Safra Katz’s false analogy

Use of an analogy is one way of trying to get people to understand your proposition. Joint President of Oracle, Safra Katz, is reported by Michael Krigsman -  Oracle’s integration strategy: Customer trade-offs – to have used the analogy of buying a car vs buying technology to explain Oracle’s acquisition strategy.

… we would go online to buy thousands of disconnected parts from many vendors, which our children would assemble into a completed car because the parts would not come with instructions. Just as we finished assembling the car … a light would go on indicating that an upgrade or patch is required. Katz said, “We would then do it all again.”

Katz used this car assembly story as a metaphor for product complexity in the enterprise … Oracle reduces this complexity by bringing together under one roof infrastructure, hardware, and database products that are “engineered to work together.”

The problem is that analogy is false – its trying to make out that purchase decisions by consumers and businesses are the same. As a marketing colleague has pointed out about information, there a significant differences between the consumer and business market.

When you buy a car, you don’t have to consider whether the wrong car choice will change your personal or family life (unless you can’t pay or buy an old, unsafe car). Business decisions on enterprise software are far more complex and have a different set of considerations.

As Michael points out:

Even though integration can reduce implementation complexity on customer projects, large vendors may introduce another set of risks.

While a large end-to-end vendor can offer greater simplicity, the trade-off involves the customer transferring power to that vendor. In a single-vendor world, customers who invest in large systems can become beholden to the large vendor, which gains greater control over pricing, product features, maintenance costs, and future development.

When do acquisitions make a company too big?

There seems to be a belief in some quarters that when it comes to IT companies, the larger the better; for example, Acquire Me! Oracle’s and SAP’s Next Likely Targets which quotes:

"A move by Big Blue, say on a midmarket ERP partner like Lawson or Infor, could presage further consolidation in that arena by Oracle and SAP." (The 451 Group report – Where Might Old Foes Oracle and SAP Each Look Next to Stave Off Apps Hunger Pangs?)

However, from a customer (and a partner) point-of-view, dealing with some larger ERP vendors means going through the bureaucracy to get even small things done. Also, large software vendors seem to go for a centralised control model. It might be old news, but at a conference in 2008, I was told by a senior local representative that Oracle’s process for confirming quotes for SA companies could only be done by Head Office in the US, this required a wait of several weeks before a quote could be approved.

Waiting that long for a quote might be OK in some countries, but South African business people are not typically enamoured by long decision cycles.

Customers at the whim of public software company

Thomas Wailgum, writing about Oracle’s 2009 1st quarter results, makes some telling comments.

it becomes clear that Oracle is trapped in the age of foolishness and epoch belief that shareholders are more important than customers, while those customers are in the worst of times and full of incredulity.

Oracle’s profits rose by 4 percent year-over-year to $1.12 billion, but revenue fell by 5 percent to $5.1 billion … New software license sales fell 17 percent … A neat trick, did Oracle pull: Increasing year-over-year profits while revenues fell … Oracle’s enterprise software maintenance- and support-related revenues grew 11 percent to $3.1

In effect, Oracle is telling its customers that they, the source of the company’s revenue, are not as important as the shareholders. The way Oracle has increase revenue is by increasing software maintenance that its customers pay.

The question those customers should be asking is “what value are they getting from increased maintenance.” In other markets, a supplier would lose customers if it treated them in the same way.

Of course, there are alternatives. Privately-held software companies are not accountable to external shareholders and have a long-term perspective, rather than the short-term one that drives public companies who rely on stock markets for approval.

old DEC, new Oracle

The news that Oracle is to acquire Sun Microsystems sent my mind back over 10 years to a company I used to work for that had many of the attributes that the new Oracle/Sun business will have.

I am referring to DEC, aka Digital Equipment Corp, aka Digital. Look at what Digital had and what Oracle will now have:

Technology	DEC	Oracle
Relational database	Rdb	Oracle
Operating system	VMS	Solaris
Middleware	MessageQ	BEA
Hardware	VAX	Sun

There was a belief about Digital that it became too difficult to manage so many different technologies, and that contributed to the company’s demise. So I can’t help wondering how Oracle will manage.

The difference between the two is that Digital developed its products through innovation, Oracle has been getting them by acquisition.

The changing EPM space

I was surprised by the announcement that Oracle was acquiring Primavera, one of the large players in the enterprise project management (EPM) space. I went to see if AMR had some comment, and sure enough they did. Apparently it wasn’t a surprise to them.

I use the term EPM, but analysts like AMR like to use the fancier term, project portfolio management (PPM); I wonder if using the word ‘portfolio’ makes it sound better to financial buyers. This latest development is particularly interesting to me because it is in the project space that my company operates.

Oracle’s acquisition of Primavera will deepen its vertical presence in industries where it already has a presence (e.g. defense), and will expand Oracle’s horizontal profile where it doesn’t have major presence (e.g. engineering, construction). Microsoft has had EPM products for a few years, Office Project Server and Portfolio Server, but has done little with it; at the recent World Partner Congress there was only one session.

EPM is currently a niche market, like product lifecycle management (PLM). Oracle bought a major PLM vendor, Agile, some time ago, but that hasn’t raised PLM to a broader level. So I doubt that Primavera’s purchase will change much in the EPM market either. 

It will be interesting though whether this will change Microsoft’s activity and approach to the market. Microsoft probably hasn’t worried about a major competitor. It has been making the link between Project and Portfolio Server tighter with SharePoint has part of an corporate portal strategy. Conversely, now that Oracle has a project management tool, will it use it against Microsoft? Microsoft’s Office Project software is the de facto standard in project management and has no competitors. Oracle is the only company big enough to develop a competitor, using Primavera. With the recent announcement of the Beehive, Oracle also has a portal product it could integrate with Primavera.

Frank Scavo points out that ”project-based organizations are relatively under-served by enterprise system vendors today” and so this may be an opportunity for Oracle.

Another question is whether Oracle plans to link Primavera with its PLM software acquired via Agile. Our experience in project industries is that the combination of the two would be quite a powerful product. However, Vinnie reminds us that this kind of integration is “going to take years of sustained investments for Oracle to make these vertically complete”. AMR also notes that “Oracle will have difficulty rationalizing the significant overlap in functionality between the products, with Oracle Projects, PeopleSoft ESA, and JD Edwards Enterprise One all having varying degrees of PPM ability.”

I do feel sorry (a bit) for Oracle’s sales people, because this is going to bring yet another set of products that they have to learn about – it now includes database, several ERP, middleware, retail, BI, CRM, and PLM.

Oracle marketing

A bit delayed, I read Dennis’s post about the Oracle EMEA marketing event. I wonder if he remembered attending the JDE EMEA marketing events (in the old days).

I am intrigued how Oracle handles its marketing events, it’s not a company with only a database and an ERP application anymore; as I learnt as SAPICS when I met up with a couple of my former colleagues from JDE.

The Oracle sales people now have to be able to contend with BEA, Hyperion, JDE and Peoplesoft, and Siebel (which has 104 modules!).

Another joy about selling for Oracle is that it takes three weeks to provide a customer with a quote; apparently all pricing has to be done by Oracle corporate.

What future for legacy ERP apps?

What I mean by legacy ERP are older ERP applications that were acquired by companies like Oracle and Infor. As a former employee of one of the older, I am interested in the JD Edwards (JDE) solution that Oracle acquired a few years ago.

Responding to a comment I sent him about the Oracle user conference, a contact at a long-time JDE client in South Africa, said:

Like most other companies, the rather messy Oracle world environment led our company to rather look at a SAP migration – its not planned locally for another 5 years, thus we still run JDE – but World version! [ed: the AS/400 green screen version]    Needless to say, Ifusion and other developments are really not applicable to us – I do stay in touch with Oracle though, but primarily about Oracle retail – eg Retek. We don’t run it, but all the major SA retailers do, and it’s a good occasion to meet with my peers in retail. The JDE world has shrunk smaller and smaller through the years…

I wonder how many JDE customers are just hanging on until they have budget, time and justification to change? So, is Oracle flushing money away by building its ifusion architecture to try to keep its legacy ERP customers? It seems Oracle would do better to invest in its vertical solutions (like Retek) and stabilise its legacy products so that it can milk those customers for as long as possible without having to spend too much on new development.

Also, if I was a JDE consultant/developer/specialist I would start looking at training and certification on other ERP apps – probably SAP, a Microsoft Dynamics product (but not Axapta), or SYSPRO.

Intra-Oracle product showdown

The website TechnologyEvaluation.com has done a brief evaluation of 2 Oracle ERP products – JD Edwards EnterpriseOne (the old OneWorld) and Oracle’s own E-Business Suite (EBS).

Interest for me was in these areas:

- the JDE product out-ranked EBS in the functional aspects but not in product technology, presumably because JDE still has AS/400 aspects whereas EBS is Linux-based.

- the products were described as “two of the most popular enterprise solutions available in the marketplace today”. That must be a US-centric opinion because, as I said before, none of the Oracle ERP range are doing well in South Africa and I am told by a JDE user that JDE sites have dropped or intend to drop the product and move to SAP.

Oracle blogs need to be human

I was checking out the some of the Oracle blogs on their corporate blog site, but I have to say they are all technical, don’t appeal to me as a non-Oracle person, and don’t have anything that reflects what might be called ‘a human face at Oracle’. (But then again, is Larry Ellison human?)

Oracle PR – check out Thomas Otter’s site as an example of an SAP blogger whose contents are interesting and understandable to non-SAP people.

Where is Oracle’s blogosphere?

I thought it was just me, that I tended to read SAP and Microsoft blogs and not Oracle blogs, but now I see from Dennis that there might be a general dearth of readable Oracle blogs. The Oracle blogs I have seen tend to be rather technical.

Here in SA, Oracle is not a strong apps player, and we hear very little about that side of the business in the press.

Declaration: I am not an Oracle fan, and Larry Ellison is not my favourite person. Also, Oracle looks like it is becoming the CA of the 21st century, buying up a plethora of software products which have a superficial business relationship to each other, but are in fact very different below the surface.