November 2007

Oracle’s Applications Strategy—

What’s Your Five-Year Plan?
by Bill Swanton and Lee Geishecker

Oracle has bought 36 software companies, including 21 application and business

intelligence vendors, over the past three years. Its customers are rightly concerned
that the company could lose focus—to the detriment of their application
investments. So far, however, Oracle seems to be delivering on its promises for all
types of customers.

Enterprise Strategies Report

Acronyms and Initialisms
API Application programming interface HCM Human capital management

B2B Business to business HR Human resources

BI Business intelligence KPI Key performance indicator

BOM Bill of materials LSP Logistics service provider

BPM Business process management MDM Master data management

CPG Consumer packaged goods MRP Materials requirements planning

CPM Corporate performance management OLAP Online analytical processing

CRM Customer relationship management PDA Personal digital assistant

CRUD Create, read, update, and delete PLM Product lifecycle management

EAM Enterprise asset management PM Performance management

EPM Enterprise performance management SOA Service-oriented architecture

ERP Enterprise resource planning UI User interface

GRC Governance, risk management, and WMS Warehouse management system

compliance

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Oracle’s Applications Strategy—
What’s Your Five-Year Plan?
by Bill Swanton and Lee Geishecker

Oracle is executing on a multilevel consolidation strategy designed to keep The

customers happy and paying maintenance fees for their original products, Bottom
create a cross-sell opportunity with packaged integration, and deliver a
Line
surprisingly functional next-generation Fusion Applications product.

Executive Oracle has bought 36 software companies, including 21 application

and business intelligence (BI) vendors, over the past three years.
Summary Companies that woke up one morning to find themselves Oracle
customers worry their product and support will change for the
worse. Long-time customers worry that the company will lose focus.

Our interviews with dozens of customers and Oracle executives show that, so far,
Oracle is successfully maintaining the existing customer base and delivering on its
Applications Unlimited promise to keep enhancing these products. Newly acquired
customers interested in only a single application and keeping their non-Oracle technol-
ogy stack can continue as they were. Companies willing to more fully embrace Oracle’s
strategy have more options. From our research, we found the following:
• While some skepticism remains, Oracle’s multilevel strategy lets customers adopt a
stance that makes them comfortable.
• Oracle is delivering enough enhancements to existing applications to keep customers
reasonably happy.
• Oracle is dealing with its overlapping application portfolio by segmenting its target
market.
• Oracle isn’t forcing the adoption of Fusion Middleware, but more of its technology
will seep into every application.
• Application Integration Architecture (AIA) is the near-term opportunity for most
customers to get more value out of their Oracle investments.
• Fusion Applications are a direct descendent of E-Business Suite, are heavily influ-
enced by Oracle’s other products, and will have net-new distributed order manage-
ment functionality.

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 1

 • Oracle’s ever-changing BI and corporate performance management (CPM) strategy
has strong products, but will leave many customers having to deal with existing
investments in nonstrategic products.
• Industry-specific Global Business Units (GBUs) are focusing on integrating acquired
applications and seem slower to adopt AIA and Fusion technology.
• Edge applications and Siebel are natural cross-sells to the other application plat-
forms, but Oracle dreams of using them to penetrate SAP’s installed base.

Companies should look at Oracle’s offerings and pick one of two strategies: either focus
on maintaining your current individual application investment as a standalone or start
adopting Oracle middleware and complementary applications. For companies following
the second strategy, Fusion Applications are an interesting option, but there is no need
to commit to them today.

2 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

While some skepticism remains, Oracle’s multilevel
strategy lets customers adopt a stance that makes
them comfortable
Despite the worst fears of many, few customers have made major changes in their appli-
cation strategies because of Oracle’s acquisition of their product. The most common
complaints are the loss of influence over a product that was formerly owned by a small
company and long-time E-Business Suite stalwarts losing connections as Oracle reorga-
nizes to absorb its acquisitions and staff its Fusion Applications strategy.

Oracle’s strategy has let its customers self-select into a role that makes them feel both
comfortable and content they are getting value from the ongoing Oracle relationship.
We are seeing these customers fall into five roles:
• Single product loyalist—Loyalists continue to focus on the same product and ongo-
ing enhancements, sticking with the technology stack they have always used. They see
Oracle as essentially a consolidator that brings more stability for their product at perhaps
a higher annual maintenance fee. Many JD Edwards customers fall into this camp.
• Multiple product expansionist—The expansionists are starting to see the advantages
of buying more products from the same vendor and holding that vendor responsible for
the integration. Typical members of this group are E-Business Suite customers that are
looking at Siebel, Demantra, and G-Log as they expand their footprints.
• Industry specialist—Industry specialists entered the Oracle fold through its many
acquisitions in retail, communications, utilities, and financial services. Depending
on how many products they own, they may look to Oracle for integration. This
group included the least happy companies, specifically those pursuing a best-of-breed
strategy based on a different technology stack, such as from BEA Systems, IBM, or
TIBCO. Many are sitting on the fence until they understand the uptake of Oracle
technology by the industry business units.
• Best-of-breed opportunist—The opportunists have often chosen SAP as their back-
bone system and became Oracle customers because of the acquisition of products like
Agile, Demantra, G-Log, and Siebel.
• New architecture adventurer —We found no companies that are fully committing
to move to Oracle’s new Fusion Applications, but we expect it will take a rare breed.
Most existing customers will stick to the safety of their existing products, which
Oracle has promised to continue to enhance for some time to come.

Regardless of role, all the companies seem to appreciate the potential upside of the
Oracle strategy. After a few years of working with Oracle, they also see little downside
and are content to continue watching how the strategy evolves. In fact, once Oracle
accounts for over half of their enterprise applications footprint, most companies adopt
an Oracle-first policy of seeing if Oracle’s product meets their needs before investigating
other vendors. They like the idea of single vendor responsibility.

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 3

Table 1: Oracle acquisitions, January 2005 to November 2007
Company Date Category/Purpose
PeopleSoft (including JD Edwards) Jan-05 Core applications
Oblix Mar-05 Middleware—identity management
Retek Apr-05 Retail

TripleHop Jun-05 Middleware—search

TimesTen Jun-05 Communications—in-memory database
ProfitLogic Jul-05 Retail—price optimization
Context Media Jul-05 Middleware—content management
i-flex Aug-05 Banking
G-Log Sep-05 Best-of-breed application—logistics hub
Innobase Oct-05 Open Source—database
Thor Technologies Nov-05 Middleware—identity management, provisioning
OctetString Nov-05 Middleware—identity management, virtual directory
TempoSoft Dec-05 Best-of-breed application—workforce management
360Commerce Jan-06 Retail
Siebel Jan-06 Core applications—CRM
Sleepycat Feb-06 Open source—database
HotSip Feb-06 Communications—carrier-grade communications infrastructure
Portal Software Apr-06 Communications—billing and revenue management
Net4Call Apr-06 Communications—service delivery platform
Demantra Jun-06 Best-of-breed application—demand management
Telephony@Work Jun-06 CRM—CRM IP call center
Sigma Dynamics Aug-06 Analytics—time-based data
Sunopsis Oct-06 Middleware—data integration
MetaSolv Software Oct-06 Communications—service fulfillment
Stellent Nov-06 Middleware—content management
SPL WorldGroup Nov-06 Utilities—customer care
Hyperion Mar-07 Business intelligence / performance management
Tangosol Mar-07 Middleware—extreme transaction processing
AppForge Apr-07 Mobile applications
LODESTAR Apr-07 Utilities—load analytics
Agile (including Eigner and Prodika) May-07 Best-of-breed application—PLM
Bharosa Jul-07 Middleware—fraud detection
Bridgestream Sep-07 Middleware—identity management
Netsure Telcom Limited Sep-07 Communications—network business intelligence and reconciliation
Logical Apps Nov-07 Governance, risk management, and compliance
Interlace Systems Nov-07 EPM—operational planning
Source: AMR Research, 2007
4 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007
Oracle is delivering enough enhancements to existing
applications to keep customers reasonably happy
Most customers feared that Oracle would put their product on life support, keep charg-
ing maintenance, and try to push them to Fusion Applications. It hasn’t worked out
that way. From a dispassionate financial point of view, these acquisitions only work if
Oracle keeps companies committed to the product and continuing to pay maintenance.
Customers are rightly griping that, in many cases, Oracle raised the software mainte-
nance fees to its relatively high 22%, and spent much of that on new industries and
products. But all software vendors play this game to some extent.

As shown in Table 2, Oracle has fairly significant new functionality scheduled for the
next releases of all its major product platforms. This functionality, which is not ground-
breaking, is based on demand for enhancements from the customer base. Oracle is being
responsive to the base by maintaining separate development organizations for each prod-
uct family. Only in the BI and performance management (PM) space described below
do we see any evidence of significant products being put out to pasture.

Table 2: Application Unlimited—enhancement continues

Application Next Release Selected Areas of Enhancement

E-Business Suite 12.1 System maintenance tools, SOA enablement,
AIA PIPs, globalizations and localizations,
PIM for Retail, spare parts, demand signal
repository, price protection, manufacturing
transaction hub
Siebel 8.1 Self-service applications, Loyalty, AIA
PeopleSoft 9.1 Talent management, business process auto-
mation, EAM, enhanced procure to pay, AIA
JD Edwards 9.0 AIA, localizations, order fulfillment work-
EnterpriseOne bench, kit processing, configurator, out-
bound consignment
JD Edwards World A9.1.2 Expanded use of Fusion Middleware, costing,
government contracts
Demantra 7.2 S&OP enhancement

G-Log 7 Global trade management, fleet manage-

ment, AIA
Siebel CRM 15 Sales productivity applications, PDA support,
On Demand dashboards, AIA
Source: AMR Research, 2007

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 5

 Many are skeptical that Oracle can afford to keep these teams together and still build
Fusion Applications. It boasts about retaining a high percentage of the development
and support staffs in every acquisition, as well as staffing the Fusion Applications devel-
opment with thousands of engineers. How does it make the numbers work? The argu-
ment goes like this:
• Acting as a consolidator, Oracle can take over a product, eliminate most back-office
and many sales personnel, raise maintenance fees, and essentially keep all of the
development and support people associated with the product. This consolidation
model is well proven in companies such as Infor.
• For each of its major platforms, including E-Business Suite, PeopleSoft Enterprise,
JD Edwards EnterpriseOne, and Siebel, Oracle has had a team building the underly-
ing middleware and tools for a next-generation product. These efforts were consoli-
dated into a single effort on Fusion Middleware, freeing up head count to staff the
Fusion Applications effort.

Over time, Oracle will shift more of its efforts to newer products, but we do not expect
them to kill off any products as long as there is a maintenance revenue stream coming
in. A prime example is the JD Edwards World product, with its imminent demise pre-
dicted for more than 10 years through three corporate owners. It is still supported and
enhanced to this day. Another example of Oracle’s continued support is Rdb, which
was acquired from Digital in 1994.

Oracle is dealing with its overlapping application

portfolio by segmenting its target market
Too many people assume that software companies only acquire others to get function-
ality for their core product. While such strategic acquisitions were the rule a few years
ago, Oracle is big enough to manage a portfolio. It may have multiple products that fit
a customer’s needs, but this can be worked out in the field based on the nature of the
opportunity and the resources at hand to close and service it. Table 3 lists the major
Oracle application platforms and how they are positioned.

6 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

Table 3: Handicapping the major Oracle platforms
Platform Key Roles Target Market
E-Business Suite Major back-office (ERP) platform Large, global companies with
centralized IT strategies
Siebel Major front-office (CRM) plat- Large CRM, especially call
form centers
PeopleSoft Lead for government and educa- Comprehensive HCM and
tion lead enterprise-wide in gov-
ernment and education
JD Edwards Alternate back office (ERP) Construction and facilities
EnterpriseOne management companies,
less-than-$500M manufactur-
ing sites, food and beverage
(grower management)
JD Edwards World Keep the base happy Existing customer base

Hyperion Corporate performance man- Large companies

agement, including consolida-
tion, budgeting, and planning
Source: AMR Research, 2007

Companies frequently complain about Oracle’s overlapping sales forces. As one execu-
tive told us, “I don’t have time to manage five strategic partnerships.” Though it is still
evolving, a customer is often visited by separate sales teams for the following:
• Database
• Middleware technology
• Back-office applications (E-Business Suite, PeopleSoft, JD Edwards)
• Front-office applications (Siebel)
• BI/PM technology (Siebel Analytics)
• BI/PM applications (Hyperion)
• Industry-specific applications (retail, communications)
• Overlay sales teams for specialty products (Demantra, G-Log)

Oracle claims it is increasing account coordination, especially for its larger customers.
We have yet to see this in effect. In reality, each of these sales teams has a number to
meet and will pursue it independently. We don’t expect this to be simplified any time
soon, given Oracle’s ongoing acquisitions and propensity to reorganize sales.

Figure 1 demonstrates Oracle’s extensive portfolio, though any one customer should
only be exposed to a portion of it if Oracle handles the segmentation correctly in the
field. The portfolio has four major segments:

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 7

 • Technology stack—Oracle was first a technology provider and then an applications
provider. Recent versions of applications like E-Business Suite are coordinating these
product lines better than in the past and delivering on the current version of technol-
ogy products. While Oracle continues to support non-Oracle technology stacks for
acquired applications, such as IBM’s WebSphere, it is also trying to make more of
them run on Oracle technology, especially the database and application server. This
starts tapering off when it comes to the development tools, as most of the acquired
products had their own, such as PeopleTools. We expect Oracle to be very pragmatic
in determining what to adopt by product line.
• Enterprise performance management—The Hyperion acquisition and wide-
spread use of Oracle Business Intelligence Enterprise Edition (OBI EE), a.k.a. Siebel
Analytics, across applications makes this the greatest area of change.
• Horizontal applications —The major platforms for Oracle target many industries.
E-Business Suite is the dominant back-office application, and Siebel the dominant
front-office application for large global enterprises. Pragmatically, PeopleSoft is mar-
keted as high-end human capital management (HCM) for those wanting a separate
application. PeopleSoft also takes the lead in the education and government sectors,
where it had specialized functionality and a dominant share. Conversely, JD Edwards
is targeted at smaller or site-level manufacturing as well as niche markets for con-
struction and food and beverage that require grower management. The Edge applica-
tions (described later) can be cross-sold across many platforms.
• Vertical applications —Trying to fit all industry-specific functionality into the core
horizontal applications was taking too long and adding complexity. Instead, Oracle
started buying up best-of-breed applications in particular target markets, forming
GBUs dedicated to these markets in retail, communications, banking, and utilities.
The long-range plan is to cross-sell the back- and front-office applications.

It is important to realize two things:

• These applications were acquired over three years, and it takes time for the overall
strategy to permeate the product. Oracle tends to remediate the applications initially,
in particular removing any open source components and then starting a slow process
to get the application to use more of the Oracle technology stack as an option.
• The company is extremely pragmatic in deciding how fast to make investments and
changes. It won’t do anything to alienate the customer base and may put off changes
if the product was recently upgraded. The main consideration will be market oppor-
tunity and demands from existing customers.

8 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

Any given customer will only be interested in a portion of this portfolio based on size,
industry, and existing investments. Oracle’s challenge will be to articulate a segment-
specific view clearly to these customers so they understand their choices and opportu-
nities. While the company will happily sell them anything, customers don’t want to
be the lone company with a particular array of products. They need to understand the
ones it treats as strategic combinations. Oracle still has a way to go to articulate this
message clearly in terms of industry-specific portfolios by company size.

Figure 1: Positioning of Oracle’s Application Portfolio

Banking Communications Utilities Retail

MetaSolv ProfitLogic
Education Net4Call Lodestar 360Commerce
and iFlex Retek Real Estate
Vertical Portal SPL
Government Construction
Apps

Edge Apps
PeopleSoft Siebel CRM JD Edwards
Horizontal Enterprise EnterpriseOne
Fusion
Apps Applications Manufacturing
Services
E-Business Suite (EBS)

Hyperion
EPM Financial PM
Transactional
PM
Operational
BI

Native Dev Env (J2EE/PLSQL)

Technology Oracle Application Server
Stack Tools (BI Publisher, Ent. Mgr., AIA, UPK. etc.)
Oracle Database

Source: AMR Research, 2007

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 9

 Oracle isn’t forcing the adoption of Fusion
Middleware, but more of its technology will seep into
every application
Oracle has been reassuring companies that don’t use its middleware that it will con-
tinue supporting other technology stacks, such as IBM in the JD Edwards products
and BEA Systems in PeopleSoft Enterprise. For the single product loyalists, this should
enable them to maintain, but perhaps not expand their use of Oracle products.

Oracle, however, is also cross-pollinating many application platforms with supporting

technology for system management, analytics, and training. Examples of these tools are
shown in Table 4, clearly showing it is using some of the best aspects of its acquisitions
to improve them all.

This strategy should improve all applications, but it is unclear how this will affect cus-
tomers using products outside the Oracle technology stack. In some cases, the tool is
being ported into an application’s underlying toolset. In others, application-specific con-
tent, such as analytics or support information, is being created for that application. This
may lead to the Oracle technology stack finding its way into any environment over time.

Table 4: Sample of cross-platform technology

Technology Origin Value

OBI EE Siebel Standard analytical models for various industries, with productized
extracts from applications.
BI Publisher EBS Formerly XML Publisher, decouples data extraction from formatting
and language for more flexible reporting and B2B messaging.
Enterprise Manager Oracle RDBMS Common systems management for database, middleware, and all
applications.
Application Integration New Application-independent integration strategy to allow loose cou-
Architecture (AIA) pling of multiple Oracle products.
Universal Productivity PeopleSoft Online help and training tool.
Kit (UPK)
WebCenter Middleware Unified user experience across multiple applications in context. For
example, get HR data from PeopleSoft Enterprise on the screen with
transaction data related to that employee from EBS.
Industry Models PeopleSoft Four-level business process models for 30 industries, 22 processes,
and 200 activity flows, which are application-product independent.
The fourth level is approx. 1,000 platform-specific activities and over
5,000 tasks. These models should drive more standardized imple-
mentations through Oracle Process Architect (IDS Scheer’s ARIS).

Source: AMR Research, 2007

10 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

AIA is the near-term opportunity for most customers
to get more value out of their Oracle investments
For the past 10 years, major enterprise software vendors have trumpeted the virtue of
buying an integrated applications suite from a single vendor because it avoided build-
ing and maintaining costly integration between best-of-breed packages. In the 1990s,
Oracle had tried the best-of-breed route with a group offering known as Oracle CPG,
bringing together six best-of-breed vendors for a dream suite aimed at consumer goods.
That effort soon collapsed as everyone realized the integrations between these compo-
nents were version specific and all the vendors had to upgrade in lockstep for it to work.

So how is Oracle going to sell its new portfolio of best-of-breed applications? The
answer is packaged integration with a twist. Figure 2 shows Oracle’s Application
Integration Architecture.

Figure 2: Role of Application Integration Architecture (AIA)

E-Business Siebel CRM

Siebel CRM Edge Apps On Demand
Suite (EBS)
ABCS ABCS ABCS ABCS

Application
Business Connector Industry Reference Models Fusion
Services (ABCS) Applications

Process Integration
Packs (PIPs)
Business objects and
services supported natively
Based on Open Foundation Pack by Fusion Applications
Application Group • 25 Enterprise Business Objects
Object definitions • Basic Services
For ecosystem
Oracle Fusion Middleware to develop integrations
ahead of PIP availability
ABCS ABCS ABCS
PeopleSoft JD Edwards
Industry Apps
Enterprise EnterpriseOne

Source: AMR Research, 2007

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 11

 Oracle started with the Open Applications Group (OAG) business object documents.
This standard contains definitions for things like items, purchase orders, and customers
as part of an object-oriented framework. Oracle used these to define a standard set of
objects and services independent of any particular application that serves as a neutral or
canonical object that can be used to communicate between applications. The company
has identified approximately 100 of these and has detailed definitions for 25 so far.
Oracle’s final versions have been adjusted to better map them to all the different appli-
cations in the portfolio.

These object definitions have been packaged with basic create, read, update, and delete
(CRUD) services as the enterprise services Foundation Pack, which can be used in con-
junction with Fusion Middleware to build integration scenarios. This package will be
made available to third-party developers and service provider partners to encourage an
ecosystem to grow around AIA technology. These object definitions will be consistent
with the service objects natively supported in the upcoming Fusion Applications prod-
uct, so the near-term integration and longer term replacement product strategies are
closely coordinated and will support interoperability between older applications and the
new product.

Few customers want to build their own integrations, so Oracle is creating packaged
Process Integration Packs (PIPs) to do well-defined integration scenarios. (The name is
unfortunate, as the acronym is the same as RosettaNet’s Partner Interchange Processes,
which is a slightly different concept.) One early example is the Siebel CRM Integration
Pack for Oracle E-Business Suite Order Management, which covers a specific scenario
and products. Some of the early scenarios are listed in Table 5.

The Oracle PIPs are intended to deal with integration scenarios across multiple products,
typically an extended business process that is beyond the scope of any one of them. The
same group at Oracle is building a set of business process reference models. The top 3
layers cover 30 industry models, 22 high-level process flows, and over 200 detailed busi-
ness processes that are common across all the applications. The next level down focuses
on individual activities and is application specific. This activity started at PeopleSoft
before the acquisition and has been expanded to the other Oracle applications.

All of the components discussed so far are application platform independent, a com-
mon language for all to speak. Each development group is building Application
Business Connector Services (ABCS) for each application to translate the common
object and services into specific internal objects and application programming interfaces
(APIs) to implement the services. These will have to be built out over time. While some
can be retrofit into existing application releases, others will require internal changes to
the application and will have to wait for a future release.

12 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

Table 5: Application Integration Architecture priorities
Expected
Process Integration Packs (PIPs) Availability
Siebel CRM On Demand Integration Pack for Oracle E-Business Suite Available
Siebel CRM Integration Pack for Oracle E-Business Suite Order Management Available
Siebel Call Center Integration for Oracle Adverse Event Reporting System Available
Siebel CRM Integration Pack for Trade Promotion Management Available
Siebel CRM Integration Pack for Banking Account Originations Available
Siebel CRM Integration Pack for i-flex FLEXCUBE Account Originations Available
Siebel Universal Customer Master Integration Pack for Oracle E-Business Suite and Siebel CRM 2008
Siebel CRM Integration Pack for Oracle E-Business Suite Order Management 2008
Oracle E-Business Suite Integration Pack for Demantra: Demand Forecasting 2008
Oracle E-Business Suite Price Protection for Oracle Trade Promotion Management 2008
Siebel CRM Integration Pack for Demantra: Trade Promotion Optimization 2008
Agile Integration Pack for Oracle E-Business Suite: Product Lifecycle Management 2008
Oracle Product Information Management Integration Pack for Siebel CRM and E-Business Suite 2008
Oracle Transportation Management Integration Pack for E-Business Suite 2008
Oracle Transportation Management Integration Pack for Siebel CRM and E-Business Suite: 2008
Logistics Service Provider
Siebel CRM Integration Pack for Oracle Communications Billing and Revenue Management: Available
Order to Bill
Siebel CRM Integration Pack for Oracle Communications Billing and Revenue Management: Available
Agent Assisted Billing Care
Oracle Communications Billing and Revenue Management Integration Pack for Oracle E-Business Available
Suite: Revenue Accounting
Siebel CRM On Demand Integration Pack for JD Edwards 2008
Siebel CRM On Demand Integration Pack for Siebel On-Premise 2008
Oracle Retail Merchandising Integration Pack for EBS R12 Fin and PSFT 8.9 Financials 2008
Oracle Retail Merchandising Integration Pack for Oracle PIM Data Hub 2008
Oracle Retail Merchandising Integration Pack for Oracle Retail Stores and Oracle Transportation 2008
Management
Source: AMR Research, 2007

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 13

 There are two big advantages to this approach:
• If done right, the integration scenario encoded in the PIPs is independent of the
specific release of the applications at each end. So you could do an upgrade on your
E-Business Suite without having to also upgrade your Siebel front office.
• The integration scenarios should be independent of specific applications, allowing
them to be reused for a similar problem with different applications. For example,
most of the work needed to get Siebel orders to E-Business Suite would also apply to
get Siebel orders to JD Edwards EnterpriseOne. This should give Oracle some econ-
omy of scale to keep up with all the variations.

The AIA will satisfy customer demands for integration of acquired applications, while
creating a gradual migration path to the future Fusion Applications. The PIPs, com-
bined with the business process management (BPM) tools in Fusion Middleware, will
give customers an opportunity to implement cross-functional business processes and
then create a unique competitive advantage on top of standard enterprise applications.

One thing that becomes apparent when looking at the list of planned PIPs is the
importance of Siebel in Oracle’s plans. Siebel is being positioned across almost every
industry and integrated with almost every other product. We expect this to be a major
part of Oracle’s cross-selling efforts.

Obviously, Oracle has to execute extremely well to monetize this strategy. It can’t let
creeping complexity derail the promise of easy business process improvement. It has
to keep a lid on the total cost of ownership, maintain software quality as it brings in
the new tools, and be wary of creating operational issues like excessive downtime for
updates or maintenance. But still, it has created one of the most compelling strategies
AMR Research has seen in quite a while.

For current Oracle customers, AIA is the space to watch. It will be the key to cost-
effectively applying other pieces of Oracle applications in your landscape. The trick will
be to understand where Oracle is making its investments and not get ahead of where it
has built standard PIPs to support the scenario you have in mind.

14 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

Fusion Applications are a direct descendent of
E-Business Suite, are heavily influenced by Oracle’s
other products, and will have net-new distributed
order management functionality
Another myth about Oracle’s strategy is that it plans to combine the code bases of all
the products it bought into one product. Nothing could be further from the truth.
What it is instead doing is tapping the best ideas and designs from each product as it
builds new ones and, in some cases, redesigning the function if none of the products
did it well. Retention of the designers from all the products was critical here, in addi-
tion to creating cross-product process councils to discuss the ideas and guide develop-
ment of Fusion Applications.

The best of the ERP and CRM data models

As shown in Figure 3, Fusion Applications draw on a variety of the applications Oracle

built or acquired. The E-Business Suite ERP data model and even large amounts of
core transaction processing code have been brought forward to Fusion Applications.
Especially in the core financials, this should make potential users far more comfort-
able than trying out a product built from scratch. Another key part of the data model
is E-Business Suite’s Trading Community Architecture (TCA), which models business
partner hierarchies for customers and suppliers. BI Publisher (formerly XML Publisher)
will be moving to Fusion as well.

While little actual code or data structures is coming from PeopleSoft Enterprise, the
ERP data model was extended by mimicking several useful organizational concepts.
These included organizing items into tree structures, such as people into organizational
charts, the ability to look at the data as of a certain date, and the SetID security con-
struct. Oracle also drew on the PeopleSoft Enterprise user interface (UI) design and the
idea of using design patterns for consistency across functions as it reimplements most of
the UI with its WebCenter tool.

Another important concept from the PeopleSoft area is a pillar deployment strategy.
Fusion Applications will be distributed in at least three major pillars: ERP (finance and
supply chain), CRM, and HCM. While it can be deployed as a single instance with
all three, customers will also have the ability to set up three separate systems with pre-
built AIA integration between them. This flexibility allows changes and upgrades to be
decoupled between the pillars (for example, allowing the annual statutory upgrades to
be made to the HCM instance without affecting 24/7 supply chain operations).

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 15

 Siebel is contributing the CRM data model, including sales and marketing objects such
as promotions, but not the core customer definition that is coming from TCA. Siebel
was stronger on consumers than B2B, so its householding concepts will be included in
the customer data model.

While little specific data models or code came from other applications, such as JD
Edwards EnterpriseOne, Oracle has systematically compared how various functions
were implemented in each product and picked the best ideas for Fusion Applications.
We expect EBS customers to be comfortable with the result, though Oracle still will
have to make a good case for them to upgrade.

Figure 3: Fusion applications genealogy

11.5.10 12.0 12.1

E-Business
Suite (EBS)
• ERP
• XML Reporting AIA
Fusion Middleware • Transaction Code • Business Objects
Development • TCA • Services
Environment

• Tree Structures V1 V2
Fusion
• Date Effectivity
Applications
• SetID • Siebel Analytics (OBI EE)
• UI Design • CRM Data Model
• Pillar Deployment • UCM Householding
8.x 9.0 9.1
PeopleSoft
Enterprise
8.0 8.1 All codelines of all
Siebel products were assessed
8.9 9.0 and functionality ideas
JD Edwards incorporated in Fusion
EnterpriseOne Applications design

Source: AMR Research, 2007

16 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

Strong initial functionality

Functionality will be critical to Fusion Applications adoption. Many of us assumed that

the initial version of the applications promised for 2008 would be a bare minimum,
such as just core financials and procurement. This would have been a credible foot-
print, mimicking many of the E-Business Suite implementations today and filling the
need for many of the new vertical industries Oracle is targeting with its GBUs. Oracle,
however, is planning much more functional coverage and even net-new functionality as
shown in Figure 4:
• The ERP pillar will be a fairly complete coverage of financials, procurement, inven-
tory, and supply chain, but will not include manufacturing in the first release. It will
handle buying, selling, and moving material, but not creating new items through
MRP, bill of materials (BOM), and routings. Some specialized industry capabilities,
such as clinical trial support for the life sciences vertical, are also out of scope.
• While lack of manufacturing may seem a large impediment, Oracle is targeting the
manufacturing brand owners that are heavily outsourced and retailers with a new
distributed order management capability not present in the existing products. This
will let a single order be parceled out for fulfillment to multiple partners, warehouses,
and eventually internal plants, with full visibility to order status. Solutions to this
problem in the past usually involved customizations, nonintuitive internal sales order
processes, difficulty in invoicing, and lack of visibility. For many companies, this
single capability may be the biggest attraction of Fusion Applications when they con-
sider upgrading.
• Manufacturing will be part of Fusion Applications version 2. Oracle is considering
making it a separate pillar, which would allow separate manufacturing instances
linked to a single global financial and supply chain instance. This would give more
options for downtime scheduling for 24/7 manufacturing operations.
• The CRM pillar will contain much of the Siebel horizontal functionality, but verti-
cal-specific capabilities will be in future versions.
• The HCM pillar will contain most of the HR functionality customers expect from
PeopleSoft and E-Business Suite, but some of the other constructs, such as education-
oriented functionality, will be in the future.

Figure 4 is just a rough picture of what is planned, based on conversations with Oracle
executives. The devil will be in the details, as companies discover whether their pet
features are in or out and whether a function was completely redesigned for the new
product.

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 17

 Figure 4: Fusion Applications target broad functional parity in V1

V1 V2 V3

Data Hubs

Financials

Procurement
ERP Supply Chain
Pillar
Dist. Order Mgmt. New Capability

Manufacturing Possibly Separate Pillar

EAM

CRM
Pillar
CRM Horizontal Vertical

HCM HCM
Pillar
None Some Much Most More

Functional Parity versus EBS 12, PSFT 9.0, Siebel 8.0

Source: AMR Research, 2007

18 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

Easier to use, maintain, and tailor…

Meeting or exceeding functionality is only part of the story. Despite the DNA from
other products, Oracle is doing a lot of things fundamentally differently, which will
make Fusion Applications attractive.

From an operational point of view, the pillar strategy and promise of downtime mini-
mization improvements might be a good hook for IT groups at large global companies
that are feeling pressure to reduce scheduled downtime of business-critical systems. The
company is designing the product so that a patching session or upgrade starts with a
snapshot of the database and the bulk of the work is done offline. The existing release is
still running, and database stream technology is used to queue up ongoing transactions.
A much smaller downtime window is then used to flip over to the new code and con-
verted data and bring it up to date with the transaction stream.

The pillar strategy will also allow companies to decouple parts of their landscapes for
easier maintenance as well as do patching and upgrades at different intervals. There is
also the potential for having some pillars as global single instances, while others may
be implemented regionally. Prebuilt AIA integration should still allow the benefits of a
global single instance.

Oracle has further improved its software development process, instilling more discipline
and quantitative tracking of quality indicators. This, combined with the use of declara-
tive business rules, putting application logic in the objects and services instead of the
UI, and a better role-based security model, has reduced the duplication of code, which
led to errors in the past.

The UI is far more intuitive, with worklists and context-sensitive pop-up menus of
useful features available in most places, such as employee names, company names,
addresses, and dates. For example, you can quickly start an e-mail, chat with an
employee, or access financial information web sources about a company right from the
screen. Oracle is also adding Web 2.0 concepts like social networking as optional tool-
bars and extensively embedding BI portlets in the UI.

The company has a special team working to simplify setup, configuration, and admin-
istration of the applications. It is building in business-level key performance indicators
(KPIs) for measuring processes and monitoring the health of the applications. These
supplement more technical monitoring in Enterprise Manager, aiding the applications
team in maintaining service levels. A major goal has been to reduce the time and man
hours spent maintaining the system.

The BPM capabilities in Fusion Applications will be more extensive than in any other
suite we know of. Since Oracle externalized in BPEL much of the built-in workflow, it
will be easier for customers to create customized workflows to give them unique, com-
petitive capabilities without customizing core product code.

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 19

 …but it is still a sizeable upgrade project

Getting to Fusion Applications will be an interesting challenge. Here are some things
for companies converting from E-Business Suite to consider:
• The overhauled UI eliminates Oracle Forms in favor of WebCenter technology. If
you modified the UI—using Logical Apps to simplify the fields, for example—you
may have to redo these customizations. Any customized add-ons will have to be
redone, though Oracle claims there are tools to convert Oracle Forms into a skeleton
for a WebCenter UI that will need to be completed in the JDeveloper environment.
• With Oracle attempting to convert internal workflows from E-Business Suite to use
the BPEL Manager technology, workflow will change completely. Any Oracle work-
flow you developed will have to be redone. This also changes the existing built-in
E-Business Suite workflows, so the application may behave much differently.
• While PL/SQL will always be part of the mix, your technical team’s skills will
require a substantial upgrade. Java, WebCenter, and BPEL will become more impor-
tant. Since these tools are already appearing in Fusion Middleware and are at the
center of AIA and E-Business Suite R12, existing E-Business Suite customers can and
should gain familiarity with them.
• With such a change in underlying technology, performance characteristics are likely
to be much different. Oracle and other enterprise applications vendors are already
seeing the use of Java increasing hardware requirements. Anyone converting to
Fusion Applications will need to perform extensive performance and scalability test-
ing before going live, as the bottlenecks and tuning requirements are likely to be
completely different than they used to be.
• Even in the current products, Oracle is overhauling its BI strategy, using BI Publisher
(formerly XML publisher) for reporting and OBI EE (Siebel Analytics) for performance
management. Customers will need to reimplement essentially all of their reporting.

While Oracle is promising standard upgrade scripts to Fusion, we think this is going
to be a stretch. E-Business Suite customers may get a direct master data conversion and
some mapping of option settings, but they will still have to go through all the func-
tionality and data with a fine-tooth comb. PeopleSoft and JD Edwards customers may
have to do more. In any case, moving to Fusion Applications is going to be closer to
a reimplementation—at best the equivalent of what companies go through when they
try to consolidate two separately implemented ERP instances. Oracle is promising to
transfer licenses for like functionality to reduce the cost, but this is a small part of the
budget of such an upgrade.

We are impressed with what Oracle is promising and see a lot to like about the new
Fusion Applications. For existing customers, the hurdle will be high to justify the cost
and risk of moving to them. At a minimum, Oracle will first have to prove the new
applications’ quality and scalability for large global companies.

20 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

Oracle’s ever-changing BI and CPM strategy has strong
products, but will leave many customers to deal with
existing investments in nonstrategic products
When Oracle announced its intent to acquire Hyperion in 1Q07, it shook the founda-
tions of the CPM marketplace. The vendor most recognizably aligned to the finance
organization was now part of a provider that has software assets encompassing IT
architecture through a full range of business applications.

To best understand this ongoing direction, the situation must be put in context of the
customer’s existing investment:
• Firms using CPM components from existing Oracle product lines, such as E-Business
Suite, PeopleSoft, and JD Edwards, are covered under Oracle’s Applications
Unlimited policy, with existing products maintained, enhanced, and supported for
the foreseeable future.
• The same will hold true for Hyperion customers. There will be no forced migration
to new products in advance of customer demand. But these customers will demand
guidance and direction on what path makes the most sense given Oracle’s product
strategy.

The Hyperion brand remains, with its existing product line serving as the core of
Oracle’s CPM footprint going forward. This includes planning, financial management,
and strategic finance, along with financial data quality and hierarchy master data man-
agement (MDM). Hyperion’s online analytical processing (OLAP) engine, Essbase, is
also a core component of the CPM footprint as well as Oracle’s broader PM architecture.

The Hyperion products are augmented with operational BI applications, including a

financial analytics package built on OBI EE, its primary BI toolset. These applications
were part of Oracle’s Siebel acquisition in 2006 and will play an elemental role for busi-
ness analytics in general. Hyperion’s BI products are also included in the BI suite for
organizations that currently utilize that product line.

Supporting architectures will certainly merge over time, but for now the components of
the CPM suite will be developed in parallel and integrated based on business require-
ment. It’s interesting to note that Hyperion-based CPM is part of Oracle’s Fusion
Middleware product line, not its application strategy. A dedicated sales and marketing
organization selling CPM applications into the finance organization has recently been
established.

A newly created profitability application is in the final stage of development and

expected to be released in the first half of 2008. Not enough details have been released
for us to comment.

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 21

 Oracle’s go-to-market strategy is the enterprise performance management (EPM) sys-
tem: the nexus of CPM, BI, enterprise applications, and supporting infrastructure. This
is completely appropriate for a company of Oracle’s scope, and it will certainly attract
buyers looking for a single provider from bottom to top. The company, which paid
dearly to acquire Hyperion, must finesse its market position to include both the EPM
system approach as well as its best-in-class legacy for CPM and BI.

Without more attention to this dual position, Hyperion risks being marginalized
by buyers as being only for Oracle Application users. Hyperion’s profound presence
across SAP’s customer base was a big plus for the acquisition, but it must be vigorously
defended, with an eye toward expansion. While Oracle has governance, risk manage-
ment, and compliance (GRC) assets, they have yet to show up in its CPM product
strategy, something SAP and others will push aggressively.

In the end, Oracle has made the biggest bet on CPM and has the most to win or lose
based on its execution. Reputation goes a long way in the office of the CFO, but no
vendor can rest solely on its laurels. Proven expertise in a departmental sell in finance
gives Oracle a solid foundation for future CPM growth.

Table 6: Business intelligence and performance management strategy

Segment Strategic Deemphasized

Financial applications Hyperion Financial
(consolidation, budgeting, Management, Hyperion
planning) Planning, Hyperion
Strategic Finance, Hyperion
Performance Scorecard
Analytical frameworks OBI EE (Siebel Analytics)
Enterprise Planning and
Budgeting (EPB), Oracle
Financial Analyzer (OFA)
EBS Daily Business
Intelligence

Core BI tools Oracle BI Tools, Hyperion BI Disparate tools from other

Tools, Hyperion Essbase acquisitions

Source: AMR Research, 2007

22 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

Industry-specific GBUs are focusing on integrating
acquired applications and seem slower to adopt AIA
and Fusion technology
Oracle’s GBUs in the retail, communications, utilities, and banking industries are being
given a high degree of autonomy to penetrate these markets. Many of these units are
led by executives who came to Oracle with the acquisition of a key industry application
and, in some ways, act like they are still running their own companies. Oracle’s execu-
tive management intentionally gave them this autonomy to avoid the common problem
of top talent from an acquisition leaving as soon as their contract expires as well as to
create accountability.

You can see this in how the unit behaves in the market. For example, companies sur-
veyed with both retail products and ERP products note the difference in how the strat-
egy is described depending on to whom they are talking. Some customers complain
they haven’t been able to get a coherent roadmap though they’ve been asking for it for
over 18 months.

A look at the roadmap shows that the GBUs seem to be concentrating on getting their
own houses in order before jumping into the Fusion Applications game. Retail is still
busy bringing Oracle-based technology into each of its acquired products and integrat-
ing them as a retail suite as a major focus of its version 13 in 2008. Wider adoption of
AIA and an integrated back office is in the release beyond that, tied to work on a retail
business process model. Communications seems to be adopting AIA a bit more aggres-
sively.

Customers in industries covered by the GBUs should understand the sequence and tim-
ing of the integration of the various Oracle products they are considering. Many will
still be like best-of-breed, standalone products for a year or more, even though Oracle’s
functional coverage maps make them appear as part of the same suite. If the product
meets your needs and the integration is adequate, that’s fine, but don’t assume more
than can be delivered.

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 23

 Edge applications and Siebel are natural cross-sells
to other application platforms, but Oracle dreams of
using them to penetrate SAP’s installed base
As mentioned earlier, Siebel is a natural cross-selling opportunity that seems to be posi-
tioned in many different places. Oracle has also acquired a series of applications that
don’t fit neatly into any GBU or product platform, but will be attractive to many (see
Table 7). For the most part, these are best-of-breed applications that found their way
into Oracle and other vendor accounts. They also tend to be fairly modern architec-
tures, so they aren’t candidates for radical replatforming to Fusion Middleware.

Organizationally, Oracle has grouped responsibility for the products in a group called
Edge Applications, which includes Demantra, G-Log, and Agile. While it may not be
branded this way, it is an apt description since these products can be sold around the
edge of its major assets. Each product will have an overlay sales force to help account
teams position these specialty products.

Oracle’s ownership should increase the market for these products, seeing how most had
to focus their sales efforts on large companies in North America and Europe because of
resource constraints. Oracle’s global sales capability should create new opportunities, and
its resources will accelerate plans the software vendors couldn’t accomplish on their own.
For example, Agile was unable to capitalize on a natural opportunity for high-tech in
Asia as an independent company, but those plans are front and center under Oracle.

Oracle is also planning to use these products to penetrate SAP accounts, as many of
them had sold to SAP customers before the acquisition. The most important outcome
of this will be standard integrations, but Oracle will have to resist trying to force
Fusion Middleware into these accounts—at least in a visible way. While there is cer-
tainly a best-of-breed opportunity in SAP accounts, we hardly think that Oracle will
be able to use that to a dominant position within them. It will be just another way to
annoy a rival while making money.

24 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

Table 7: Oracle Edge applications

Product Notes
APS (Demantra, Numetrix) Network design, demand management, sales and operations planning, produc-
tion scheduling. Well-developed integration approach prior to AIA as part of
Oracle’s SCM Suite strategy. Moving to AIA in future.

Transportation Plan better WMS integration and features for Logistics Services Providers (LSP)
Management (G-Log) planning. Existing point-to-point integration with EBS and EnterpriseOne.
Extensive AIA plans for EBS, Siebel, and Retek. Replaces EBS Transportation
Management and Transportation Planning.
Agile PLM (A9) Asian language support is a major development focus. Delivered on Oracle
Application Server for most customers prior to acquisition. Replaces EBS’s Oracle
PLM (but not PIM). Existing third-party integrations will be replaced with AIA.

Agile Advantage SMB and On Demand solution.

Agile PLM for Process Recipes and specification management for CPG and retail. .NET based and no
(Prodika) plans to change yet, but will be offered on Oracle database. Oracle acquisition
should provide resources needed for this product to grow.

Agile e6 (Eigner and Targeted at engineer to order and complex products.

Partner)

Source: AMR Research, 2007

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 25

 Recommendations
Oracle’s acquisition spree has created a complex organization and a constantly evolving
strategy that is hard for even the analysts to follow. Oracle customers need to pay close
attention and build their own five-year strategies for their relationships with Oracle.
This requires understanding the products that may affect your landscape, their road-
maps, and your evolving business needs. The key will be to identify key decision points
in the future for buying additional product lines, upgrades, or shifts to new products.

This plan will differ for each type of Oracle customers:

• Single product loyalist—Continue on your way and upgrade as you see the func-
tional need. Be on the lookout for a divergence of interests, such as a tailing off of
enhancements or pressure to switch technology stacks. If this should occur, you
should evaluate the option of dropping maintenance or getting it from a third party
and developing a new long-term strategy.
• Multiple product expansionist—You have the most to gain from Oracle’s strategy.
Understand the difference between the “marketecture” and the delivered integration
capabilities. The danger here is getting ahead of the packaged integration capabilities
and having to bear the cost of the old best-of-breed approach. Hold Oracle respon-
sible for the integrations and any rework needed to get your initial implementation
onto standard product.
• Industry specialist—Focus on things controlled and promoted by the GBU for the
near term. Assess how fully the GBU buys into full Oracle strategy before expecting
it to take responsibility for wider integration of Oracle’s products. Make your desires
clear, though, to drive prioritization of this work.
• Best-of-breed opportunist—Nothing much has changed, other than you have a
stronger company behind your software. To the extent that Oracle is providing inte-
grations, evaluate other Edge products if they fit your needs.
• New architecture adventurer —May you live in interesting times. Right now it
is hard to imagine too many existing Oracle customers fitting the risk-and-reward
model for Fusion Applications.

26 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

For most existing customers, Fusion Applications are a future option, with no need
to commit to it now. Smaller GBU customers that need to replace ancient back-office
systems are probably the best initial bet, as well as new customers. If you are interested
in the technology and can take the risk, you can probably negotiate hard with Oracle.
They are going to need references—the bigger, the better—to get Fusion Applications
to take off.

Oracle has come a long way since the 18-month fight to take over PeopleSoft. It has
developed a rational strategy to satisfy its customers while making money. We see few
downsides for any customer type and some fairly compelling upside opportunities. It
will take an ongoing comparison of your business strategy and Oracle’s execution to
maximize the value.

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 27

Notes

28 © 2007 AMR Research, Inc. Enterprise Strategies Report | November 2007

 Notes

Enterprise Strategies Report | November 2007 © 2007 AMR Research, Inc. 29

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