Feb 12, 2013 (06:02 AM EST)
Oracle Legacy Apps Holding Fusion Back, Says Forrester
Read the Original Article at InformationWeek
Applications Unlimited is a policy Oracle adopted way back in 2006 as a promise to keep supporting and updating applications including Oracle e-Business Suite, PeopleSoft, JD Edwards and Siebel CRM. Fusion Applications were in early development at the time, but they were being touted as the next-generation application suite that would bring together the best of Oracle's own enterprise applications and those it had acquired. The Apps Unlimited policy was intended to allay customer concerns that Oracle might kill their incumbent products off and force them to upgrade to Fusion.
That was seven years ago, and Oracle has done a good enough job of keeping its various legacy apps up to date that a majority of customers want to keep them going, according to Forrester. In a survey of 139 Oracle applications customers, Forrester found that 64% intend to upgrade to the next generation of one of those legacy apps while 25% said they plan to keep them running without ever upgrading them.
The bottom line, according to Forrester, is that too many Oracle customers are standing pat, and not enough are embracing Fusion as the future. As a result, "Oracle's application revenue growth has underperformed both the overall software market and SAP, resulting from slowing growth in existing apps and too little revenue from its Oracle Fusion Applications," Forrester wrote.
[ Is Oracle really serious about the public cloud? Read Oracle Wants Cloud Cake And Hardware Wins. ]
So what about the Oracle customers who are prepared to migrate to new apps? Cloud-based applications, or software as a service, is the leading option, but 17% of respondents in Forrester's survey said they would seek such applications from third-party vendors while only 11% said they would seek cloud apps from Oracle -- the options here being Fusion, plus acquired apps such as RightNow CRM and Taleo human capital management (HCM). Upgrading to new on-premises applications is another option, but here, 12% said they would migrate to apps from third party vendors while only 8% said they would choose new packaged apps from Oracle.
The higher stats for third-party apps should be alarming to Oracle, and there's anecdotal evidence that pure-play vendors, such as Salesforce.com, Workday and others, are getting most of the cloud business, according to Forrester analyst and report co-author Andrew Bartels. Part of the problem, Bartels told InformationWeek, is that Fusion Applications aren't all ready for prime time. "Some Fusion apps are quite good and others are less mature," he said. "And in some instances, Fusion Apps are being developed to supplement, rather than replace, legacy transactional applications." Fusion HCM and financials apps, for example, are actively promoted by Oracle as cloud-based add-on apps for Oracle E-Business Suite or PeopleSoft.
The "dilemma" Forrester references in the title of its report is that Oracle, and its customers, must reconcile the tension between the Applications Unlimited policy and the desirability of having a single, modern go-forward applications portfolio that will benefit from focused research and investment so it can outclass competitive offerings. As Forrester sees it, Oracle will either have to move away from Applications Unlimited and more forcefully toward Fusion or it will have to go the other way and continue to update legacy apps while treating Fusion as just another app rather than the application suite of the future.
It's Forrester's bet that Oracle will eventually have to push Fusion and other cloud apps, and that will be through a combination of carrots and sticks. The carrots are the new features and innovations built into the new apps, such as collaboration, contextual business intelligence and exception-management features. What might be the sticks?
"They might not end Apps Unlimited but rather whittle it down a bit by, for example, going to longer release cycles, increasing the cost of support or reducing the level of support," Bartels speculates.
Oracle did not respond to requests for comment in time for this story, but in recent statements and interviews it seemed to be sticking by the current, middle-ground strategy of continuing to support Apps Unlimited while also touting Fusion and newly acquired cloud products as the next-generation apps.
The risk in change is that Oracle will face a backlash if it backs away from Applications Unlimited too quickly. On the other hand, there's only so much you can do to update aging products, so customers would face increasingly stodgy products if they stick with the old. And Oracle will continue to stifle growth and shortchange its future, Forrester warns, if it doesn't move more aggressively toward the future.
Betting that Oracle, will, in fact, step up efforts to move customers toward Fusion, Forrester's report make four recommendations to customers:
1. Assess the long-term sustainability of each of your enterprise apps.
2. Develop a plan for replacing, upgrading and adding applications.
3. Strike best-possible deals with Oracle for Fusion migration.
4. "Shift to the cadence of the cloud" when embracing new apps.
That last point means you should "embrace the cloud's managed services model to keep applications up-to-date, whether you opt for a pure-cloud model or a hybrid delivery model."
Technology industry analysts aren't the only ones raising warnings about Oracle's current path. Nomura equities analyst Rick Sherlund made a similar point about "Fusion confusion" in a research note last year. Unless Oracle posts strong software growth numbers in the quarters ahead, you can bet that these voices for change will grow louder.