Oracle Buys Up Retail Forecaster

News Analysis: The database behemoth's purchase of ProfitLogic is its second acquisition in a serious bid to rule the retail sector, but integration may be a challenge.

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.

/zimages/3/28571.gifClick 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."

/zimages/3/28571.gifOracles 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?