Oracle the Innovator (and Ecosystem Contender)

I just spent two days having my brain annihilated by information overload at Oracle’s Applications Analyst Summit, and, with 21 pages of notes, it’s going to be hard to sort through everything and come up with a concise post on what we learned. But here goes.

The first is that Oracle has been innovating more than it gets credit for, and not just by buying up companies right and left. We saw some excellent examples of innovation in its core applications suites, collectively known as Applications Unlimited, and what the company plans to announce at next months’ Open World conference will make a lot of these customers happy. There’s a lot of value in the Applications Unlimited portfolio that customers can upgrade to, and a lot to be said for Oracle’s claims that they are continuing to add value to their core products.

Also making progress is the uptake for Applications Integration Architecture, or AIA, which is emerging as the linchpin for the company’s competitive position in applications for the next five years. Oracle’s focus on providing innovation through integration – if you’re running eBusiness Suite and want transportation management, advanced retail functionality, or any of the other functions provided by the myriad smaller acquisitions made over the years, you’re going to ideally want to use AIA to tie  it all together – means that AIA needs to be robust and successful.

AIA is not the only way to integrate, in fact most application to application integration in the Oracle stack is done the old-fashioned, peer-to-peer way. But Oracle’s comprehensive vision of a “plug and play” portfolio of innovative best of breed applications rests on AIA’s success. Right now, the actual number of implementations are relatively small, far short of critical mass. But the architecture, data model, and roadmap are looking pretty good, and the strategy appears sound.

What is unknown is how the performance of this “innovation through integration” strategy will be once Oracle’s customers start building out their architectures. Part of the problem will be in ensuring that all the moving parts – and AIA adds a lot of moving parts – work efficiently across all the different platform choices Oracle is providing. This includes support for hybrid on-demand/on-premise systems running Applications Unlimited and CRM On-Demand, Fusion, or any of the third party applications (like SAP) that Oracle wants to support with AIA. The performance issue will be a key one to watch in the battle between the more monolithic SAP approach and Oracle’s much broader platform (and code base.)

Also unknown (or at least unannounced) is how Oracle will manage the increasingly complex upgrade roadmap that its customers must content with. While any individual customer’s choices will be relatively limited, there is going to have to be some serious discussion with customers about how to navigate a complex decision tree that includes whether the customer should upgrade within the Apps Unlimited family, grab some new Fusion Apps functionality when that becomes available, or… frankly, pay attention to competitors’ competing roadmaps. This decision tree isn’t hard to construct, but filling in the relative TCO costs of the options Oracle is presenting to its customers will be an important element in the company’s positioning against SAP and others that are also trying to attack the TCO issue as vigorously as possible.

A final takeaway from the Summit comes in the way of a confirmation from the new head of the whole applications kit and caboodle, Thomas Kurian, who recently took over the full Apps Unlimited and Fusion portfolio in addition to owning the middleware stack. One of the things I’ve noticed lately is a shift in Oracle’s attitude towards building a strong partner ecosystem for its applications business to match its large technology ecosystem. Oracle hasn’t gone out of its way in recent years to cultivate an apps partner ecosystem the way that SAP has, but that appears to be changing, something that Kurian confirmed to me in an early morning meeting prior to day two of the summit. While Oracle isn’t putting out a public ecosystem effort that in any way competes with SAP’s ecosystem effort, Kurian acknowledged that Oracle is focusing more on growing the current 130 plus certified applications ISV partners it currently has.

This focus on ecosystem will make for some interesting competitive issues in coming months and years. With the line of business in many Oracle and SAP customers clamoring for solutions that fill in the white space in their organizations, these big vendors need to either co-opt into their ecosystems the many smaller ISVs that fill these functional voids or lose a significant account “control” opportunity. The LOB buyer is the next frontier in applications growth, and their ability to identify with not just a point solution vendor but the infrastructure vendor that can best slot that point solution in their architecture will be crucial to long-term growth for the Oracles and SAPs of the market. This dual loyalty only comes from a strong ecosystem strategy – aided and abetted by joint sales and marketing activities – and if Oracle can gen up a successful ecosystem partnership program it will give ecosystem leader SAP a run for its money.

I still have about 15 more pages of notes to sort out from the Summit, but these are the highlights that I’m allowed to discuss publicly. (We were asked to sign an NDA that forbids us from writing about what the NDA is about! Maybe not a first, but it was a delicious, Catch 22-like moment).  The Analyst Summit was, in sum, an impressive, though perhaps overloadingly so, event that highlighted one of Kurian’s other points from our conversation. No company in the apps business has transformed itself in the last five years as much as Oracle has. And, judging from what we saw this week, that transformation promises to continue for some time.