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Thursday, September 28, 2006

Rimini Street expands 3rd party maintenance for Oracle products

I interviewed Seth Ravin, founder of Rimini Street, today about his firm's efforts to expand their support offerings for Oracle's Siebel, PeopleSoft, and J.D. Edwards product lines.

I covered Rimini Street exactly one year ago, when the company was first founded to provide an alternative to Siebel's support organization. At the time, I predicted: "Oracle will downplay the existence of Rimini Street for now. But if Ravin's new firm starts to get traction, it wouldn't surprise me if Oracle threatens legal action."

So far, Oracle has indeed been acting as though it is unconcerned about Rimini Street. Ravin today said that Oracle has taken the high road--Oracle's co-CEO Charles Phillips says that it's good for Oracle customers to have choices. However, as Ravin points out, it would be awkward for Oracle to attack Rimini Street for providing third-party support for Oracle customers while Oracle itself is, at the same time, promoting its partnership with SYSTIME to provide third-party support for SAP.

Rimini Street Customer Base
Of course, in terms of size, Rimini Street is not yet a major threat to Oracle's maintenance revenues. The firm only employs about 30 people today, according to Ravin. He also indicated the number of clients, which he asked me to not disclose until his firm announces it at Oracle's Open World conference next month. Without giving the exact figure, let me say that it's not a big number. It comprises 60-70% Siebel customers and 30% PeopleSoft customers, with offerings for JDE customers just begun.

Although the number today is not large, it does include some very large companies--Fortune 500 firms. The conventional wisdom has been that third-party support appeals mainly to small companies looking to save a buck. But, as it turns out, large companies also want to save money--especially large companies that have heavily modified the vendor's software and have no plans to upgrade. Some of these companies are not willing to continue paying 22% of the sales price to Oracle for product upgrades that they are not likely to ever install. Also, having mature systems, they don't need Oracle's help desk support.

Retail, healthcare, and governmental organizations also seem to be receptive to Rimini Street's offerings--the last especially in cases where there are significant budgetary constraints.

Beyond the Traditional Support Contract
One interesting point: Rimini Street has been expanding its support offerings to go beyond what is typically offered in software maintenance contracts. The company is now offering support, not just for vanilla code, but for the client's own customizations. There are certain restrictions (e.g. the code has to be working in the client's production environment), but once the customizations are put under maintenance, Rimini Street guarantees that they will continue to work with whatever changes Rimini Street introduces to the code. The firm also provides certain support to ensure interoperability, data quality, and system performance--the kind of real-world problems that traditional vendor support contracts do not cover.

Actually, what Rimini Street is doing is really not so radical. It is really just a system implementation consulting firm, or a system integrator, that happens to sell its services under a service contract instead of a break-fix arrangement. It is not a software company. Ravin points out that in a perfect world, Rimini Street ought to be an Oracle partner. Just because they compete with Oracle for maintenance contract dollars shouldn't make a difference--Oracle competes with its partners all the time. Just ask any of Oracle's implementation partners how often Oracle Consulting competes with them for services deals.

As I've indicated in the past, it is the software vendors' own money grab that has opened the door for third-party support organizations, such as Rimini Street. Vendors have been treating their installed client base as a captive audience, jacking up support prices to provide revenue to fund the rest of their operations. This creates a value-gap that third-parties can fill by offering tailor-made services that meet the needs of the customer for significantly less money.

In the case of Rimini Street, contract prices start at about 50% of what Oracle charges. Then, if the customer is paying maintenance for products he has not implemented, or user seats that he is not using, the price drops even further.

It's hard to see what's wrong with this picture.

Related posts
Oracle faces threat to Siebel maintenance fees
SAP to provide maintenance for PeopleSoft products
Ellison threatens SAP regarding PeopleSoft support
High software maintenance fees and what to do about them

by Frank Scavo, 9/28/2006 04:33:00 PM | permalink | e-mail this!

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Monday, September 25, 2006

Sun's massive ERP consolidation effort

Sun Microsystems is currently undertaking the mother of all application-consolidation projects: a three-year effort that is replacing 1,000 applications with a single instance of Oracle's E-Business Suite.

The Oracle system will run on a Sun UltraSparc E25K server for the back end, with small thin x64 Web servers on the front end. According to CIO Bob Worrall, Sun would have liked to run the system on an Oracle grid, but there are "no serious references of Oracle running in a gridded environment that supports 40,000 users."

The first big deliverable is scheduled for July 2007 when Sun goes live with services and price-quotation systems. There are "several hundred" team members working on the project.

Application consolidation of the sort that Sun is undertaking is just one of several consolidation strategies that IT organizations can use to reduce the cost of ongoing support. Other forms of consolidation include server consolidation, storage consolidation, and data consolidation. Our most recent research at Computer Economics shows that all forms of consolidation are highly popular, as companies endeavor to reduce the burden of maintaining existing systems and capabilities to free up funds for new development.

Because application consolidation is much more difficult than server or storage consolidation, it is the least-deployed consolidation strategy. Nevertheless, it has the highest potential payback, as duplicative efforts in system upgrades and maintenance are eliminated and the organization enjoys economies of scale with a single system. Fewer servers, fewer software licenses, and few support personnel are just the beginning of the savings.

Computerworld has the interview with Worrall, discussing the project.

Related posts
Oracle knocks quarterly results out of the park

by Frank Scavo, 9/25/2006 11:43:00 AM | permalink | e-mail this!

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Friday, September 22, 2006

SAP plans Oracle-database killer

Shai Agassi speaks about plans to launch in-memory data warehouse capabilities for SAP. Agassi claims that, if successful, such an approach would reduce demand for high-performance relational databases, such as Oracle's.

eWeek has the interview with Agassi.

Agassi doesn't mention it, but SAP wasn't the first to come up with this idea. A BI vendor in Sweden, QlikTech, already has released this technology in its business intelligence product, QlikView. I've seen it demonstrated and it's pretty impressive.

QlikView also wins the Spectator award for the coolest name for a contest, "Think outside the cube."

by Frank Scavo, 9/22/2006 09:41:00 AM | permalink | e-mail this!

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Wednesday, September 20, 2006

Oracle knocks quarterly results out of the park

Oracle yesterday announced a 29% increase in earnings and a 30% increase in revenue for the first quarter. (The percentages reflect the increase over the first quarter last year.) Total revenue was $3.59 billion. These results far exceeded analyst expectations.

There are several aspects of Oracle's performance that are especially positive:
  • These results are not just the result of squeezing more money out of Oracle's installed base: new license sales were up 28% overall, which include both database and application sales.

  • New application license sales rose a whopping 80%, indicating Oracle's success in getting customers of its acquired products to continue buying.

  • Oracle's core database and middleware business also expanded, at a 15% pace.

  • These first quarter results follow exceptionally strong performance in the previous quarter.

  • The first quarter is normally Oracle's slowest quarter, as the opportunity pipeline tends to be drained as a result of the typical year-end push by the sales force.
In Oracle's press release, it was quick to use these results as vindication of its strategy to beat SAP.
"We're rapidly taking applications market share from SAP," said Oracle President, Charles Phillips. "Q1 was the second consecutive quarter that Oracle's applications new license sales growth was 80% or more. That's ten times SAP's 8% new license sales growth rate in their most recently completed quarter."

"SAP appears to be rethinking their strategy as they lose application market share to Oracle and confront the difficulties of moving their application software to a modern Service Oriented Architecture (SOA)," said Oracle's CEO, Larry Ellison. "They've just announced that they are delaying the next version of SAP applications until 2010. That's a full two years behind Oracle's scheduled delivery of our SOA Fusion applications. And now Kagermann is talking about an acquisition strategy to augment SAP's slowing organic growth. These are major changes in direction for SAP."
Recently, I've been somewhat skeptical of Oracle's ability to fund continued development of its acquired products at the same time that it is developing its next generation Fusion applications. The financial results from this quarter and the previous quarter will certainly help in its efforts.

The Wall Street Journal has more on Oracle's performance.

Related posts
More on Oracle's Fusion strategy
Oracle's Fusion strategy: clear as mud
Fusion to build on Oracle's E-Business Suite

by Frank Scavo, 9/20/2006 09:17:00 AM | permalink | e-mail this!

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Tuesday, September 19, 2006

Business Technology (BT): a better acronym for IT

George Colony, CEO of Forrester Research, has been on a one-man campaign to change the use of the term "information technology (IT)" to "business technology (BT)." I first heard Colony talk along this line earlier this year at Forrester's conference in Las Vegas. At the time, I didn't pay much attention, thinking that it was just another attempt by a consultant to give a new name to something old.

DP, EDP, MIS, IT
This time, however, I find myself more open to the idea. What we call the IT function today has already gone through a number of name changes, from data processing (DP) in the 1950s and 60s to electronic data processing (EDP) 70's, to MIS in the 1980s, to IT in the 1990s.

I'll date myself and admit that I'm old enough to remember each one of these acronym changes. Each reflected a change in thinking about our profession. DP was all about data--whether in the form of punched tape, cards, or mag tape. The transition to EDP reflected the shift from mechanical data (cards, paper tape, etc.) to electronic data. The rise of the acronym MIS reflected the view that our job was not just about data, but about information--and especially management information, information used to manage the business, including early forms of decision support and planning systems, such as MRP. Eventually, the acronym MIS fell out of use in favor of IS or IT, reflecting the realization that the information we managed was not just management information but all sorts of information.

But what all of these acronyms have in common is that they are centered on "data" or "information." Colony's point is that the job of IT today is not just about managing information. It is about supporting the business in all aspects--from managing information, to facilitating communication, to automating business processes, to enabling collaboration. It even involves digital communication with things, such as equipment, inventory items, and vehicles that are electronically enabled through technologies such as RFID.

Therefore, it is getting harder and harder to separate the business from the technology. In the late 1990s, the term "e-business" was popular, denoting a new way to do business--electronically. Today, though, no one really talks about e-business. It's just business.

I'm mixing Colony's thoughts here with my own. But putting it all together, it's clear that "IT" is no longer sufficient to describe what we expect from IT. A better term is Business Technology (BT), denoting simply the application of technology in business.

From CIO to CBT
If IT is now BT, then it follows that the Chief Information Officer (CIO) must be something new. Colony proposes Chief Business Technologist (CBT). A bit of a tongue-twister--I might suggest Chief Business Technology Officer (CBTO). Either way, the point is that this C-level officer of the organization is responsible for more than managing the information of the organization, and more than even the technology. He or she is responsible for ensuring that the technology is actually used to the benefit of the business and that the business is enabled by technology.

Interestingly, Colony made one point that I fully agree with and seldom have heard from others. He said that the CBT probably needs to come from a technology background, not a business background. The technology is too important to not have someone at the head of BT without a background in technology. Of course, the BT needs to be fully immersed in the business as well. But it is easier for one with a technology background to become immersed in the business than for one with a business background to become adequately immersed in technology.

Some companies, frustrated by the lack of business acumen in their IT groups, have transferred someone from the lines of business to the CIO position, hoping to bridge the communication gap that too often exists between IT and the business. But such a strategy only moves the communication gap, to a gap between the CIO and the IT organization. A better strategy is to develop today's CIOs to be truly CBTs or CBTOs, with knowledge and experience in both technology and business, responsible for ensuring the success of both.

Related posts
Marketing IT like a business
IT decisions that are too important to leave to the IT department
Escaping the ROI trap
Escaping the ROI Trap, Part 2

by Frank Scavo, 9/19/2006 01:35:00 PM | permalink | e-mail this!

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Infosys not likely to buy large U.S. consulting firm

An interesting presentation this morning at the Forrester Technology Leadership Forum 2006. Nandan Nilekani, head of Infosys, spoke about competing and winning in the global IT marketplace. His prepared remarks were quite "big picture," but during the Q&A session afterwards, he gave some interesting insights into his view of his competitors.

An audience member asked Nilekani about the ability of the large international consulting firms to compete with Infosys. Nilekani said he believes that Infosys is not just competing on the basis of lower labor rates. Labor rates help, but more of his competitive advantage comes in how Infosys manages the work itself. In other words, Infosys doesn't just work cheaper, but better (my words).

Nilekani did acknowledge that, among the large international consulting firms, IBM and Accenture are his strongest competitors. He said that most of the other large consulting firms are have difficulty integrating their onshore and offshore service organizations, so when they provide offshore services it appears that the customer is dealing with a separate organization.

George Colony, Forrester's CEO, who was facilitating the Q&A session, then noted that Infosys is sitting on approximately $1 billion cash on its balance sheet. Couldn't that be put to use to acquire a U.S. consulting firm?

Nilekani said it was unlikely that Infosys would acquire a large traditional U.S. consulting organization, because he would view such an acquisition as (his words, not mine) "contaminating" the Infosys business model. If Infosys is doing things in a new way, why would he want to acquire a "legacy" consulting firm, he asked. He said that if Infosys were to make an acquisition in the U.S., it would more likely be to fill some niche in its capabilities or to provide a better "front end" for its business in the U.S.

Related posts
Offshore outsourcing in midlife crisis

by Frank Scavo, 9/19/2006 10:10:00 AM | permalink | e-mail this!

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Offshore outsourcing in midlife crisis

I sat through an excellent presentation on offshore outsourcing yesterday at the Forrester Technology Leadership Forum 2006. Forrester analysts John McCarthy and Stephanie Moore held a mock debate on the current state of the offshore IT outsourcing industry.

I won't reiterate the 10 major points of their debate, but here are a few of the items I found particularly insightful.
  • The best Indian firms have moved beyond pure "body shopping," to offer higher value full-service multiline delivery capabilities. Labor rates are rising, and the best firms are responding by improving internal processes and automating routine work.

  • A massive shakeout is coming among the Indian offshore providers. Offshore contracts are rising in complexity and few of the providers have the management expertise and account management skills to handle them. As a result, only two or three of the top Indian firms will make it as full multiline suppliers.

  • Some large multi-national consulting firms--specifically IBM and Accenture--are effectively competing with the Indian service providers for outsourcing contracts. For large complex offshoring contracts, therefore, IBM and Accenture are a viable alternatives to the large Indian outsourcers. But, in Forrester's estimation, other international consulting firms are far behind in their ability to scale offshore contracts.

  • "Captive sites"--offshore operations set up as part of the customer's own organization--are not working. Companies see the large margin that Indian firms enjoy and think they can set up their own offshore operations and keep that money for themselves. But, John and Stephanie noted that nearly all such efforts have only succeeded in driving up labor costs for everyone, and that captive sites experience attrition two to three times greater than third-party sites. Forrester is strongly discouraging clients from setting up their own offshore operations.
John and Stephanie also pointed out that project failures are common in offshoring contracts, but most of them can be attributed not to a lack of expertise with the service provider, but the client's own lack of process discipline and a hands-off management approach.

Offshore vendors "need adult supervision and governance. Outsourcing does not mean abdicating responsibility" for project success.

Related posts
Trend toward offshore outsourcing not yet peaked
Offshoring leaves software firm not so jolly
Productivity risks in offshore outsourcing
Risks of offshore outsourcing

by Frank Scavo, 9/19/2006 09:57:00 AM | permalink | e-mail this!

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Monday, September 18, 2006

IBM's software business: view from the top

Steve Mills, Senior VP in charge of IBM's software group, gave a keynote here at Forrester's Technology Leadership Forum 2006 today.

People forget how big IBM's software business is: Mills is sitting on top of a $17 billion organization. And, he's been with IBM for 33 years, so he's seen many changes in business computing over the years, and at IBM in particular.

Some of the interesting points from his presentation:
  • As organizations continue to build IT assets, the percent of IT spending going toward new development has been declining over the years. Today, only about 20% of IT spending is for new systems. Therefore, it is a challenge for CIOs to meet the demand for new systems, while controlling the costs of maintaining existing systems.
  • IT is the transforming technology of the past 60 years. It has transformed nearly every industry and affected many areas of our lives. It is the labor-saving innovation of all time. But IT itself is labor-intensive--an interesting paradox. The labor-intensive nature of IT is the greatest inhibitor to the improvement of IT utilization. The greatest problem facing IT organizations is their being overwhelmed with work and rising labor costs.
  • There is a consolidation of software vendors today, but the industry is still expanding and new vendors are being introduced. There is still new venture money flowing into the software sector at a rate of $4-5 billion per year.

  • The opportunity for business process outsourcing (BPO) is far larger than that for software-as-a-service (SaaS). Worldwide spending for BPO was $422 billion for BPO but only $2 billion for SaaS. In 2009, IBM expects the BPO market to grow to $641 billion, but SaaS to grow to only $3.9 billion.

  • Service-oriented architecture (SOA) is really just a continuation of things we have been doing in software for many years, such as object-oriented programming, remote procedure calls, and message-oriented middleware. The added promise of SOA is in greater flexibility in building and maintaining applications. SOA as a buzzword might go out of favor, but the concept will continue.

  • The greatest opportunity to reduce the cost of maintaining existing system is to "consolidate like crazy." The best way to cut software costs is to buy less software, and you do this by consolidating systems. How many ledgers do you have, how many inventory systems? Multiple redundant systems drive additional costs for hardware, software, and labor. The fewer systems, the better.

  • As an example of application consolidation, Mills offered IBM's own experience in going from 16,000 applications in the 1990s to 4,000 today.

  • Mills pointed out that IBM's software-related business is larger than SAP's because IBM plays not just in software but in hardware, middleware, and services--a market that is five times as large as the initial software sale.
During the Q&A session, Mills was asked whether Oracle's many acquisitions were good or bad for IBM. Given that IBM actually partners with Oracle at several levels, Mills was polite in his references to Oracle. But he did indicate that in all of the acquisitions IBM has done, it has learned to focus on growth of the businesses they buy, not just the financial leverage that might come from buying the revenue stream and cutting expenses (which he later referred to the "Computer Associates game.") According to Mills, Oracle has "a tough job ahead." He also said that Oracle's strategy has been a "dream come true for software vendors such as SAP and Lawson."

Related posts
IBM compromising its partner strategy with bid for MRO Software
IBM and Oracle: strange bedfellows
IBM: friend or foe to SAP?

by Frank Scavo, 9/18/2006 05:28:00 PM | permalink | e-mail this!

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What is an IT ecosystem?

I'm participating as a blogger here at Forrester's Technology Leadership Forum 2006 in Scottsdale, Arizona, this week.

This event, aimed at senior IT and business executives, has as its theme, "Prospering in Your IT Ecosystem." Forrester's use of the term ecosystem is somewhat new. I've used the term ecosystem myself in reference to the relationships between major technology vendors (e.g. SAP, Oracle, IBM, Microsoft) and the hundreds of complementary product and service providers that co-exist with those major vendors. The smaller providers survive, and sometimes thrive, by filling gaps in the solution set, and the major vendor benefits by extending its reach and representation much farther than it can on its own.

Forrester's concept of an IT ecosystem, however, is much more comprehensive. The CIO is no longer just responsible for leading the "IT department." He or she is responsible for managing relationships within an "ecosystem" comprising three types of participants:
  • Consumers: the end-customers and users of technology within the organization.
  • Producers: the technology vendors, including both product and service providers
  • Influencers: the key stakeholders within the business that have an increasing voice over the direction and role of IT.
The boundaries between participants in the IT ecosystem are becoming less definite, leading to many interesting complications in the role of the CIO today. In the first two sessions Forrester's Tom Pohlmann and Laurie Orlov each highlighted some of these issues. For example,
  • A recent Forrester survey of CIOs indicates that IT strategy is increasingly being dictated by business leaders (influencers) outside of IT, and CIOs expect this trend to accelerate over the next two years.

  • The perception of CIOs versus CEOs are quite different regarding the value of IT to the organization. CIOs are an optimistic bunch: 82% see the outlook for their industry as positive and they expect a 5% increase in IT spending this year. CEOs take a much more cloudy view: an recent IBM survey asked CEOs to indicate sources of innovation within their organizations, they listed nearly every function except the IT group. They only mentioned IT when asked to identify barriers to innovation.
Clearly, the challenges facing the CIO and other senior IT executives is evolving. The technologies to master have never been more diverse, the expectations of the business have never been greater, and skilled IT resources are getting harder to find. Pohlmann pointed to a UCLA study that found a 70% drop in college student interest in computer science from 2000 to 2005.

There was much more, of course, in these first sessions, but this will need to suffice for now. I'm off to another presentation.


by Frank Scavo, 9/18/2006 03:33:00 PM | permalink | e-mail this!

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Thursday, September 14, 2006

Wal-Mart continues RFID push, despite doubts about supplier benefits

Walmart is announcing an addition of 500 more stores that are RFID enabled, and it is mandating 300 more suppliers to comply with its RFID requirements.

Line56 has more on Wal-mart's RFID program.

In the meantime, I've been getting some feedback from Spectator readers in response to my request for real-world experiences with RFID. The bottom-line? RFID adoption in fact is slowing and even stalling in the face of technical problems and questionable payback.

RFID vendors and service providers may not be publicizing this, but that's what they're telling me off the record.

If you've got more feedback, please send me a message.

Related posts
RFID adoption stalling?

by Frank Scavo, 9/14/2006 08:05:00 PM | permalink | e-mail this!

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Wednesday, September 13, 2006

Doug Burgum leaving Microsoft Business Solutions

The transition of MBS top leadership is now fully complete, with Doug Burgum announcing he will leave Microsoft next year.

Burgum came to Microsoft with its acquisition of Great Plains, which was the start of the MBS unit. He has run the unit since then. Last year, Burgum stepped down as head of the group, giving up the top job to a yet-to-be-named successor. At that time Burgum said he would stay on in the role of "chairman"--more of an honorary post than anything else.

But this week, MBS announced that the top MBS job would be given to current Microsoft corporate VP Satya Nadella, who has led MBS's global research and development operations for the past five years. Burgum then took the opportunity to leave altogether.

Burgum has not indicated what he plans to do next.

Computeworld has more on Burgum's move.

Read the related posts below for my take on Burgum's tenure and Microsoft's efforts to gain traction in the ERP space.

Related posts
Burgum pushed aside as head of Microsoft Business Solutions
Reorg highlights troubles at Microsoft Business Solutions
Microsoft: selling enterprise software is a "humbling experience"

by Frank Scavo, 9/13/2006 08:08:00 AM | permalink | e-mail this!

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Sunday, September 10, 2006

Click Commerce being swallowed by Illinois Tool Works

Last Tuesday, Illinois Tool Works (ITW) announced it is buying supply chain management software vendor Click Commerce. Click has been on an acquisition program of its own over the past few years, having built a portfolio of SCM packages, including its acquisitions of Elance (contract management), Optum (warehouse management and supply chain execution), and Xelus (service parts planning).

Now Click itself is being bought by ITW, a $13 billion diversified manufacturing firm. Click's revenue last year was $59 million. The deal is for $292 million, or $22.75 per share, a 27% increase over Click's stock price before the announcement.

Although ITW has grown through acquisition itself, it has no experience in software development. That doesn't have to be a problem, provided that ITW lets Click operate largely as an independent business unit. Click was making some smart moves prior to this announcement. If ITW is smart, it will manage Click with a light hand.

The deal calls to mind another software vendor that was acquired by a large diversified manufacturing outfit: Baan, which was acquired by Invensys for $708 million in 2000, only to throw in the towel three years later and sell Baan (along with most of its other software acquisitions) to SSA Global for $135 million.

Hopefully ITW will do better with Click than Invensys did with Baan.

Here is the obligatory press release regarding ITW's acquisition of Click.

Related posts
Click Commerce buys Xelus, continuing acquisition strategy

by Frank Scavo, 9/10/2006 04:20:00 PM | permalink | e-mail this!

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Thursday, September 07, 2006

SAP: If you can't beat 'em, sue 'em

i2, once a leader in the supply chain management space and a high-flyer in the dot-com days, has shrunk to a fraction of its former self. During the same period, SAP has built out its supply chain management functionality, leaving little room for a best-of-breed player such as i2 in the large SAP installed base.

Now, i2 is claiming that not all of that functionality was invented by SAP. i2 is suing SAP for infringement of seven U.S. patents awarded to i2 between 1998 and 2006. The patents cover technology for process planning, factory planning, sales negotiation and tracking, manufacturing allocations, and management of available to promise (ATP).

In a press release, i2 CEO Michael McGrath said,
i2 is proud of its nearly 20 years as a global innovator and leader in supply chain management. Much of this leadership position was built upon our pioneering ability to solve complex business problems, which was recognized by the awarding of patents for these innovations. We believe that it is critical to protect our patented innovations, and accordingly took these actions today against SAP.
SAP says it is looking into i2's claims.

Related posts
i2 kills off its SRM business
i2 fires 300, struggles to refocus
i2 founder gives up top spot to new CEO

by Frank Scavo, 9/07/2006 10:28:00 AM | permalink | e-mail this!

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Monday, September 04, 2006

More on Oracle's Fusion strategy

The venerable Bruce Richardson at AMR had a meeting and e-mail correspondence with John Wookey, head of application development at Oracle, regarding Oracle's strategy for Fusion. Richardson summed up his correspondence with Wookey in an AMR alert.

The main takeaway, in my opinion, is that Oracle intends to continue major investment in its existing products (E-Business Suite, JDE, PeopleSoft, Siebel, etc.) at the same time that it is investing major resources in its next generation Fusion product. This approach is meant to give (the big word here) "choice" to customers as to when to upgrade/migrate to Fusion.

Wookey says,
The key is choice. We expect people to embrace Fusion, but we want them to move to Fusion based on when it makes the most business sense for them. We are not taking the traditional vendor approach that pushes customers to move based on vendor timelines.
But can Oracle really afford to do two things--to fully invest in its multiple existing products at the same time it is investing in an entirely new product? Wookey says yes, though he doesn't say how doing both will affect Oracle's financial performance as a publicly held company:
Typically, a vendor only has enough resources to re-platform applications and put the existing technology into maintenance mode (i.e., bug fixes); this means that customers don’t have the luxury of figuring out when it is right for them to move to the next technology. They are forced to go when their vendor releases its next product.

Our strategy is different. We are giving our customers a choice … true choice because we will continue to make the current products better and we will deliver a next generation application suite that customers will move to when they see the business value.
Oracle's strategy is clearly aimed at keeping its existing customers from jumping ship while it makes the transition to Fusion. In this regard, I think Oracle is smart.

But what Richardson did not probe is Oracle's apparent decision to base Fusion on the E-Business Suite (EBS) data model and business rules. From Oracle's perspective, this decision is logical--Oracle has to start somewhere with Fusion. But as I pointed out previously, this decision has huge implications for existing and prospective Oracle customers. For existing customers, it means that while EBS customers will face something like a major upgrade to go from EBS to Fusion, customers running JDE or PeopleSoft will face something like a complete migration to a new product. This is why Oracle has to commit to investing in its existing products.

But the implications for prospective Oracle customers are also serious: if you are shopping for a major ERP system today, and you are considering Oracle, you should only consider EBS. There is no point in buying JDE or PeopleSoft (the situation is less clear with Siebel), no matter how much money Oracle sinks into these products today, because they do not represent the easiest path to Fusion.

That's the line of questioning that I wish Richardson had pursued.

Related posts
Oracle's Fusion strategy: clear as mud
Fusion to build on Oracle's E-Business Suite

by Frank Scavo, 9/04/2006 07:10:00 AM | permalink | e-mail this!

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(c) 2002-2014, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

About the Enterprise System Spectator.

Frank Scavo Send tips, rumors, gossip, and feedback to Frank Scavo at .

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

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Blog Roll and Favorite Sites
Strativa: ERP software vendor evaluation, selection, and implementation consultants, California
StreetWolf: Digital creative studio specializing in web, mobile and social applications
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Si Chen's Open Source Strategies
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