When Oracle announced its new on-demand sourcing offering earlier this week (Click here for Part 1 and Part 2 for my coverage and analysis), I noted that I was negligent in coming up to speed on the latest Oracle E-Business Suite Release 12.1 which will soon, sometime in 2009 according to Oracle (my guess is in the next few months), form the basis of the On Demand offering (my previous knowledge focused on the R12 release which dated back to 2007). The 12.1 release which Oracle talked about at OpenWorld last fall, features a number of enhancements to 12.0. Through some creative homework, I've been able to discover a number of features and enhancements that I believe will soon become part of this upcoming Oracle Sourcing and Oracle Sourcing Optimization release. At this point, don't take everything in this post as gospel, as Oracle has not yet provided it to me through an official channel, and final release features might change or get pushed out. Still, since the release is imminent, companies evaluating Oracle Sourcing On Demand should consider what is coming in 12.1 as part of their basis for comparison with competitive products. But don't make any final decisions until the product is available or unless Oracle provides you with a contractual obligation for specific feature capability by a certain date!
Perhaps the most valuable new feature from an everyday usage perspective in 12.1 Sourcing is enhanced spreadsheet support that provides a new XML spreadsheet format designed for supplier response creation and buyer award analysis. In Oracle's words, "buyers and suppliers can download all the information in one single spreadsheet, simplifying the loading and maintaining of spreadsheets for negotiation". Supplier spreadsheets now feature the capability of giving suppliers immediate feedback -- immediate bidding gratification or disgust, one could argue -- based on their responses even if they're offline. From a category manager or buyer perspective, users can now perform what if analyses, look at side-by-side bid comparisons, calculate overall savings, and examine awards and savings amounts by supplier all in a spreadsheet environment. Oracle 12.1 Sourcing also includes a new countdown clock that updates to show both buyers and suppliers the exact amount of time remaining. The clock adds extra time automatically if a market is extended because of bidding activity. This alleviates the need for manual refresh and brings the application up to an industry standard level of market (time) feedback consistent with Oracle's competitors who've had this functionality, in some cases, for over a decade. Another capability in 12.1 Sourcing is the rather nifty little ability to archive and print specific supplier responses in PDF format.
Within the application itself, Oracle users can now take advantage of cost factor enhancements that allow buyers to better model the total cost of products and services based on either unit cost, percentage of unit price or a fixed amount for a line item. These new enhancements provide greater flexibility for companies to use the award quantity to distribute fixed amount cost factors (this is somewhat minor, but does show Oracle is thinking through the award component of a sourcing event). From a market feedback perspective, 12.1 also includes new price tier enhancements that enable suppliers to offer different unit prices based on the volume of the business that a buyer is willing to commit. In Oracle's words, "quantity based price tiers allow buyers to specify different price points for each quantity range on negotiations with standard purchase order, blanket or contract purchase agreement outcomes. Suppliers can respond to the tier structure defined by the buyer, or they can provide their own price tiers". From a public sector standpoint, 12.1 includes new capability designed specifically for government RFQs that require two-stage negotiations. This capability is essentially a multi-round RFI, RFQ and negotiation designed to separate out technical and commercial evaluation criteria in bidding (and is further proof about why government procurement is a train wreck, but don't get me started -- at least Oracle has/will have the capability to serve their backward needs).
From an optimization perspective, the 12.1 release shows that Oracle has clearly learned a thing or two from Emptoris, the vendor that originally pioneered e-sourcing optimization in a software (vs. a solution) format. 12.1 introduces a number of core optimization enhancements including constraint prioritization (saving time and avoiding having the optimization engine churn over null sets). 12.1 also adds count/number/quantity based constraints which enable users to specify award quantity (e.g., in percentages) in addition to award amount. This is a basic capability that is essential in an e-sourcing optimization product. From a reporting and analysis perspective, 12.1 adds the ability to view optimization awards together in a side-by-side orientation to better understand award and savings impact of each proposed solution. 12.1 also lets category or sourcing managers work with suppliers to get more expressive in their bidding, offering incentives/preference based on a specific factor they might propose (e.g., volume). These might take the form of either fixed or tiered rebates or a potential combination of the two. The catch is that the buying organization must enter this data manually, although in Oracle's defense, this capability does enable a great deal of flexibility in creating and analyzing possible award scenarios which might never have surfaced before.
In summary, Oracle Sourcing 12.1 provides a number of highly functional upgrades on top of Oracle R12 Sourcing. These upgrades will be critical to bring Oracle up to parity with other SaaS-based offerings from best of breed providers. When this release goes live, the fact that these optimization enhancements will be included as part of the SaaS-based offering (optimization needs to be licensed as an additional capability in an installed environment) is icing on the database cake stack. However, we should not jump to conclusions just on the basis of these added capabilities. The reality is that they help bring Oracle closer to parity with market leaders rather than catapulting Oracle to the front of the market. In many procurement-led decisions where Oracle is invited to the table, I still suspect that best of breed providers including Ariba, Emptoris, Iasta, BravoSolution, among others, will continue to win their share of the deals, even in a SaaS or on demand environment. Still, these providers, not to mention Ketera, Perfect, and Zycus, should treat Oracle as serious competition (in the case of the latter three providers, Oracle might even win on functionality in some situations, depending on what a customer prioritizes). So what about the SAP question you ask? With 12.1, I would currently give Oracle the edge in solution depth (and overall suite integration), but I'd give SAP the nod for ultimately sourcing configurability and customization in an installed setting.
Contrarian's Corner: Oracle 12.1 sourcing clearly brings a number of subtle and important enhancements. But it also shows a number of limitations -- relative to best of breed capabilities -- of R12. While I don't believe that Oracle released a half-baked sourcing app previously, companies considering the current version of Oracle On Demand should realize that they're using a product that was originally designed over five years ago and adjust their near-term feature/capability expectations accordingly until 12.1 is available.