Oracle Opens New World of Opportunity

Oracle OpenWorld and PeopleSoft acquisition reveal strengths and weaknesses for Oracle in 2005 and beyond.



VentanaMonitor™

Oracle has stepped ahead of vendors such as BEA, IBM, Microsoft and SAP when it comes to the individual and combined computing capability of Oracle 10G for database management and application server technology. The acquisition of PeopleSoft will bring new challenges and distractions for Oracle that will hinder its ability to formidably challenge the market leader in enterprise applications, SAP. Oracle’s attention on acquiring PeopleSoft and its lack of progress in BI and performance management pose additional challenges as Oracle looks to expand its presence with its existing tools and applications. Ventana Research believes Oracle will leverage its strength in database management systems and application server technology to improve its position in information management. However, we do not see these efforts advancing their position in BI or financial, workforce or operational performance management.

Assessment

The recent Oracle OpenWorld conference provided education and insight into the future of Oracle, what its priorities are for database, tools and applications, and how it will drive its strategy into the market. In addition, the pending acquisition of PeopleSoft and the recent acceptance of the updated tender purchase offer will alter the course of the enterprise applications market for ERP, SCM, PLM and CRM forever. The advancements at Oracle in database management and application server technology are now ahead of the market, but challenges in applications and in addressing BI, performance, compliance and process management remain in its information-computing portfolio.

Database: Oracle remains one of the market leaders in providing database management systems. Its ability to continuously drive innovation was clearly evident in its Oracle 10g release. The new realease offers administration and virtual storage management capabilities, ensures data integrity through Data Guard and Flashback capabilities, and offers a host of significant application development-related features that can accelerate the design, development, deployment and maintenance of database-centric applications. Oracle has brought forward a significant release that elevates security, manageability and availability, not just for OLTP, but for even more critical data warehousing and related requirements for enabling information management. Ventana Research believes that although DBMSs have pretty much become a commodity across the three major suppliers (IBM, Microsoft and Oracle) for basic information computing, Oracle has definitely stepped ahead of its competition in regards to capabilities and cost for DBMSs.

Tools: Oracle has not been one of the most exciting application server and tools companies in the market, but they have steadily grown in capabilities and market share over the last two years. In fact, with only IBM and BEA ahead of it, and its heavy sales and product investments, Oracle clearly is in the driver’s seat to challenge IBM. Organizations looking for a fully integrated J2EE application server platform that brings together grid computing, web services, enterprise portals, business intelligence, mobile and wireless, security and identity management into one single environment should examine Oracle. Discouraging is the depth and usability of capabilities in BI and enterprise portals that have not done well in customer adoption. SAP has begun to challenge Oracle but has provided limited proof points to convince the market that it can gain substantial market share or customer adoption to catch up with Oracle, let alone BEA or IBM. Ventana Research believes Oracle will become a formidable threat to Microsoft and IBM in the application server market but will have to make an acquisition to overcome the velocity of the existing BI market.

Applications: Oracle has had its challenges convincing the market that its architecture and approach to enterprise application is superior to the likes of PeopleSoft, SAP and Siebel, which have larger market share and customer adoption statistics. Unfortunately, operating in a heterogeneous environment across many geographic and corporate divisions has challenged Oracle’s ability to be successful. Now, with the acquisition of PeopleSoft, Oracle will face customers who have no choice, financially or operationally, other than to have everything in one centrally located application or database instance.

Unfortunately, as transactional-centric applications become even more of a commodity, Oracle will be faced with the challenge of addressing its ability to maintain customer relationships and the looming software as a service business model, which threatens the on-premise and internally-managed approach. Ventana Research believes that as organizations realize the impact of Oracle’s acquisition of PeopleSoft on Oracle applications, the future for PeopleSoft applications in the short and long term and the complexities of the alternative, SAP, more focus will be given to simply maintaining existing applications, as opposed to upgrading or purchasing new ones. Unfortunately, Oracle’s investments and long product cycles have impaired it from being successful in the performance management areas of finance, HR and operational areas like customer relationship and supply chain management.

Market Impact

The announcements and strategy of Oracle to lead the database and application server market are clearly enabling it to drive market leadership. With only IBM, Microsoft and SAP as formidable threats to its core business, Oracle is plotting its course to ensure they do not become a commodity. SAP is an interesting challenger to Oracle in the application server market with SAP Netweaver, but Oracle does not perceive it as a threat and directly challenged SAP to compete against it in price, processing and performance dimensions. Oracle now is advancing its ability to compete against NCR Teradata and IBM in large-scale data warehousing environments, which will remain an opportunity for growth as information management becomes a larger priority than just the applications in the enterprise.

Unfortunately, Oracle has not fully addressed how it will be able to catch up in the BI and performance management areas, where its tools and applications typically do not show up on the long list of potential vendors, let alone the short list. The recent announcements for Oracle BI 10G and Oracle CPM direction with Oracle Planning and Budgeting are at least two major product releases behind the rest of the market, posing new challenges as Oracle inherits a complex set of applications and partnerships with PeopleSoft’s EPM solution suite. We do not believe the current and future state of Oracle with PeopleSoft will threaten the existing BI and performance management markets of the likes of Business Objects, Cognos, Hyperion, Siebel and others.

Recommendation

Organizations looking to advance their database and application server investments should seriously consider Oracle for its price and capabilities, as it has advanced these two technologies well beyond the scope that IBM and Microsoft have accomplished to date. Organizations considering Oracle and PeopleSoft for applications should proceed with extreme caution as anything more than maintenance on existing applications could be risky to adopt in the near term. Ventana Research recommends that all organizations consider Oracle for database management and application server computing but move cautiously for enterprise applications, and especially for BI and performance management, until they can demonstrate investments and competitiveness in the market. To build and protect your future investments, ensure that your organization adopts performance management independent of your ERP and CRM market to ensure a separation of process and investments.

Mark Smith is CEO & Senior Vice President of Research at Ventana Research.

Ventana Research is the preeminent research and advisory services firm helping our clients maximize stakeholder value with Performance Management throughout their organizations. Putting research in a business and IT context we provide insight and education on the best practices, methodologies and technologies that enable our clients to leverage assets to understand, optimize, and align strategies and processes to meet their goals and objectives.

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