare itself to its peers on key service and quality issues.
In terms of the "Spend less, know more" message, the database consolidation efforts answer both the "spend less" and the "know more" part of the message. But there is more to the story than that. Oracle also believes that companies are spending too much on hardware, implementation and maintenance of their computer assets. To counter this, it is strongly recommending to customers that they use Linux for the middle tier of applications, giving increased performance and reliability and allowing a wider choice of hardware at a lower price.
According to Mark Jarvis, Oracle's chief marketing officer, running Linux hardware will cost companies approximately six times less that running their operations on UNIX systems - and will give a faster response time. Again, it is taking its own medicine here as well and is running all of its demos on Linux. After initial resistance from Oracle's own sales people, Ellison reports that they have now become evangelists for Linux.
Further, Oracle reports that its customers are saving 50% of their costs through outsourcing parts of their operations. Its message: use Oracle's business flow accelerators, run on Linux and outsource what you don't need to run yourself. This will reduce both implementation and maintenance costs. And this extends into applications as well - it is focusing on the development of cross-application products rather than running applications as discrete components that reduce visibility into total operations. Everything will be based on a single database and information flows will be more efficient.
So application components will be larger and there will be fewer of them. Bad news for the consultants and systems integrators? There will still be some need for components to be assembled and integrated but, using Oracle's approach, this need will be vastly reduced.
Instead the work to be done will be more oriented around business processes and tailoring applications and information more exactly to the business methods used by a particular company. In short, less expenditure, but better operational knowledge.