Charting Your Future With Oracle
As we’ve documented through the Escape Hatch from Oracle research mission, using and working with Oracle has both advantages and drawbacks. Oracle offers an array of high-quality products that are vital to many enterprises across industries. Companies have come to depend on using Oracle software to run mission-critical operations.
But the way Oracle antagonizes its customers with the use of high-pressure, high-cost audits and delivers a roadmap for CIOs that is “Oracle-first” (even “Oracle-only” in some cases) has the effect of limiting choice. Meanwhile, customers today have unprecedented levels of choice in enterprise software and cloud alternatives to Oracle, and that is expected to continue, creating a buyer’s market for the next decade. Still, the prospect of divesting completely from Oracle software is unrealistic for most CIOs today.
As a result, companies with long-standing relationships with Oracle often face a conundrum. They must navigate how to continue to use Oracle ERP software to run their business while finding ways to incorporate more balance in their IT strategy, not just in the use of non-Oracle technologies, but in how they work with Oracle as a vendor overall.
CIOs today essentially have three choices. They can follow the “Oracle-first” roadmap Oracle has laid out for them, they can attempt to escape to non-Oracle software or cloud offerings, or they can choose a hybrid in which they keep some systems operating on Oracle while migrating others off onto new software.
Let’s examine how to manage each of these situations.
Many companies have a long-term investment in Oracle. This investment is not just in ERP software, but also in customizations they have made to tailor the software to fit their specific business needs. Their staff has grown accustomed to attending Oracle conferences, such as Oracle Open World, seeing the latest demos, and looking forward to the next updates Oracle is delivering.
However, Oracle has changed its pattern of innovation over the past few years, and it is worth noting. If you look historically at the pace and manner in which ERP applications were released, customers would see a major application release every 3-5 years, which would require a full upgrade to leverage. However, recently, Oracle has announced a shift. Moving forward, after customers upgrade to the latest major release of the ERP application (E-Business Suite, PeopleSoft, Siebel, JD Edwards), Oracle moves these customers to a Continuous Release Model, in which they get one or more “updates” each year of varying frequency depending on the application. Customers then download, test, validate, and apply this update based on their business needs.
However, customers must continue to pay full maintenance and support fees to receive the updates, and they are expected to continuously plan and continuously integrate them.
There is no question that Oracle is delivering updates to its customers, but what is the ROI of those updates compared to the cost spent acquiring and implementing them? Could that spend be invested elsewhere to innovate the business at a better rate of return?
Planning Your Escape
On the other end of the spectrum, some companies have made the strategic decision to divest their Oracle investment over time, replacing Oracle software with on-premise or cloud-based alternatives. A recent survey of CIOs by Arete Research showed nearly 75% plan to reduce their spend with Oracle.
The reasons behind this could stem from vendor-level frustration or seeing less new value from updates. But I hear something else from Oracle customers as well: a desire to access new, disruptive technologies to outpace competitors.
When companies have reached this point, they must make sure they have the time necessary to make such a migration successful. Because the migration will involve completely retraining existing staff — or hiring new people — they will want to shift budget and resources to these efforts, but continue to ensure their Oracle ERP runs smoothly. One effective tactic for these types of customers is to leverage third-party support to accomplish both objectives.
Third-party support often comes at a significant discount compared with Oracle maintenance and support fees. In addition, customers often receive greater responsiveness and quality since these providers focus solely on support and do not have to balance it with investments in software development and engineering.
With third-party support as a foundation, CIOs are free to focus on how to make the transition off of Oracle successful, fully evaluating the technology offerings available. Once they settle on what they think is right for the business, they bring in systems integrators and analysts to help the transition run smoothly.
An important way to improve the chances of success is to start with low-hanging, easy to achieve projects on the new software or platform. These proof-of-concept projects will increase buy-in across the business and show that the shift was worth the effort. These projects can be small and should generally not be high risk. But they’ll help build momentum around the new software.
A Hybrid Approach
Some companies may decide to take a hybrid approach in which they do not completely go all in on new software and attempt to keep some core ERP operations running on Oracle. This makes sense in many contexts where leaving Oracle would be too disruptive, at least in the near-term, given the mission-critical operations that are running on the software.
For this approach to work, companies must again plan their projects with return on investment in mind. The ROI should be identified at the beginning of the project and measured throughout and at the end.
In choosing what to keep and what to leave, there will be some strategic systems that companies decide to adopt in anticipation of what architectures might look like in the future. One common example is adopting cloud Infrastructure-as-a-Service as a means to reduce the burden on IT of keeping up with ongoing (and low-value) hardware refresh procurement, testing and deployment. In this scenario, customers can keep the ERP software they own, but move select ERP applications into the cloud where they feel their performance and security needs will be met.
In addition, with the increasing maturity of SaaS, some specific Oracle ERP functions may have viable SaaS alternatives today. However, the move to SaaS represents a fundamental shift in how software is consumed, where customers now essentially rent versus own their software licenses and access their software through a web browser. Customers should therefore consider the implications of which SaaS vendor they select if they intend to replace their current ERP functions, as they will most likely be using that vendor for many years.
ERP in the cloud still comes with many hidden costs that are hard to project even with the greatest levels of due diligence. Oracle for example has even publicly acknowledged their customers will typically spend at a ratio of three-to-one or more with Oracle once they replace their current ERP software with Oracle SaaS – so customers should consider the total ROI of the move.
During this transition to hybrid IT, customers can again leverage third-party support to help fund and support the move, and, depending on which cloud solutions they adopt, they can continue to leverage one source of support across both internally deployed and cloud solutions.
The ultimate question for CIOs moving forward is where true innovation will come from across their vendors. For many companies, increasingly, ERP is where they run their business, not innovate their business. Thinking business-first rather than vendor-first can help you open your strategy beyond Oracle, but do so gradually to maximize cost savings and ROI and minimize risk.