Oracle revamps apps unit
The company is reorganizing its applications division in an attempt to boost sales at the slumping unit.
The division will be broken into two separate pieces--"back office" and "front office"--creating a separate development group in the process. The current applications division head, senior vice president Ron Wohl, will maintain control of the back-office applications, like human resources and financials, while Nimish Mehta, senior vice president of Oracle's industry applications division and vertical segments, will take over management of front-office applications, which includes the company's sales force automation software.
Although Oracle president and chief operating officer Ray Lane and other executives were hesitant to say Wohl had been demoted, they did say there was "some stuff moved" from him to Mehta.
Chairman Larry Ellison is driving the reorganization, sources said. Ellison became more directly involved in the unit, whose products include its enterprise resource planning (ERP) and other client-server applications, after the company's recent poor showing in the applications business.
Oracle reported earlier this month that its applications licensing business missed its 50 percent annual growth projection, rising 35 percent in the Americas and 30 percent overall. It marked the second consecutive quarter that the business disappointed Wall Street, falling far short of the near triple-digit growth earlier in the fiscal year.
Yankee Group analyst Chris Selland said Oracle's latest moves make sense. "They have a future in applications. Right now, the database market is beginning to saturate. They needed to make changes."
The move also supports grumbling by some industry watchers, who blamed internal reshuffling for failed communications in recent months between analysts and the applications unit, specifically regarding the company's upcoming release of Oracle 11, the next version of its ERP suite.
"[Ellison] concluded that we should get involved in new areas," Lane said. "Right now, we currently do the same things as the other players in the market. We build back-office functionality, like SAP. We're not offering anything different."
When SAP moved into American markets in the early 1990s, Lane said his company made a concerted effort to develop an enterprise applications package to compete directly with the Germany-based software giant.
Since then, Lane noted the market has become saturated with products offering the same features.
Ellison laid out a four-point plan for the applications group, according to Lane. First, the company will focus more on supply chain applications and take advantage of its partnership with i2 Technologies, which develops advanced planning and supply chain management. Second, the company will concentrate investment and man power in developing "front-office" applications for its ERP suite, creating an individual development group of about 30 developers.
"We will hire some new people and use some existing employees [in the new group]," Lane said.
The company also will concentrate more on data warehousing to back up their business applications, he said. Finally, Ellison wants to focus more on honing the thin client for the ERP suite.
For some analysts, the behind the scenes shuffling in the applications unit explains why they have been left out of the loop.
When it comes to the next release of the business applications package Oracle 11, "that whole thing has become blind, deaf, and dumb," said Giga Information Group analyst Byron Miller. "They've held off on any communication with analysts on the next release, which usually means a release is in trouble. Oracle is being strangely silent."
Selland said in recent months he has set up five meetings with the applications group, only to have all of them canceled for one reason or another. "Communication stinks with them right now," he added.
When asked about the analysts' concerns, Lane said he hadn't heard about them but wasn't surprised and passed some of the blame to Wohl. "I agree with them. Ron is good at focusing on development. [However], I don't think he's as good at going to market and getting the word out."
Sharron Bittick, newly appointed senior director of analyst relations at Oracle, said she has begun work on a new analyst program and hopes it will allay some of the analyst concerns about relations with the company. However, it will be six months before the program is in place.
For now, Lane said the applications group will be working on several unnamed new initiatives. Ellison has "ramped up his time in the area. He'll stay more involved for a little longer."