Oracle Applications customers reveal their future plans

I'm a huge fan of primary research, especially when it is paired up with great analysis. Some Enterprise Software and Solutions (#EnSW on twitter) analysts base too much of their commentary and advice on what they read in the news, see at user conferences, and hear from other analysts.

Computer Economics is an #EnSW analysis firm with a difference. Frank Scavo and the folks at Computer Economics do great research - quantitative and qualitative - on the #EnSW world. If you are an IT executive, or an #EnSW vendor, you owe it to yourself and your enterprise to check out their research.

The latest published research from Computer Economics is a study called "Go-Forward Strategies for Oracle Application Customers." In the spirit of full disclosure, I should mention the following, and you should bear these facts in mind as you consider my comments:

• I have been in the #EnSW world for around 25 years now, including long stints in executive product roles at Oracle and SAP.
• My company, C3, may someday be competing with Oracle (and other #EnSW vendors).
• Computer Economics provided me with a copy of this $995 report at no cost for my review.
  

Here are some key findings from the report, followed by some of my thoughts about the results:

• Finding: Dissatisfaction with the cost and benefits of support runs high across the Oracle Applications customer base, with 42% of respondents reporting dissatisfaction with the quality of Oracle support, and 58% reporting dissatisfaction with the cost of Oracle support.
• My thoughts: That is a very surprising result, showing an astonishingly high level of dissatisfaction!

• Finding: Customers generally expect Oracle to grow as a share of their IT spending, despite their level of satisfaction.
• My thoughts: There are a number of obvious reasons for this result, including vendor consolidation, customer expectations of growth in their business coming out of this continued weak economy, and the difficulty of moving from one application product set to another.

• Finding: Third party maintenance and support is attractive to a substantial fraction of Oracle Applications customers.
• My thoughts: A far smaller percentage of Oracle Applications customers are considering third party maintenance and support as compared to the fraction who are dissatisfied with support quality and price. It is not clear to me that any third party can really deliver bug fixes, patches, and legislative and regulatory updates. Nonetheless, #EnSW vendors are increasingly dependent on maintenance and support revenue, and thus they are increasingly vulnerable to customers using third parties, or going off maintenance and support entirely.
  

• Finding: Despite - of perhaps because of - their dissatisfaction with the current applications support, Oracle Applications customers are not planning a rapid migration to Oracle Fusion Applications, with 5% planning to migrate away from Oracle, 24% researching or planning to migrate to Fusion, and the remainder with no plans to migrate to Fusion. e-Business Suite has the largest percentage of customers considering Fusion Applications, and JD Edwards has the largest percentage of customers considering moving away from Oracle.
  
• My thoughts: Oracle is just beginning to roll out information about Fusion Applications, with the first big "reveal" coming at this year's Oracle Open World. Many Oracle Applications customers have only a limited understanding of the benefits and features, and limitations, of Fusion Applications. Over time, you can expect this result to change dramatically.

• Finding: The report includes information about the staff required to run various Oracle Applications products, including e-Business Suite, JD Edwards, Peoplesoft, and Siebel. JD Edwards requires the smallest number of support staff, with e-Bueinss Suite and Peoplesoft at the other end of the spectrum to operate.
• My thoughts: There is significant value in this section, and in the report recommendations, for Oracle Applications customers.
  

Computer Research has done the industry another mitzvah in sponsoring and executing this research and analysis project. Oracle Applications customers, and #EnSW vendors, would benefit from reading this insightful report.


Links:

• Primary Research: http://en.wikipedia.org/wiki/Primary_research
• #EnSW: http://twitter.com/#!/search/%23EnSW
• Computer Economics: http://www.computereconomics.com/
• Frank Scavo: http://twitter.com/#!/fscavo
• Go-Forward Strategies for Oracle Application Customers: http://www.computereconomics.com/article.cfm?id=1595
• C3, my employer: http://www.c3-e.com/
  

The BI recession?

Bob Evans described a customer claim that we are in "The SAP Recession" (quoting from an article from Reuters). According to his opinion piece:

Timken Co. CEO Jim Griffith said, "I call this the SAP recession" (and Timken's an SAP customer!). But despite how it bad that sounds, Griffith intended it as a compliment. (I think).

...

"I call this the SAP recession," Griffith is quoted as saying, "because companies have a much better control over their inventories and so our customers did a much better job of reducing inventories immediately when they saw the demand go. And the further back you were on the supply chain, the more that hit you."

There is a lot to be said for this point of view. I was at a major consumer products manufacturer in an earlier decade, when tough times hit our business. The tough times hit the company hard, because we did not have the systems (or standard agreements!) in place to cut hard and quickly - on discretionary spending, capital outlays, supplier contracts, or employee hours. As a result, our suppliers and employees were buffered from the effects of the downturn. They could see the hits to our earnings and thus predict the arrival of the "rainy days" ahead - they were able to adjust their spending and expectations, softening the blow of our customers' hard times throughout our supply chain. Given that we were not lagging other large companies at the time in our IT systems, it is likely that similar scenarios played out across the economy, leading to a much softer, slower, and economically more efficient deflation of the economy.

Jim Griffith has a good point, although I think he is misplacing the beginning point of this new era. Due to Y2K concerns (and good marketing on the part of SAP, other ERP vendors, and their systems integration partners), many companies implemented integrated enterprise systems for employee management, budget control, financial controlling and reporting, purchase order management, supplier contracts, and other enterprise spending vehicles in the period leading up to January 1, 2000.

Shortly thereafter, the global economy (and the US economy in particular) faced a significant downturn. For the first time in a recession, companies had the tools to clamp down hard on spending - tools including ERP systems (including purchasing, travel, budgeting), reporting and BI systems (for visibility and transparency), collaboration tools (such as e-mail and workflow approval), and business processes (for adjusting budgets, approving capex and opex spending, stopping all hiring and travel, and much more). Companies used these tools, and it seemed to me that the result was a much steeper decline into recession than ever before. I remember months that went by after 9/11 when there were zero jobs posted on job bulletin boards, no consulting contracts issued, and no employee travel approved.


2001 was the first cyclical downturn where most large companies had pretty good expense control capabilities, pretty good ability to adjust budgets on the fly, and pretty good ability to manage supplier contracts via ERP. In previous downturns, expense control was haphazard, but with SAP you could shut off employee travel (for example) in an instant. As a result, the downturn was more abrupt - the economic equivalent of program trading, but without a regulator that could turn off the program.

Every recession (and upturn!) after Y2K can be thought of as being accelerated by ERP systems like SAP. What has changed since 2001 is a pervasive use of business intelligence (BI) tools in most leading companies. Now, companies can not only shut off transactions, but they can analyze business performance such that they can identify (and efficiently/brutally execute) strategic business opportunities including facility consolidations and shutdowns, offshoring and outsourcing efficiencies, supplier consolidation, and even exits and shutdowns of poorly performing business units.

Perhaps this recession, rather than being called "The SAP Recession," should be called "The BI Recession" ...