Oracle faces 'dilemma' with its Fusion Applications

How can Oracle spark greater adoption of Fusion Applications without riling customers on older releases?

Oracle spent years developing its next-generation Fusion Applications and finally put them into general availability nearly a year-and-a-half ago, but some new evidence suggests that it's been less than successful at enticing customers to move up.

Two-thirds of 139 Oracle applications customers surveyed by Forrester Research said they had no plans to implement Fusion Applications, while another 24 percent said they didn't know whether they would, according to a new report out this week.

"If Oracle Fusion Applications are the future for Oracle, most Oracle users haven't gotten the memo," the report states.

All told, Oracle may be facing a "strategic dilemma" with Fusion, in Forrester's view. Oracle has a large installed base on older applications such as E-Business Suite and PeopleSoft that provides plenty of lucrative maintenance revenue while not requiring the vendor to spend as much on sales activity as it would have to for new products.

In addition, some time ago Oracle made long-term commitments to those products through its Applications Unlimited program; any sudden move to phase them out in favor of Fusion would surely provoke customer revolt.

And it has chosen to market Fusion Applications largely as a "co-existence" proposition, with customers adding modules over time to their current environment. For added flexibility, Fusion Applications are available as cloud services as well as in on-premises form; some two-thirds of initial Fusion customers have gone the SaaS (software-as-a-service) route, according to Oracle.

This is a losing strategy, according to Forrester. "The current middle path of talking about Fusion while providing no disincentives against clients staying on existing apps will lead to mediocre growth," the report states. "Our bet is that Oracle will push Oracle Fusion Applications."

An Oracle spokeswoman couldn't immediately comment on Forrester's report.

"I believe the uptake [of Fusion] is still guarded but [customers are] excited," said Margaret Wright, president of the Oracle Applications Users Group, in a recent interview. A number of OAUG members are going down the co-existence path with Fusion, but many others "have a lot invested" in E-Business Suite Release 12, with some having just made the upgrade, Wright added.

Still, "the functionality [in Fusion] will entice people," Wright said. "It's not so much technology for the sake of technology, but usability. We're hearing a lot about the user experience."

It may be a mistake to view Fusion Applications as some kind of inevitable endpoint, however, according to Wright. "The customer base for Oracle is so huge, it's not a one-size-fits-all scenario."

Oracle has said some 400 customers are now running Fusion Applications. While that represents a tiny percentage of its overall user base, Oracle has also said tens of thousands of customers are using its Fusion Middleware stack, which forms the foundation for Fusion Applications, meaning many customers may be well-positioned to adopt the new software when they are ready.

In addition, Oracle is beginning to step up its efforts to form an ecosystem around Fusion Applications. Last month, it announced the availability of the first Accelerate rapid deployment offerings from partners for Fusion.

Oracle has also created a Fusion Applications Developer Relations team.

It's also likely that Oracle will begin more aggressively marketing Fusion, such as through "attractive module bundling price points" and other incentives, as well as "some disincentives to clients staying on existing apps, such as longer and more modest enhancement releases," Forrester said in its report.

Still, Oracle is reportedly not all that anxious about ramping up Fusion Applications sales as quickly as possible.

"You may not believe this, we're not focused on publicity, but rather we want to ensure customer success," said Steve Miranda, executive vice president of application development, in a recent interview with analyst Ray Wang of Constellation Research. "Each go-live is very important to us. In our first set of go-lives, we have 10,000 customers who want to talk to the first 10 go lives. We also don't want to overwhelm our initial customers."

"I'm not worried about speed," Miranda added in the interview. "I'm worried about moving in the right direction."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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Tags IT managementCIO roleOraclesoftwareapplicationsForrester Research

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Chris Kanaracus

IDG News Service
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