Acquisition streak breeds rationalization for successful apps augmentation

Was anyone still surprised when Oracle announced in May that it was acquiring product life-cycle management (PLM) vendor Agile Software for $495 million in cash? It was deal No. 31 in almost as many months, beginning with the bellwether acquisition of PeopleSoft in January 2005. Before that, common industry lore quoted CEO Larry Ellison saying that Oracle wrote software, not checks.

07/01/2007


Was anyone still surprised when Oracle announced in May that it was acquiring product life-cycle management (PLM) vendor Agile Software for $495 million in cash? It was deal No. 31 in almost as many months, beginning with the bellwether acquisition of PeopleSoft in January 2005.

Before that, common industry lore quoted CEO Larry Ellison saying that Oracle wrote software, not checks. But with the PeopleSoft deal, Oracle clearly declared a change in strategic direction.

Many wondered how the company would fare, having little experience at managing the process of melding other companies, products, people, customers, and—most important—cultures into the fold.

“It wouldn't be fair to say it's all gone without a hitch, but they've done a very good job of it,” says Jim Shepherd, senior VP of Boston-based AMR Research . “They've succeeded much better than many expected.”

Besides buying other enterprise vendors for their installed base, Oracle favors buying applications that augment its existing solutions, including G-Log for transportation management, the retail-focused Retek , and i-flex in banking. These have become separate business units to “establish a presence in underserved markets with strong growth potential,” says Jon Chorley, VP of supply chain management and the Oracle E-business Suite product strategy.

“There are three ways to look at acquisitions from an application perspective,” Chorley continues. “One is an industry-based initiative, like Retek. Another thread is where Oracle has a solution, but it may not be as strong as it should be.”

The third thread is a combination of both—e.g., Siebel Systems, with a customer relationship management solution that supports high-tech, financial services, and communications; but also adds depth in terms of strong capabilities in call-center support and sales, says Chorley.

In the case of Agile Software, “We had a solution that needed improvement,” he asserts. “We believe that managing product innovation and bringing new products to market efficiently are core requirements of every business. And they are underserved requirements.”

As for rationalizing its acquisitions, Chorley says most of the hard work is done up front in deciding which companies to target.

“In many cases, it is more efficient to develop the application rather than acquire it,” explains Chorley. “If there is difficulty, you have to decide whether you can resolve it quickly—in months, not years. And can it be integrated? Is it compatible? Can we accelerate selling more of it than the company can by itself? It's important to manage the process effectively. You set the vision properly because you've done your homework. After that, it's mostly managing a lot of small things.”

Oracle recently took the wraps off two key initiatives stemming from a string of acquisitions. They include an integration framework for acquired applications, and a road map for content management offerings.

The integration piece—formally called the Oracle Applications Integration Architecture, and code-named Project X—delivers a short-term road map for integrating Oracle e-Business and acquisitions—e.g., PeopleSoft, J.D. Edwards, and myriad vertical industry offerings—with Siebel CRM. It will provide some of the integration that Oracle previously promised with its future Fusion applications, for which the company has not announced any definitive timetable.

The new architecture will rely on Oracle Fusion SOA Suite middleware, and specifically, Business Process Execution Language (BPEL) for orchestrating Web services that will link the applications. As part of the integration architecture, Oracle will define industry reference models specifying common business objects and integration models, building in part on the work of the Open Applications Group.

Oracle also announced nine integration packs, with the first two linking Siebel CRM to Oracle E-Business Suite for opportunity-to-quote and order-to-cash cycles. Future process integrations will include other Siebel integrations with Oracle applications covering adverse event reporting for the life sciences industry, trade promotions for consumer packaged goods, product concept-to-launch and order-to-cash for rationalizing product pricing, and mail order channel management.

Other integrations will link Oracle Transportation Management with J.D. Edwards EnterpriseOne for supporting lead-to-order, and PeopleSoft Financials with Oracle's Financial Services Accounting Hub for consolidating back-office data. Although Oracle has not disclosed specific release dates, these process integration packs are likely to become available over the next 12 to 18 months.

Turning to Oracle's new content management strategy—which follows the recent acquisition of Stellent—Oracle will consolidate the combined offerings into five product lines.

Not surprisingly, four of the products come from the Stellent side. In general, they consolidate what had been a series of point products into larger suites. For instance, the flagship offering, Oracle Universal Content management, will combine Stellent's document management, Web content management, digital asset management, and document retention.

Other content offerings will include Universal Records Management, for enforcing consistent records retention policies; Imaging and Process Management, enabling a complete round trip from creation to archiving, and integration with Oracle ERP systems—plus rival SAP and Microsoft offerings; and Information Rights Management, which provides fine-grained tools governing content access. The product takes advantages of patented distributed encryption technology that came through Stellent's previous acquisition of Sealed Media.

The final piece, the content database, is the one part that came from Oracle. It will support storing all content, not just the metadata, in an Oracle database.

Prior to the acquisition, Stellent had begun a service-oriented architecture strategy to link what had been a family of disconnected—and in some cases, acquired—products. That will remain its strategy going forward, as it supports Oracle Fusion middleware. But it will continue to support other app servers and integration middleware as well.





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