Oracle Buys Up Retail Forecaster

 
 
By Lisa Vaas  |  Posted 2005-07-06
 
 
 

Oracle Buys Up Retail Forecaster


Oracles purchase of ProfitLogic on Tuesday was a shot across the bow to competitors, signaling not only that the company is determined to rule the retail sector, but also that, to compete, retail software vendors must throw sophisticated pricing, markdown and merchandising technology into the mix.

ProfitLogic Inc. is a niche operator, selling a forecast engine that helps calculate sell-through. Essentially, its price optimization software analyzes current inventory to determine what prices should be so the user can sell inventory off in a timely fashion.

With some tweaking, users also can figure out what the initial buy should be, what level replenishment should be at, and what promotional pricing should be so as to balance sales lists against incremental gross margin dollars. After all, selling at a loss leads to a great sales list, but the company wont make any money, said Paula Rosenblum, an analyst at Aberdeen Group Inc.

The burning question, however, is how ProfitLogics technology will sync up with the technology Oracle Corp. now has on hand, between its own offerings and the technology it acquired with its Retek buy.

Click here to read more about Oracles recent purchase of Retek.

According to analysts, the scenario could well be a mixed bag. Rosenblum said that ProfitLogics price and markdown optimization software—now in use by some 30 customers, including retail giants such as The Gap and Bloomingdales—is nonintrusive and doesnt need much integration.

On the other hand, ProfitLogics merchandise optimization software, which will add "a lot of value" to Retek/Oracles planning capability as far as buying, allocating and replenishing lineups go, will likely require a bit more integration, Rosenblum said.

Following fast on Tuesdays announcement of Oracles ProfitLogic buy, AMR Research Inc. came out with a report suggesting that the merging of the platforms will be a "significant effort."

"Combining retail optimization technologies will be a significant effort because ProfitLogic and Oracle have used entirely different platform architectures in their current optimization systems," said the report, titled "Oracle Acquires ProfitLogic: The Drive To Lead in Retail Software Continues."

Oracles Q4 earnings sweep the boards. Read more here.

"One or both of these engines will need to be rebuilt to achieve a common architecture," the report said.

What should customers look for in an upcoming product road map? Rosenblum said that the ideal for retail is to have one forecast engine that will produce a single version of a sales forecast, in stark contrast to the hodgepodge of forecasts coming from point solutions now in place at most retailers.

"If you can really get one of these engines as central to an entire suite, an integrate engine that creates on forecast, you have a big story to tell," she said.

Next Page: Whos winning in the retail race?

Whos Winning the Retail


Race?">

Other analysts said that the retail sector is not looking for an end-to-end solution at all, and that, in fact, the industry is quite happy with point solutions, particularly given the myriad databases and other legacy applications into which theyve poured money over the past two decades.

If a company has already settled on Oracle, then jumping into a full Oracle suite wont be a big deal. If not, then all bets are off, and those who watch this space are waiting to see how retail will shake out after the Oracle and SAP AG acquisitions.

SAP and Oracle, of course, want the market to believe that an end-to-end solution is the only solution when it comes to parsing the voluminous amount of data that retail collects and with which it does so little. Both are sprinting to the finish line to be the first to deliver the goods.

Whos ahead? As it now stands, some analysts see SAP as having better integration, but not necessarily all the applications needed, such as the price-optimization piece Oracle snapped up in ProfitLogic.

Retek/Oracle is now in the lead with breadth of footprint, but SAP is in the lead for integration and cohesiveness of offerings and has made some big retail customer wins of late, Rosenblum said. However, the majority of retailers—particularly large ones—simply dont run on one package, and its unclear that theyll ever choose to do so.

Other analysts say it doesnt matter whos "ahead" at this point, since its basically spring training for these software giants, both being relatively new to the sector. What matters, they say, is whos ahead in two years or so.

Still, one saving grace for Oracle could well be the fact that practically all of ProfitLogics customers run on Oracle databases. ProfitLogic President Scott Friend referred to 90 percent overlap in a conference call on Tuesday, according to those who attended the call.

Jerry Sheldon, vice president of technology for IHL Consulting Group Inc., said his companys data on ProfitLogic backs up this assessment, meaning that theres already been a good deal of work done on the two technologies. "Its a good fit; theyve done a lot of integration with Oracle databases," he said.

Oracle will encourage customers to move to an integrated platform after they get one up and running. The takeaway, according to AMRs report, is to look for a clear support and migration plan for all current and prospective ProfitLogic customers—a plan that has been made more complicated now that it must incorporate Retek, ProfitLogic and Oracle technologies. "Retailers considering any of these should insist on reasonable software investment protection terms," the report said.

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