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Commentary: Oracle identity crisis gives some firms pause

Although Oracle wants to redefine itself as an e-business vendor, it has yet to make the change from its current identity as an enterprise resource planning vendor.

By Timothy Tow, Gartner Analyst

Although revenue from Oracle's application business grew 42 percent year over year in the first quarter of fiscal 2001 (ended August 31), the figure disappointed Wall Street, which expected growth of more than 60 percent.

Part of the reason for the disappointment is that Oracle has not yet fully realized its promise as an e-business application provider. Although the company wants to redefine itself as an e-business vendor, it has yet to make the change from its current identity as an enterprise resource planning (ERP) vendor.

See news story:
Oracle earnings beat estimates, but stock tumbles
To be sure, some external factors may dampen revenue growth a bit. For Oracle, as for most software vendors, the first fiscal quarter is usually slow because of the rush to close sales in the last fiscal quarter of the preceding year. Sales also tend to slow during the summer months. And this year, a saturated application market, the year 2000 hangover and emphasis on e-business over traditional ERP has affected many software vendors.

Nevertheless, the major reason for slower than expected growth in application revenue is likely the maturity and timing of Oracle's product releases. Many companies are waiting for improvements in Oracle's latest release of its application suite--Oracle 11i, which is primarily integrated front-office and back-office ERP and customer relationship management (CRM) but also serves as an e-business suite. Some prospects have reported that Oracle could not even demonstrate 11i during sales calls. Although Oracle announced general availability of 11i at the end of May 2000, the company has not yet released some components (for example, mobile CRM).

Other e-business specific components (for example, e-procurement) are competing well against best-of-breed vendors; however, those sales are a small portion of Oracle's overall application revenue. Since 11i also requires the latest version of Oracle's database product, 8i, companies must first upgrade their databases.

However, 8i is relatively new, and many customers and prospects have declined to be early adopters of either product.

Because Oracle announced that support for its next-to-last release of the application product (release 10.7) will end by June 2001, few companies want to buy that product. The release before 11i, release 11, does not have many of the new features of 11i--for example, a new order management module, rewritten CRM and sales force automation modules in Oracle tools, improved workflow, and supply-chain planning products. Again, many Oracle customers are holding off.

Finally, Oracle has also recently opened up its application-service-provider channel to other companies, so Oracle Business Online is no longer an exclusive option.

(For related commentary on preparing your company for an ERP implementation, be it from Oracle or another vendor, see registration required.)

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.