I spent much of last week sorting through the absolutely overwhelming communications disaster called Oracle Open World in search of some clarity on Oracle’s vision for its customers, and have come to the following conclusion: Oracle’s applications customer strategy just isn’t about making things better for its customers.
The problem with the Oracle of today is that the focus of a group of the some of the best technology minds in the industry has been hijacked to fulfill a vision that is skewed more towards fulfilling the promise of a decade-old merger and acquisition strategy than it is towards making customers both successful and happy. And the vision comes with a built-in irony that has me convinced that the customer comes second at Oracle, second to the shareholders whose addiction to Oracle’s margins has driven the executive team at Oracle to consider investors, not actual companies that consume its software, as the real customers.
Let’s start with the irony: Oracle is selling a vision of an integrated hardware stack that is magnificent in its simplicity: everything from the silicon to storage to networking are all “engineered” to work together. I wouldn’t be surprised if the electrons inside their boxes are also engineered by Oracle. If they could gain some sort of system-level efficiency by altering the laws of physics, they probably would do that too.
Contrast that with the software side of Oracle’s product line, and the irony arrives by the bucket load. Oracle’s applications strategy is the antithesis of integrated , in reality a hairball of products and underlying technologies, data models and deployment models, that, could have only been “engineered” by an M&A strategist. Any real engineer would be crucified for pretending this software strategy makes sense for the customer looking for an integrated applications environment.
Four (or five, depending on how you count it) main product lines, each with its own code base. And literally dozens of other products, acquired with the goal of improving shareholder value, most of which also came with their own proprietary software or data models. Hundreds of business processes, many overlapping and redundant from one product to the next. And a big, hairy-chested middleware “suite” – Fusion Middleware – that is itself a conglomeration of technologies – a little Java here, some BEA and BPEL there, some MDM, some analytics , some DBMS technology, the more the merrier, all jammed into a one-size-fits-no-one morass of integration options. To simplify things, they also have an integration system called AIA that is used infrequently for the very reason that it’s an expensive, complex, technically challenging, and hard to cost-justify Tower of Babel erected to a false deity, the Oracle integrated software stack.
Compounding the irony is that, despite Larry’s insistence – could he be that out of touch with his customers that he believes this? – that integrating his software stack is easy, the reality is that integration is hard, expense, and, most ironic of all, the responsibility of the customer, not Oracle. There is no magic bullet, no easy-to-configure wizard, for the majority of the integration that Oracle customers require to run their businesses on Oracle software. Nope, it’s all about custom development, using expensive development resources. Sure, there are more and more “integrations” being built by Oracle, and more all the time. And as long as time is not of the essence, one day Oracle will have filled out the massive matrix of integrations required to link hundreds of key business processes across dozens of often overlapping applications. One day.
In the meantime, the customer has to wire this hairball up. And, having talked to many customers about this issue, the conclusion I came to is that Oracle’s investors are missing a big part of the problem they have helped to create. Because, in the long term, as long as customers are not using AIA to solve this problem systematically, the total cost of ownership of the investor-driven software model Oracle has foisted on the market will remain excessive, and render Oracle vulnerable to a lot of smarter, and more agile, and better rationalized competitors.
The irony of the roll-your-own integration conundrum on the software side is how much of a non-starter it would be on the hardware side. Imagine having to solder the connections in your rack systems, splice the cables to your storage systems, write your own network protocols – kind of reminds me of the state of the art when I started in this business in the 1980s. And here we are, thirty years later, and Oracle’s customers have been pulling out the soldering irons and user manuals in order to realize their vendor’s integrated software stack vision.
It’s amazing how pervasive the problem is, and how out of touch Oracle seems to be about it. Even customers who were hand-picked by the Oracle communications team to talk to the influencers at Open World had war stories about this problem. One customer I spoke with was told by Oracle that Agile PLM would plug right into a process manufacturing instance of eBusiness Suite, and two years later this happy customer (Stockholm Syndrome, anyone?) was still fighting Oracle’s integration battle inside his company, at his expense. Another customer shared a similar story about Siebel CRM and eBusiness Suite, another about PeopleSoft and Siebel. And so it goes in the engineered-for-investors Oracle stack.
This disconnect, this dystopic vision, becomes even more ironic when you add Fusion Apps to the mix. Here’s a new suite that has to be sold in parts to customers using other, older parts of the Oracle product mix because selling it as a suite would expose its severe limitations in terms of industry-specific functionality. With integration as the starting point, you’d think Oracle would engineer the integration between Fusion Apps and the key products in the suite to be a no-brainer for the customers. Wrong. Coders, start your engines: Oracle Fusion Apps require the customer to do the majority of the integration work in order to make the products work with the rest of the Oracle stack. Sure, they are building the integration points – there are 10 or 15 available today as Fusion goes GA – but how that piecemeal approach to the core requirement of integration helps control customer costs and deliver customer value is beyond me.
I’m not even sure it delivers customer value either. Interestingly, I spent much of Open World button-holing applications customers and asking them if they were planning on upgrading to the Exadata/logic/lytics strategy. The answer was universal – not now. When I asked them why, it was because they couldn’t see the value in such a migration, not when they were up to their eyeballs upgrading and integrating their apps. And when I asked them when they might consider such a move, the answer boiled down to the following: when Oracle gives me a clear ROI strategy for migrating that I can take to the board. And when I asked Oracle for evidence of this strategy, the answer was simple, there is none.
One Oracle exec whom I asked did discuss an ROI strategy, but his answer was basically about the ROI for Oracle (sound bite: running on Exadata lowers Oracle’s support costs. Translation: investors get even better margins.) And while I was promised that this ROI strategy would be revealed to me when it was available, I’m not holding my breath.
Because in the end Oracle’s roll-up the best of breed strategy has never been about better TCO for the customers. It’s been about optimizing the sales opportunity for Oracle’s incredibly effective sales machine, while bringing smaller, inefficient software companies under the razor-sharp cost-cutting eye of Safra Catz. There is certainly a fair amount of consideration about customer choice in the strategy as well – they have many truly best of breed apps in the portfolio – but that has increasingly fallen prey to the requirement for delivering more red meat – in the form of profit margins – to an extremely avaricious investor community hell-bent on looking out for number one.
That hunt for profit margins is now all the more acute because of the strain that the Sun acquisition has put on those margins. Safra Catz is now on the record for two quarters promising that the company will soon get back to its former, pre-Sun, margin glory, with little specific guidance on when that will actually happen. Hence the real focus of Open World, which was one big, fat commercial for Exa-everything. Sure, there were plenty of keynotes about things like clouds and apps, but there was no mistaking what Larry was really selling: engineered hardware systems. And there is no mistaking the almost frantic urgency in the subtext to that message: we won’t make good on our promise to Wall Street if the customers don’t start buying more hardware.
The shame of it all is that the applications team and their products, the above notwithstanding, are some of the best of the best. The core products continue to evolve nicely, Fusion Apps like Distributed Order Orchestration and Talent Management are pretty cool. I even like what Larry is saying about the cloud and multi-tenancy (it’s not the be-all and end-all of cloud computing, despite the orthodoxy of the much of the SaaS market). But the way that Oracle has now slotted its applications strategy into the larger investor-strategy, and effectively forced customers, particularly apps customers, to bear the financial and complexity burdens of a strategy designed primarily for the investors, is more than a shame.
Where does this all lead? There are definitely apps customers who could benefit from engineered systems, but I think a more agnostic, customer-choice hardware model fits the needs of modern businesses best. Meanwhile, Oracle’s acquisition of best of breed vendors will run into a more rapidly shifting mobility-based user experience revolution that is already under way, and already making new user experiences like those in Fusion Apps look old and tired by comparison.
And therein lies a big risk for Oracle’s investors and customers alike. SaaS and PaaS make it much easier to slot in best of breed than ever before, and new development environments make it easy to build new SaaS-based apps more quickly than ever before (Kenandy built its ERP apps using Salesforce’s APEX in months, not years.) Meanwhile, customers are under more and more pressure to genuinely lower costs in a demonstrable way, and that means more attention to TCO in software and hardware, even if their vendors try to hide the true cost of their systems and pretend that, as Oracle claims, it’s time for a hardware refresh because the vendor says so.
All this means that as Oracle is forced to carry this enormous legacy portfolio forward, and as its Fusion Apps continue to be hamstrung by a lack of vertical and geographical specificity, the risk that Safra won’t make good on her promise to Wall Street increases. Right now, Oracle’s case to its customers on the value of engineered systems looks too much like the case it’s making to Wall Street. Until that changes – if it can change – Oracle is headed down a path that is at best lacks customer-centricity and at worst is genuinely customer hostile. Engineered systems can be useful, but only as long as they are engineered for the right reasons…..
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