Oracle explains business applications market strategy

At a presentation to analysts from the pan-European Software & It Services group at SG Securities on Wednesday, Oracle discussed its applications strategy and outlined just where it believes the most intense competition will be with rival SAP AG.

High on the list will be the battle for vertical industries with CFO Greg Maffei acknowledging there will not be a winner-takes-all situation as far as the horizontal market is concerned but that the situation will be very different in the vertical market. "Someone will get the lion's share of a vertical," he said. Sometimes that will be Oracle, other times it will be SAP.

As reported, Oracle has been active on this front, acquiring to gain or improve its foothold in the market as demonstrated by the $650m Retek purchase and the ProfitLogic deal, which was estimated at around $200m - both in the retail vertical market. These may be added to if Oracle buys up banking software provider I-flex Solutions, which will give it significant traction in the banking section of the financial services sector. Both verticals represent major growth opportunities, and are focus areas for Oracle and SAP, because neither is dominated by a single vendor capable of offering broad based horizontal application infrastructure and capabilities, plus vertical functionality.

So far the difference in approach is that where SAP has tended to build vertical functionality in-house, Oracle has taken a fast-track approach and acquired it. SAP is willing to buy to boost its assets, but only at the right price, as indicated by its withdrawal from the bidding war with Oracle over Retek. The scene is definitely set for further clashes as both vendors look to same group of vertical market players.

There is no question that with the Oracle Fusion initiatives and the SAP Business Process Platform, the two vendors have a similar strategy regarding the move to a SOA but Oracle maintains there is a difference in terms of the credibility of the two approaches.

Middleware is an essential component for anyone building an SOA, said president Charles Phillips, adding that Oracle has an advantage over SAP today because it has an established application server platform, with significant market penetration and recognition amongst the ISV and customer communities. "It is proven and endorsed by the market and is already available now in the Fusion middleware platform."

The second component of the Fusion initiative is Project Fusion, which refers to the plans for the business applications. This takes advantage of Fusion middleware to migrate applications toward a service-based architecture, said Phillips. He said new releases of the business applications, scheduled from September onwards, would start to take on more characteristics of Fusion.

Like SAP, the move to SOA-based Fusion will require multiple releases. The only questions are how transparent that is, if the platform is proven and whether it has been done it before, said Phillips. He believes a major difference between Oracle and SAP is the credibility of the application server. He stressed that Oracle has endorsement and proven technology whereas SAP's NetWeaver has not been proved in the market and lacks third-party signatures.

Maffei also took issue with SAP's growth potential, questioning whether its revenue increases were sustainable, maintaining that when SAP signs large deals the revenue is spread over two to three years. Although this is quite normal, he believes that much of the revenue SAP is enjoying is from deals it made two to three years ago which are taking time to roll through. The suggestion is that its current revenues do not reflect customer take up of its next generation developments.

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