SHOMI, Part3: The Most Influential Technology Vendors in the Manufacturing Industry

Bob Parker, VP Research, Manufacturing Insights -- Manufacturing Business Technology, 5/5/2008 9:54:00 AM

Those of you that are familiar with Manufacturing Insights research themes will recognize the SHOMI (pronounced 'show me') acronym which is shorthand for the most influence technology vendors in the manufacturing industry – SAP, HP, Oracle, Microsoft, and IBM.  These vendors are providing products to optimize operations through technologies like virtualization, web service based integration, collaborative decision making, and business network automation. 

This is the third of five part series covering each of the vendors.  This installment will cover Oracle.

Oracle – Picking up the Pieces of Your Portfolio Plan
Oracle is a melting pot of enterprise technology.  It brings in both infrastructure and applications, assimilates those acquisitions into the Oracle business model, and successfully delivers value to its customers.  They have the acquisition process down to a science – buy at a good price, remove the redundancies, and protect the customers.

Oracle's strategy is geared toward surrounding application rivals, particularly SAP, with well established products that extend functionality and protect its core database business.  Similarly, they have used a combination of internal development and acquisitions to put together a very complete technology infrastructure offering.  Both partners and customers tell us that it has become easier to do business with Oracle.

The strategy has paid near term dividends with impressive revenue and profit growth.  However, the company will be significantly challenged over the next five years to deliver on its vision for a common application infrastructure for its portfolio, known as Fusion.  Interestingly, it may not be as important to the customer base as it is to Oracle's business model.  A common infrastructure and application products that are more integrated will be critical to Oracle achieving economies in their development, marketing, and sales organizations.  Any protracted delay will mean a creeping cost disadvantage and, eventually, customer dissatisfaction with the availability of new functionality.

Architecture – Bringing Fusion to Fruition
Oracle has done a great job in helping its customers take advantage of virtualization to optimize physical infrastructures.  The company's database product team was well ahead of the curve on using clusters to balance processing loads and improve availability.  Working with partners like Sun and EMC they have also contributed greatly to storage optimization.  The application side of the business has benefited from this technology leadership although Oracle must walk a fine line in order to keep the database revenue that comes from independent software vendors flowing.

Things get interesting at the industry process platform level.  Oracle has all the requisite pieces – from application server to portals to master data management – as well as some interesting advanced capabilities like enterprise class identity management and embedded database tools.  The problem is that they remain a collection of tools that must be unified before the applications that will depend on them can move from a translation table based integration to a true service oriented approach.  The BEA acquisition gives them the essential hub that the other infrastructure pieces can fuse to and the applications could connect into.    

The analysis is similar regarding collaborative decision environments. In addition to the embedded analytics in the Oracle database, they have picked up OLAP and analytic applications from the Hyperion acquisition and have used the Siebel BI framework for creating new dashboards across the application portfolio. The acquisition of content management vendor Stellent gave them a very capable tool for organizing unstructured content and they have a collection of tools that could support social networking and ad hoc workflows. Once again, if BEA's work in this area can bring these pieces together in a cohesive way, they could get a significant share of investment currently being earmarked for improving decision making.

Oracle has announced its approach to supporting deployment of SaaS type applications and offers a number of its own products on this basis.  This architecture could have value as the platform for a corporate cloud that would support the need to have a common system across several companies working on a specific venture.  We will monitor progress on this offering closely to see if it is able to scale to meet the future needs of large manufacturing firms.

Supply Chain – Best of Breed Goes Big!
Oracle’s Supply Chain Management suite, following their acquisition flurry of the last few years, is remarkable in its breadth and depth.  At Manufacturing Insights we have observed in recent years the struggles that face ‘best-of-breed’ applications in an environment where end-users are increasingly looking for platform-based solutions that minimize integration challenges and ‘work right out of the box’; and while best-of-breed applications are clearly not dead, they must demonstrate comparable integration facility. Interestingly, then, Oracle’s acquisition strategy has resulted, in a number of areas, of them not only ‘owning’ the platform but also actually being the best-of-breed solution. A smooth integration of these newly acquired products and modules is critical as both current and future customers will be buying into the Oracle suite with the presupposition of seamlessness.
 
It is also interesting to see how much effort has been made in recent years in the ‘demand sensing’ and ‘supply chain planning’ spaces.  This has been driven by a number of environmental factors:
• Proliferation of outsourcing and global supply networks where distances and cycle-times require better controls and forecasts,
• Recognition of the longer-term negative equity impact of out-of-stocks and poor customer service,
• Rapid innovation in the demand/supply planning process, demand sensing algorithms and supporting technologies.

Oracle’s acquisition of Demantra, along with the development the E-Business Suite Supply Chain Planning (SCP) modules and the integration of RFID/Sensor integration capabilities, positions the company well in this space.

Supply Chain Execution (SCE) applications, particularly transportation and warehouse management, seem to have taken a back-seat to the sexier demand and supply planning as ‘industry darlings’.  Whether due to the focus many end-users have had on being ‘demand-driven’ or just a result of not needing to fix what isn’t broken, SCE applications have received less focus in the industry than we believe the should have.  That appears to be changing, however, as we have spoken to a number of Oracle customers who had recently implemented transportation, warehousing, or inventory management.  Driven by global supply network complexity and growing energy costs, we heard a number of positive SCE implementation stories and expect to see renewed growth in these areas over the next few years. 

Product Information Management (PIM) is also an area of real capability growth, particularly as it relates to data synchronization and underlying data accuracy.  Many companies in multiple industries have invested heavily in data synchronization (both upstream and downstream in the supply chain), only to find more fundamental internal short-comings related to data accuracy and data governance.  Oracle’s evolving PIM Data Hub approach seems nicely positioned to help.

What is particularly interesting is the growing realization that the suite of Supply Chain applications sits alongside, and often intersects with, the Product Lifecycle applications.  This intersection is particularly apparent in the PIM (and master data) applications and within the Agile suite where the most sophisticated management of the new product development and implementation (NPDI) process sits.

Product Lifecycle – Just Add Agile - ity
Oracle, like other ERP vendors has arrived into the PLM space from ERP, so it's view is product data/configuration centric.  Oracle views enterprise PLM as the integration of product data management (PDM) with traditional design model based PLM -  and with supply chain, ERP and customer management - to provide a single version of the truth.  Oracle had struggled with their PLM strategy, especially to provide CAD integration and manage product lifecycle data. However, the acquisition of Agile not only brought strong capabilities in these areas, it has also brought much focus and clarity in Oracle's message.  The acquisition also made significant improvements to the existing PIM Data Hub and Product Portfolio Management offerings.

The current position is strong, especially in heterogeneous design environments that use different PLM tools and processes.  This is a common situation in large manufacturing organizations, and similar challenges will be present as design and supply chain partnerships expand.  Manufacturing Insights expects that some Agile customers that are happy with their existing Agile environment will not transition to PIM Data Hub.

As the PLM definition – formal or in practice – expands, Oracle has more to offer, providing pre-packaged tools and scenarios for PLM such as NPI, compliance and ideation. However, the evolution in enterprise PLM may prove fast and pervasive, and Oracle will need to make sure they can keep up. Unlike SAP's development of a strong community of partners, Oracle's Fusion strategy seems to dwell on a migration plan to put Oracle's applications on the Fusion roadmap.  This is, of course, necessary, but Oracle needs to transition to a more push strategy, where the Fusion ecosystem drives innovation and business excellence in product lifecycle.

Emerging agenda - Waiting in the Wings?
Although Oracle has made dramatic moves to enhance its capabilities in PLM and SC over the last few years, it still is less clear in its strategy around emerging agenda topics such as RFID and sustainability.  In RFID, Oracle appears to be in a holding pattern, waiting for the market to become better defined and basically, larger.
  
Oracle's increasing strength in supply chain could allow Oracle to jump into this market fairly quickly.

For sustainability, Oracle has applied the concept increasingly to its own operations, for example, through initiatives that reduce its power consumption per employee, supporting the ISO 14001's environmental standard in its some of its facilities, and signing up for the EPA's Climate Leaders and Green Power Partner Partnership programs.  When it comes to its products supporting sustainability, Oracle is more likely to focus on its capabilities in data management and analysis.  As with any of the SHOMI vendors, opportunities that arise from the manufacturing industries initiatives for sustainability will benefit from Oracle's own experience, but the actual market offerings have to become better defined.  

Advice to Users – Set Expectations and Be Patient
Oracle has acquired companies to add to its portfolio of products rather than to simply add maintenance revenue.  As such, the applications they have added are of high quality, have proven integration capability, and customers have been given a great deal of flexibility in terms of support.  If you are an Oracle customer, whether you're running a complete resource management suite or one of the specialty applications, you can count on being treated fairly and have confidence that you own a competent product.  If you are planning on Fusion to be your underlying process platform or the basis for a collaborative decision environment, you should have a contingency plan in place.  Oracle has a complete vision for its infrastructure and understands what needs to done, but Manufacturing Insights is of the opinion that delivering in the time frame they have discussed will be very difficult.

What are your thoughts?  Are there additional strengths or weaknesses in the Oracle approach?  Feel free to e-mail your comments and questions to bparker@manufacturing-insights.com.