Going SaaS — Oracle Launches Sourcing On Demand (Part 1)

Earlier this morning, Oracle announced a new SaaS sourcing offering, joining well over a dozen other providers in this crowded market. But there is more to this move than meets the eye -- or the carefully worded press release. I had the chance to talk to and question Oracle about this new offering and came away impressed with their logic and approach beyond the marketing spin. Before I offer up my analysis about how the offering stacks up in the market in Part 2 of this post later today, I thought I'd start with providing some background on the solution. First, Oracle really is positioning this solution as a true SaaS offering that companies pay for on a monthly subscription basis. The list pricing is $850 per user per month with a minimum of 20 seats (and a set up fee of $5,000). English is included in the base offering -- other languages might incur additional fees.

To understand this pricing on an apples to apples comparison basis with other providers, it is important to note that Oracle defines a user as someone who will serve in an overall administrative function, setting up and using the application to run events. Other internal team members and suppliers do not count as users. In my quick view, the pricing appears to be quite competitive in the market. However, Iasta and other SaaS-focused e-sourcing vendors often bundle comparable capabilities at similar or lower price points (taking into account the minimum number of users in an Oracle deal). But still, coming from an ERP vendor, the pricing appears very attractive.

So what's included? The offering, in Oracle's words, is based on both "Oracle Sourcing and Oracle Sourcing Optimization and is part of the Oracle E-Business Suite Release 12 ... Oracle Sourcing On Demand is pre-configured and hosted by Oracle experts ... Leveraging Oracle On Demand, this latest offering eliminates IT inhibitors such as protracted upgrade cycles and privacy and security restrictions and reduces the capital expense of purchasing hardware." Outside of the rapid set-up and deployment that Oracle is quick to tout in its press release announcing the solution, Oracle seems to have thought through and come up with an informed perspective on the types of services that come with the offering. For example, Oracle Sourcing On Demand includes end-to-end basic support services as part of the package.

In this regard, all of the basic sourcing support services come along with the bundled pricing, including supplier training which Oracle currently supports and offers in English, Japanese, Chinese, Korean, and Spanish. Buyer training will also be available to streamline this learning process. Oracle will provide their User Productivity Kit (UPK), a customized training module that each company can configure which is designed for casual users and uses a screen-by-screen approach to show users how to get the most from their use of the toolset. In Oracle's words, "anything related to the [basic] process and application itself such as the on-boarding of suppliers, dealing with suppliers in developing markets, technical questions -- we will take care of this". What Oracle does not include as standard at this point is deep commodity or business process specific content enablement such as category templates or best-practice sourcing methodologies. For these capabilities as well as other sourcing support like advice on how to best structure an event, Oracle Sourcing On Demand customers can work with Archstone Consulting, an Oracle partner, on a flexible basis.

I was curious when I spoke to Oracle about why they chose to launch this new offering in the current market environment. After all, there have been on demand e-sourcing products in the market for nearly a decade. Nagaraj Srinivasan, Vice President of Oracle Supply Chain Products Development, suggests the timing is opportune because "the economic conditions make it suitable to look at overall sourcing strategies and there is a lot of sourcing activity in the space". In addition, "The second reason is when you look at early adopters and early providers they have had a hard time attempting to define what services to include. Some have gotten it more right than others. At this point, we have a good understanding of services and what combination of hosting adds value to the offering." Nagaraj also suggested that the new offering can help Oracle customers who may not be on the latest version of an Oracle back-end ERP package -- or may have a heterogeneous environment including Oracle -- take advantage of Oracle's latest sourcing capabilities without having to go through their other Oracle ERP and procurement applications. Nagaraj believes that integration with the rest of the procurement suite -- even in an On Demand deployment model -- is another advantage that Oracle has over their competition. In his words, this allows companies to focus on true "spend outcomes" that drive to implemented results rather than loosely connected process steps.

Oracle has a single customer live on the On Demand SaaS offering at this point (they went live in less than 30 days, according to Oracle). Stay tuned for Part 2 of my analysis later today when I discuss how this latest announcement fits within the context of Oracle's broader procurement and sourcing strategy as well as my take on how the solution stacks up in the market.

Read Part 2 of this post by clicking here. And for a sneak peak at Oracle Sourcing 12.1, due out in 2009, click here.

Jason Busch

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