What Does the Future Hold For Oracle’s Acquisitions?

Implications: Software does evolve over time.  Every user of software, whether it’s a home version of Windows or an enterprise version of SAP, must at some point decide to upgrade.  Upgrades are usually expensive and painful.  As long as Oracle provides a reasonable upgrade path users should not be too unhappy.

Analysis:

The continuing mega-mergers in the applications market have created concerns among users about what the future may hold for them.  Oracle is the primary example of this, but SAP, Microsoft and others are following a similar path, albeit less aggressively.  Companies doing acquisitions naturally want to merge the acquired products into their existing portfolio as soon as possible, since their margins are better once the products are merged.  Customers, on the other hand, strongly resist being forced to change to a totally different application.  The concern among customers was probably at an all-time high when Oracle acquired PeopleSoft, since that was a long and bitter fight.  Similar concerns arose when Oracle later acquired Siebel.

Oracle has successfully retained most customers by promising continuing support and development of each of the individual products they acquired.   They have demonstrated this with new software releases during the last couple of years.  Nonetheless, it is in Oracle’s best interest to eventually merge the products.  If they can support multiple products from a single code base their margins are much better.  The question then becomes not so much whether Oracle is going in the direction of a single code base, but how will customer issues be addressed during that journey?

It is a fact of life that software applications evolve over time, and at some point every user is faced with the challenge of upgrading to a new release.  Some customers upgrade frequently, which reduces the pain of each individual upgrade, but also makes the pain almost continuous.  Other customers choose to remain on the same platform for several years, which allows them to postpone the upgrade pain.  When it does come, however, it will be a much bigger problem, since the differences between the current product and the one they’re still using will be great.

The real question users of PeopleSoft and Siebel (and others) should be asking is not whether they will at some point be required to migrate to “standard” Oracle products, but rather what is the path they are being offered?  If Siebel, for example, were still independent users would at some point be required to migrate to new middleware.  That will still happen with Siebel as part of Oracle.  The only difference is that middleware will be “Fusion” and shared with Oracle’s PeopleSoft and eBusiness Suite.  That sharing should not be an issue for Siebel users, as long as their individual upgrade path is relatively painless.

Oracle’s challenge is to move all their customers to a merged code base while providing a relatively simple migration path to each user.  They are clearly aware of this and doing their best to achieve it, although it is a daunting challenge and only time will tell whether they are successful.  The sad fact is that even users of Oracle’s “original” product, the eBusiness Suite, face a massive upgrade issue with release 12.  It will be small consolation to users of PeopleSoft and Siebel to know their pain is shared equally with users of eBusiness Suite.  The good news for Oracle and their varied users is they seem to be successfully equalizing the upgrade pain to all.  The bad news is the upgrade path for ALL of Oracle’s users looks painful and difficult.  Does anyone hear SAP knocking?