Tall Tales from Redwood Shores
Tall Tales from Redwood Shores
Oracle wants to be the market leader in enterprise applications. The companys most recent quarterly results show its not doing a very good job so far. More to the point, its not going to get there just by making stuff up.
Case in point: Oracle cooked some numbers in a Wall Street Journal ad that ran in November.
The ad spun the numbers to make it look like Oracle customers are gobbling up the easy-to-install, latest software revisions, while SAP customers are balking at its expensive, difficult upgrades.
"94 percent of customers run up-to-date Oracle Applications (Easy to upgrade at no additional cost)," the ad claimed.
The ad contrasted that number to 4 percent of customers who run up-to-date SAP Applications, which, the ad claimed, are "so expensive and difficult to upgrade [that] 96 percent of SAP customers didnt do it."
Gartner cried foul this week, with its ombudsman chastising Oracle for not only comparing numbers for two entirely different time periods, but also for doing a little sleight of hand with the definition of what the term "business application" means.
Apparently, when youre talking about Oracle applications, the term refers to all aggregated products shipped as Release 11i. Thats five distinct versions, shipped over a five-year period, mind you.
When youre talking SAP, it just means one version, which became available to customers in March 2005.
The ad was obviously meant to exploit SAP customers misery about their imminent forced upgrade.
As eWEEKs Renee Ferguson wrote last month, there are still thousands of R/3 users out there.
Under SAPs 5-1-2 licensing structure, introduced in July 2004, users on 4.6C and older are facing, by the end of 2006, either a shutout from SAPs Mainstream Maintenance or escalating support fees of 2 percent for an additional year of coverage and 4 percent for two years after that.
And it hardly needs mentioning that thats a hell of a tight deadline when youre talking about ERP migration.
Thats not a good situation. Its not surprising that those R/3 users are thinking that theyll keep an eye on what Oracle does with Project Fusion.
The situation is a built-in boost for Oracle. Really, Oracle doesnt need to twist numbers aroundthe situation as it stands has positive potential for its Fusion plans.
If Oracle just let things bubble along, it would probably wind up with some SAP converts when Project Fusion becomes tangible.
But why let sleeping dogs lie? It would be unenterprising, to say the least.
Next Page: Oracles spin gets exposed.
Oracles Spin Gets Exposed
I got SAP on the phone. I was deeply and thoroughly unsurprised to hear Bill Wohl, vice president of communications at the Product Technology Group, fume. The gist of his fume was that Oracle once again isnt letting facts get in the way of a good story.
He referred me back to Oracles earning announcement last Thursday. During the call, Oracle President Chuck Phillips was talking up how Oracle is beating SAP even in its home country, Germany, snapping up applications business right out from under SAPs nose.
"The most difficult place to beat SAP is in their home country of Germany," Phillips was quoted as saying in Oracles earning press release.
"Oracle winning the applications business at SAPs retail systems development partner, German retailer Karstadt, is dramatic proof that our vertical industry strategy is working in the industries that weve targeted."
That would be a dramatic steal, wouldnt it? A great story.
Unfortunately, its not particularly accurate. Wohl forwarded me an e-mail exchange with Karstadt in which the companys spokesperson dismissed Phillips claims. Apparently, theyre still with SAP, theyre happy, and theyre on budget.
Translated from the German:
"...within your article from last Friday you quoted Oracles president Charles Philips. Regarding this article I would like to offer you the following rebuttal: KarstadtQuelle and Karstadt Warenhaus AG [two operating Karstadt companies] still adhere to the strategic partnership with SAP, the leading provider for business software. Messages with other information are not true ... the involved partners are very satisfied and the project is in time and in budget."
The Phillips quote, according to Wohl, actually refers to a small business that Karstadt had spun off and which was considering a Retek buy. In merry old England. Not Germany.
The spin makes you a little dizzy, doesnt it?
Meanwhile, Oracle is boasting of a 24 percent increase in worldwide new applications license revenue, with 42 percent in North America. This is what the market wants. After all those billions spent on acquisitions, the market wants to see some growth.
Unfortunately, financial analysts are throwing darts at that numbers bubble, as well.
" an analysis of Oracles application business by Prudential Securities analyst Brent Thill indicates that the company hasnt gotten much for its money," according to Bill Snyder, reporting in TheStreet.com.
"By combining year-ago sales of the then-independent PeopleSoft (which had swallowed J.D. Edwards) and Retek with Oracles organic application business, Thill found that new license revenue would have been $215 million had all three companies been under one roof.
But after the combination actually took place, Oracles license revenue was $127 million in its most recent quarter, 41 percent below what the companies were each doing on their own."
In other words, Oracle looked at its own numbers in 2004, without looking at the aggregate of itself, JDE, Retek and PeopleSoft. So of course its numbers grew. After all, it ate half of North Americahow could its numbers not grow? But as far as the aggregate companies growth, it shrank.
Shrink. Thats a good word. Maybe what Oracle needs to do to gain market share and sell its enterprise applications is to shrink the inflated verbiage and pop some balloons.
Editors Note: This story was updated to provide more detail about SAPs 5-1-2 maintenance plan.
Is it just Oracle, or are they all spinning you bedtime stories? Write to me at firstname.lastname@example.org.
Lisa Vaas is Ziff Davis Internets news editor in charge of operations. She is also the editor of eWEEK.coms Database and Business Intelligence topic center. She has been with eWEEK and eWEEK.com since 1995, most recently covering enterprise applications and database technology.
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