Last Tuesday, Oracle Corporation released one of the biggest announcements it has made about its applications since it acquired PeopleSoft and JD Edwards over a year ago. The announcement could not only help Oracle to maintain the loyalty of its newly acquired customers, but also help IBM to boost sales of its System i5 servers.
The announcement took place at Collaborate 06, a conference that brought together the three largest user groups representing Oracle's customers. The event gave Oracle an ideal venue to declare that it will enhance its major application product lines indefinitely. The commitment, which is part of an initiative known as Applications Unlimited, represents a distinct shift in Oracle's application strategy. Ever since the software giant announced plans to ship its next-generation Fusion Applications in 2008, it has stated that it would support its JD Edwards, PeopleSoft, Siebel, and E-Business Suite applications through at least 2013. Oracle also said it would ship new releases of these applications, but it only outlined plans to do so until 2008. By contrast, last week's announcement commits Oracle to deliver new releases of its current products alongside of Fusion Applications for many years to come.
As part of the announcement, Oracle reached out to iSeries and System i5 users by pledging to enhance JD Edwards EnterpriseOne and World applications running on their server beyond 2013. The pledge reflects Oracle's realization that most JD Edwards customers rely on the iSeries and are fiercely loyal to the platform. To underline the new commitment, Oracle President Charles Phillips invited Mark Shearer—IBM's General Manager for System i—to take part in the announcement. Shearer commended Oracle for its support and pledged that IBM will continue its ongoing collaboration with the application vendor.
To kick off the Applications Unlimited initiative, Oracle also announced the general availability of EnterpriseOne 8.12, the latest release of the application suite. The release features a new module for supplier sourcing as well as enhancements to the supply chain, human capital, and customer relationship management modules. Food and beverage manufacturers will benefit from new modules for grower management, grower pricing and payment, and blend management.
A Game-Changing Move
Oracle's new initiative should have far-reaching implications not only for its customers, but also for the IT vendors that serve them and the competitors that want to win them over. By extending the time that its customers can stay on their existing applications, Oracle has taken the pressure off those customers to upgrade to Fusion. That should increase customers' willingness to stay on their existing applications and reduce their interest in offerings from rivals such as SAP and Microsoft. Moreover, Oracle's pledges to ship new releases will give customers another reason to stay on the vendor's support contracts. That should make life tougher for third-party maintenance providers that are pitching their support plans to Oracle customers.
Ironically, Oracle's announcement also creates challenges for the vendor's own Fusion strategy. That is because the announcement repositions Fusion from being Oracle's only long-term platform for its customers to being one application suite among many. While that suite will be more technologically advanced than its peers and will remain Oracle's preferred upgrade path, it will lose the benefit of being the only upgrade path. As a result, Oracle could find itself enhancing multiple product lines for more years than it had previously planned. However, those circumstances may not be that taxing for the vendor. Now that it has more than 30,000 application customers, Oracle can collect adequate revenues from support contracts to keep enhancing its various products while it builds Fusion.
Speaking of revenues, Oracle's announcement should have a salutary effect on sales of IBM's System i5. Now that JD Edwards users—around 80% of whom run their applications on an AS/400 or iSeries server—are assured of enhancements for years to come, they will have more reason to upgrade their applications and purchase new modules. That, in turn, should generate more orders for System i5 models and upgrades to those models. The number of orders could be significant, as JD Edwards users have historically driven more sales of iSeries servers than those of any other vendor. However, JD Edwards-related sales fell sharply in 2003 when Oracle launched its takeover bid for PeopleSoft and raised concerns about the future of World and EnterpriseOne. Last week's announcement should address those concerns and could increase sales of both JD Edwards applications and the System i5.
If such a sales boost does materialize, it will be a welcome shot in the arm for IBM. As Tom Stockwell reported in his article last week, System i revenues fell by 22% during the first quarter when compared to the same quarter last year. Much of the shortfall was caused by customers who held off on purchases during January so they could evaluate the new System i5 models that IBM announced at the end of that month. IBM now needs to make up for lost ground during the second quarter, and a reenergized JD Edwards customer base could be just the ticket to help it do that.
Among the things that could help JD Edwards customers open their checkbooks are the attractive rebates that IBM and Oracle are offering them to purchase System i5 hardware. As I mentioned in a March article, Oracle is among the software vendors that is doubling the standard ServerProven rebates to customers who buy a new System i5 or upgrade their old servers. To qualify for the rebates—which can be up to $40,000 for upgrades and $140,000 for purchases—customers must acquire new software licenses, purchase qualifying software implementation services, migrate an existing software license from a non-IBM server to a System i5, or incur tier charges on an existing software license by upgrading their servers.
In addition, all North American iSeries customers can take advantage of a trade-in promotion that IBM launched earlier this month. The promotion applies to customers that trade in an AS/400 Model 5xx, 6xx, or 7xx or an iSeries Model 250, 270, 820, 830, or 840 for a System i5 Model 520 Enterprise Edition. Customers who install the new System i5 by June 30 can receive a credit of up to $70,000 on the purchase price. Those who install the new model by September 30 can receive a credit of up to $60,000. If a new Model 520 Enterprise Edition fits your requirements, the trade-in promotion could make it worth your while to buy sooner rather than later.
In short, Oracle's extended commitment to its existing applications and the latest System i5 rebates put JD Edwards customers in a much better position than they were in a few weeks ago. Indeed, one could argue that the JD Edwards community is enjoying its best days since it was acquired by PeopleSoft. In a turn of events that few would have expected three years ago, both World and EnterpriseOne are enjoying the active support of a vendor that previously had no understanding of the iSeries and its customers. As last week's announcement indicates, that is no longer the case.
Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at
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