Oracle Strategy Emphasizes Simplicity and Innovation
The two main milestones in the Oracle corporate calendar are the close of its fiscal year at the end of May, and its huge customer-focused Oracle OpenWorld event in October, with most of its public strategic announcements and product launches being timed around the latter. Oracle’s recent Industry Analyst World event provided Ovum analysts with an update on the company’s strategy across its major areas of business, and a preview of its priorities for fiscal year 2013, with a particular focus on public cloud, the mobile enterprise, enterprise applications, Big Data and analytics, customer experience, and engineered systems. Following on from the relatively basic announcements at Oracle OpenWorld 2011, the centerpiece of the event was a comprehensive fleshing out of Oracle’s public cloud strategy, which provides an integrated approach to PaaS and SaaS, and indicates Oracle’s aspiration to offer an end-to-end cloud strategy that can migrate bi-directionally to and from on-premise deployments. Below we summarize Oracle’s progress across the key areas of its business.
Oracleâ€™s overarching marketing message for 2013 of “simplify IT, power extreme innovation” is a good fit for its expanding cloud strategy. Cloud computing will also be the focus of a series of high-level â€śbusiness transformationâ€ť marketing campaigns. Oracle is right. It needs to emphasize the transformational effect of cloud computing. However, instead of focusing too much on technology, it should do more to explain how it can help customers go through this transformation. It should also lead by example, and it would be good to know more about the way Oracle itself is coming to terms with cloud computing.
The company has now started to provide more details about its public cloud, which is planned to be commercially available in a couple of months. The breadth and depth of its vision is such that, should it prove successful, Oracle is likely to become an influential public cloud market-leader, at least within its customer base to start with. It already boasts $1bn in software-as-a-service revenue (mostly via acquisitions). It is good to see that Oracle has got the core focus of its approach right. It is about user experience, with Oracle distinguishing between customer and employee, and also organizational experience, which is key to the change-management effort at the heart of a cloud transformation. Oracle is also keen to cater to developer requirements, not only with technology but also with business services such as payment services. Last but not least, it understands that public clouds not only deliver infrastructure (compute, storage) and software resources, but also data resources. Ovum is looking forward to hearing more about its plans in this area.
Engineered systems and middleware
Oracle continues to develop its family of engineered systems, with a strong ongoing pipeline for both Oracle Exadata and Oracle Exalogic systems. Further innovations and performance improvements are being made for both these products as individual components such as CPUs are refreshed, and increased optimization takes place within the Oracle Fusion Middleware stack. A good example of this is the inclusion of Oracle Virtual Machine (OVM) 3.0 in the forthcoming Oracle Exalogic 2.0 software, which will improve its ability to run multiple workloads. As Oracle and its customers gain further experience with these systems, the usage profile is also changing. For Oracle Exadata, many of the initial deployments were for data warehousing scenarios, but mixed use that includes data warehousing, OLTP, and database consolidation is now more prevalent.
Oracle is aggressively ramping up marketing for the newer members of the engineered systems family, including Oracle Big Data Appliance and Oracle Exalytics In-Memory Machine, and with strong customer interest in Big Data, Ovum anticipates high demand for these products. An interesting side note is provided by IBM’s recent announcement of its Pure Systems range of appliances, which although different in approach to Oracle’s engineered systems, underlines customer appetite for these pre-configured hardware-software combinations, and the relative ease of deployment that they offer.
Oracle is now at the beginning of the 12c wave of its application infrastructure with the Oracle Enterprise Manager 12c and Oracle Fusion Middleware products, including Oracle WebLogic Server 12c as the first product to be released. The company again broadly anticipates an 18-to-24-month cycle of releases across the middleware stack, and while it will continue its familiar themes of an end-to-end stack that is fully integrated and optimized based on open standards, there are two newer perspectives that will impact the direction of development. The first is that the Oracle Fusion Middleware stack is also now in effect the platform on which Oracle Public Cloud is built and delivered, and here Oracle has named Oracle Cloud Application Foundation, its Java-based platform, as the core upon which the rest of the stack runs. The second is the increased involvement of line of business in IT decisions, which will require Oracle to take a more solutions-based approach, even in the â€śtechnology heartlandâ€ť of its middleware portfolio. Examples of this approach already under way include process accelerators built on top of Oracle BPM, business-friendly website-authoring using Oracle WebCenter Sites, and the forthcoming introduction of Oracle Social Network as a social integration and collaboration tool.
Rival vendors have suggested that Oracle is not committed to developing its storage hardware portfolio, which it acquired when it bought Sun Microsystems in 2010, and Pillar Data Systems in 2011. Oracleâ€™s denial of these suggestions is no surprise, and is entirely credible. Technology convergence is increasing the appeal of one-stop shopping for IT infrastructure, and storage is accounting for a growing share of enterprise IT spending (now 25%, according to some estimates.) However, Oracle has work to do in the storage arena.
Tape libraries and associated management software are Oracleâ€™s greatest strength in storage, courtesy of the tape expertise that Sun gained when it bought StorageTek in 2005. However, the overall tape market is slowly shrinking, despite growth at the very high end of the market. In the larger and growing disk arena, Oracleâ€™s products account for only a very small market share, but sales of Oracle disk arrays have recently been growing quickly as a result of product improvements and the effects of Oracle’s sales force and data center presence. At the analysts’ conference, Oracle underlined its promise of commitment to its storage products by outlining its development plans for its two leading disk products: the ZFS Storage Appliance and the Pillar Axiom storage system. It also reiterated its decision to make its potentially very popular Hybrid Columnar Compression (HCC) database compression work only with Oracle storage. HCC reduces the size of Oracle databases tenfold on average, and also improves performance. The fact that it does not work with third-party storage was the result of a commercial, board-level decision, rather than any technical issue. This is reflected in Oracle’s overall storage strategy of engineering Oracle software to run faster and more efficiently on Oracle storage.
Business intelligence, analytics, and Big Data
Grappling with rapid business (and business data) change is the key challenge driving Oracle’s business intelligence (BI) and analytics strategy in 2012. Recent product development has reinforced this with the introduction of engineered systems for data warehousing and analytics, and the introduction of new in-memory processing engines that deliver both rapid implementation and analysis. Of particular interest to Oracle, as with all BI vendors, is Big Data, a strategy that draws on several other Oracle systems offerings, notably Oracle Big Data Appliance, Oracle Exadata, and (for certain use-cases) Oracle Exalytics.
On the software side, Big Data also lends more clarity to the Oracle Endeca Information Discovery technology and some interesting business use-cases are slowly emerging for Oracle Endeca’s MDEX faceted search capabilities, including crawling, identifying, and sub-setting relevant unstructured sets of Big Data for agile BI discovery and analysis. The benefit is allowing users to search, arbitrarily filter, and get quick aggregated views of returned data. This positions MDEX as a hybrid search/analytical database designed for analysis of diverse and fast-changing Big Data. These capabilities need to be built into Oracle Endeca Information Discovery, and Oracle is looking to productize it in the future. Integration between Oracle Business Intelligence Enterprise Edition (OBIEE) and Oracle Endeca’s core search engine will also be tightened and is soon likely to be ported to run on Exalytics hardware.
Clearly, Oracle customers now have multiple options to service their BI and analytics needs, which Oracle is increasingly packaging in neatly configured engineered systems, integrated suites, or pre-configured horizontal or vertically slanted applications that come with attractive pricing, bundling, and migration incentives. Oracle BI executives did their best to articulate the different tools, applications, and systems that Oracle provides, but the options are so broad that it is in danger of becoming a long catalog. Ovum is hearing from Oracle BI and analytics customers that Oracle needs to be clearer about which analytic use-cases and processing workload scenarios map best to each of these options.
Oracleâ€™s approach to enterprise applications is one of consistency and predictability. It continues to leverage R&D and M&A to fill out major product areas and plug small gaps. Another element that is useful for IT executives to remember is that Oracle extracts underlying technologies of acquired products to use in other parts of the enterprise applications portfolio. A key factor is that Oracle keeps branded products intact to generate robust revenue streams. This means it can continue to invest in R&D across the board in both organic development and acquired companies. For example, Oracle has already added more than 100 engineers to the recently acquired RightNow team. While this approach makes the ongoing work of filling out and rationalizing the enterprise applications portfolio a very complex puzzle, over the last decade Oracle has developed the people, skills, processes, and, most importantly, the culture to pull this off.
Oracle will continue to be a voracious acquirer of IT vendors. However, its track record of continuing to invest in the acquired products means that enterprise and public IT executives and managers do not need to push the panic button when a key supplier is bought by Oracle. On the other hand, Oracleâ€™s strategy does mean that IT must increase its investment in vendor relationship management to dig deep and understand the enterprise applications roadmap.
Oracle is pulling together via acquisition a powerful portfolio of technologies and services to enable both the B2C and B2B enterprise to deliver a customer experience that maps effectively to the integrated cross-channel expectations of todayâ€™s connected consumer. Customers arenâ€™t looking for a siloed price, product, or shopping experience via the PC, mobile, social, or in-store channels, they are looking for a single experience that enables them to engage with a product or a retailer through any of these contact points at their discretion. The combination of ATG as a cross-channel retail platform, which includes Endeca for smart product catalogue management and search, Siebel for CRM, FatWire for web content and experience management, InQuira for web self-service and knowledge management, and most recently RightNow for cross-channel customer experience management, is a formidable deck of cards to be holding.
Ovum believes that Oracleâ€™s challenge, however, is going to be twofold. First, it still does not have a stake in the marketing phase of the customer lifecycle. Even though ATG has a campaign-management tool, this does not yet give it a position in demand generation. Second, stakeholders in customer experience go beyond the CIO and CFO, Oracleâ€™s traditional sales channel. Oracle will also have to sell into the CMO, and this is going to require new sales skills, the creation of brand relevance, and some smart product positioning. This CMO sales channel gap, plus its lack of demand-generation tools, could signal that Oracle’s acquisition journey to complete its customer experience portfolio is not yet complete.
Oracle’s industry strategy is based on extending its core applications with differentiated industry-specific capabilities, and it estimates that 40% of overall IT spend falls within this category. The company is also building industry-specific functionality into the middleware, database, and even hardware layers, with industry IP therefore including processes, data models, integration protocols, analytical algorithms, and services. Increasingly, these elements are also being combined into complete solutions to key industry challenges.
This is a strategy that Oracle has pursued for some time, and Oracle Industry Analyst World built on it to highlight the opportunities for taking customer experience and Big Data into industry-specific scenarios. One important question that remains unanswered is how and when Oracle will incorporate industry features into Oracle Fusion Applications. Until now these have been positioned as a non-industry-specific platform, but if the product line is to become broadly adopted by clients in key verticals, they will want the software to be tailored more closely to their requirements. A similar question applies to the newest SaaS applications such as RightNow and Taleo that are part of Oracle Public Cloud.
Oracle will also need to consider the requirement for industry-specific services to support its end-to-end approach. Ovum notes that enterprise clients are looking to work with fewer vendors and to establish more substantive trusted partnerships with them, and with its partner-led approach to services, Oracle may find it more difficult to establish this type of relationship.
Simplifying business and IT complexity
At the Oracle Industry Analyst World event, Oracle executives consistently emphasized that when it comes to addressing business and IT complexity (Oracle president Mark Hurd characterized it as a Rubikâ€™s Cube) that Oracleâ€™s vertically and horizontally integrated â€śRedâ€ť IT stack, Exa* series of purpose-built appliances, and Oracle Public Cloud represent the best approach for IT to adopt. Oracle does have a credible story to tell. Its broad and deep portfolio of hardware, software, and services is among the strongest when it comes to trying to provide a one-stop shop for IT. Even though the portfolio still has gaps, and some of the elements are integrated only at the brochure level, the tens of billions spent on R&D and M&A over the last decade, driven by a reasonably coherent vision and strategy, is starting to show promise.
One important point to consider, however, is that Oracle has created a parallel Rubikâ€™s Cube of complexity that is Oracle itself. A complex global corporation built on organic development and serial acquisitions means that it has a difficult task of rationalizing products, technologies, cultures, and go-to-market activities.
Ovum recommends that IT executives and managers leverage Oracleâ€™s vision and strategy when conducting IT strategic planning. While Oracle still has much work to do to make its message a practical reality, the vision and strategy are credible and provocative, making them useful fodder for IT planners.
In terms of its systems business, Oracle discussed continued investments that build on the announcements made last year at Oracle OpenWorld. Oracle SPARC T4 servers are now shipping in volume, and customer deployments are showing significant improvements in single-thread performance. Also starting to ship is the SPARC T4 SuperCluster, an engineered system similar in concept to the Oracle Exadata Database Machine except that this is a general-purpose server based on Oracle SPARC T4 processors and running Oracle Solaris.
The company is continuing to invest in Oracle SPARC, and it is expected to release the first Oracle SPARC T5-based systems by the end of 2012, alongside upgrades to its M-Series server products. As with storage, the core strategy is to offer customers increased optimization when running their Oracle software on Oracle hardware by embedding additional processing capability at the processor level, thereby increasing performance. Oracle also provided an update on Oracle Linux and Oracle Solaris 11, and cited growing adoption of its virtualization product, Oracle VM 3.0, which was launched last August.
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