Going SaaS — Oracle Launches Sourcing On Demand (Part 2)

Earlier this morning, Oracle announced a new SaaS-based sourcing offering (click this link for Part 1). In this post, I'd like to continue to provide some context behind this launch while also beginning to offer up my analysis about how the solution stacks up in the market. This latest launch represents one of four deployment modes that Oracle offers -- either directly or indirectly -- for its sourcing products. Other deployment models include, of course, on-premise (the most popular model to date). This model provides, in Oracle's words, "deep integration" that is particularly useful for tactical sourcing. In terms of the other two models, Oracle is also working with third parties in both the BPO areas (where outsourcing firms provide a combination of software and services including hosting) and through tactical sourcing firms like eThree that provide everything from limited to complete hand-holding throughout the e-sourcing process on either a project, event or category basis. From a BPO perspective, Oracle plans to work with both global tier one firms and regional tier two firms.

I suspect that 12 months from now, this new SaaS-based direct sales offering will represent the largest number of new Oracle sourcing deals. In my view, the biggest value proposition for Oracle customers will be the ability to leverage the latest in sourcing from Oracle -- even if the last major release planning does go back over five years -- without upgrading their Oracle back-end. Even though Oracle believes that they'll be able to successfully pursue non-Oracle customers with this offering, I suspect that the majority of traction will come from current Oracle application users (even if Oracle has not succeeded in penetrating the procurement organization in these companies). Still, the verdicts out -- In Oracle's words: "we believe there will be a lot of traction between all the segments versus any one in particular." Who will the competition be? Obviously to some level SAP -- although in my experience, it is highly unlikely to see Oracle and SAP ever going head-to-head in the procurement space. But Oracle believes that the greatest competition will come from existing vendors in the "ecosystem" such as Emptoris and Ariba.

The big question on everyone's mind is how will Oracle fare in the market with its new SaaS sourcing solution? My guess is that in Oracle environments -- especially where companies are using other Oracle procurement applications -- the answer is quite well. I previously wrote that Oracle R12 seems like it's "tailor-made for an environment of centralized policy but decentralized execution. This includes the ability to create standardized workflows, forms and templates for negotiations (e.g., RFIs, RFQs, auctions, and optimization), agreement creation (e.g., blanket agreements, global agreements, signed contracts), and the implementation of agreements (e.g., POs, sourcing rules, etc.) including automatic price, term and preferred supplier enforcement." The key to understanding their unique valuation proposition is, in Oracle's words, the ability to "minimize variability" across the organization. And this requires more than just Oracle Sourcing.

Still, Oracle 12R Sourcing has come a long way, even as a standalone application that's a bit dated (despite a recent 12.1 update which I'll review in the coming weeks). The original design of R12 (and MRD) was written in 2004 and was 3 years in the making before its initial release in 2007. At the time, I believed it represented the best thinking in ERP-based procurement and was years ahead of SAP's organically developed products, at least from a usage and feature/function perspective. This is due in part to the amount of focus group testing and research that went into the product. The result, in part, was that R12 was the first Oracle release that had a consistent, web application user experience. It truly was and is a single platform in comparison to SAP (previously, users needed to use an Oracle Forms interface which was legacy client/server + java applets). SAP's Spend Management offerings are, in contrast, still a mish-mash (not a mash-up, mind you) of different technologies and platforms.

While I will save my detailed review of Oracle's Fall 12.1 release for a forthcoming post, I will say that 12.0 did stack up relatively well in the market -- especially in 2007. However, I suspect that companies will find that many of Oracle's best-of-breed sourcing competitors such as Ariba, Emptoris, BravoSolution, and Iasta have greater depth in certain areas (e.g., embedded category and process templates as part of a base offering) today. Still, Oracle 12R did represent a significant step forward for Oracle and included a number of significant enhancements. I apologize for printing the laundry list, but since I've gotten questions about this in the past, I'd rather just create a standard reference for it. So here goes. Some of the more important enhancements in 12R included: enhanced formatting and presentation throughout the UI, system scoring that lets users define acceptable response values and corresponding scores for responses to automatically score suppliers, team scoring with flexible roles, the ability to knock-out suppliers, support for very large numbers of line items (e.g., 1000s) for a single negotiation, spreadsheet (i.e., Excel) integration for download and upload, enhanced catalog management integration that enables negotiated pricing to become available to users faster, staggered closing of auctions with dynamic lot extension (hmmm … this one sounds familiar down in Texas), flexible "auto-extend" capabilities that enable users to set the maximum number of lot extensions from 1 to 9999 (or unlimited) and integration with Oracle's spend analysis solution (Oracle DBI).

Additional 12R enhancements included: Power bid on losing lines (allows suppliers to choose to apply Power Bid decrements to non-winning lines), enhanced visibility to total bid amounts, bid decrement enhancements, bid price reduction enforcement across negotiation rounds, new live consoles with enhanced bid-day graphics, enhanced ability to pause an auction, mew supplier monitoring and supplier lock-out capabilities, mew message alerting to suppliers, transformation bidding (which is similar to what Ariba, Emptoris, Iasta, BravoSolution and Zycus have), lot-based bidding, the ability to define line groups, enhanced Sourcing integration with DBI to allow real-time access to spend data within or when setting up an event, and, of course, optimization (which in the new SaaS variation, is included).

How does Oracle's sourcing optimization offering stack-up? Over on Sourcing Innovation, Michael Lamoureux provided his opinion of the offering in a post a couple of years back. Even though some of his specific criticisms may no longer be valid given enhancements in the latest 12.1 release (which I plan to review this month), Michael suggested that 12.0 did "not make the cut in my book" because it failed to provide "advanced capabilities". Michael's critique stems from the fact that "Oracle's sourcing optimization product is pretty basic. It only supports three constraints: header, which can be used to constrain the maximum award amount or exclude one or more suppliers by scores, line constraints, that determine which, and how many, suppliers can split a line item award, and to what extent, and supplier which can be used to globally limit the number of suppliers and the award to certain suppliers. Basically, they support basic exclusion, capacity, alloc

ation, and qualitative constraints." In his view, this is "Not bad compared to most of the optimization solutions on the market, but [it is] not really advanced sourcing."

Hopefully this will keep everyone satiated on Oracle Sourcing for now. Stay tuned for my analysis of Oracle's 12.1 release in the coming weeks after I've had a chance to look more deeply at the most recent product release.

Jason Busch

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