Oracle Innovation: When Will On-Premise Applications Meet the Cloud?

In our first installment of this series covering the recent Oracle summit, we discussed how Oracle is working toward mass customization of its cloud application suite as part of its broader PaaS strategy. (Others are doing this, too.) But, this vision won’t likely be fully fleshed out for at least 3 years. Color-coding of screens, changing logos, using flexfields, etc., is not exactly expressing the full power of a PaaS. Oracle does have more extensive capabilities in its PaaS “stack,” but it can only move so fast in using its own platform components to develop its cloud applications.

FREE Research Report: How to Chose Procurement Technology That “Grows With You”

The biggest challenge, though, is that the lion’s share of this innovation is going to the cloud applications rather than the on-premise applications. Frankly, it’s a bit of a tease for all the on-premise customers to see the innovations on the cloud side because they can’t really jump to the cloud solutions due to lack of functionality parity (although the gap is closing) – and you can’t easily move piecemeal by application to the cloud other than with a few applications.

However, Steve Miranda, executive vice president of Oracle Applications Product Development, was refreshingly candid when he said that “it's not a matter of if, but rather, when, the on-premise applications will get migrated to the cloud.” Let’s not kid one other and say that Fusion is just a mid-market solution. It will be the new de facto suite eventually, but it will be developed based on an agile “trickle-up” approach rather than a dumb-it-down, trickle-down approach.

Still, Oracle has a strong (although siloed) commitment to its on-premise applications. It has to! Additionally, there is a lot of innovation that is actually happening with EBS with regards to Endeca, analytics, mobile (albeit narrowly), managed services (e.g., Enrich), and “mash-up” applications like Oracle Project Procurement.

We are bullish on Oracle’s long-term prospects about moving its on-premise ERP suites to the cloud, including the procurement applications. You may hold up SAP’s Business ByDesign product suite as a cautionary tale (and we won’t get into SAP’s broader strategy to use a “business network” to connect the various overlapping acquired application suites).

As a long side note though, Oracle’s cloud procurement application suite is in much better shape than its nascent cloud supply chain suite. I’ll withhold judgment on whether Oracle can get an integrated SCM suite out this year, but I think the cards are stacked again them. Yet I applaud them and encourage them to keep the faith and march forward. Supply chain processes are more complex, more variable (e.g., process vs. batch vs. discrete), industry-specific and intolerant to hastily developed software. Supply chain is actually also an area where a supply chain business network strategy makes more sense because the information network can mirror the physical network. I did a 2-piece paper on this for supply chain network provider E2open, which you can access here and here. Speaking of, we still think that acquiring E2open seems like a no-brainer for many reasons, if even just for the execution capabilities (which includes direct P2P). Although there might be overlap on the planning functionality, there are key architectural elements that make it almost a no-brainer. And E2open is sitting out in the market at a very attractive price point (although we don’t know the effect of any poison pills that may exist there). We did a full analysis on this topic here.

There are many technical and business reasons why we say Oracle has a strong shot at pragmatically transitioning, but there are also challenges. We will discuss them and how Oracle and its customers can tackle them in an upcoming PRO analysis, so stay tuned!

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