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7 Apr 2017

If you're not at the table, are you on the menu?

Having spent my career working in IT, and most if it working with Oracle software, I can safely say that I’ve never seen the market go through such a period of change and uncertainty as it is now.

After talking to senior executives at our customers, all of whom are current users of Oracle technology, several consistent themes have emerged…

The Oracle Cloud Applications Journey

Oracle Cloud applications it's clear that Oracle’s next generation of enterprise applications (Oracle Cloud Applications) are here and proven with early adopter customers. Oracle is pushing them hard, something demonstrated by the impressive attendance at the successful Oracle London Modern Business Experience (MBX) earlier this month. Talking about the adoption of Cloud in her keynote at the event, Oracle’s CEO, Safra Catz, said “If you’re not at the table, you’re on the menu”. Is she right?

From speaking to our customers, it’s clear that things have certainly moved quickly in the last year or so. Some of the key concerns raised against deploying critical business systems in the Cloud – namely data security and data sovereignty – have been overcome in the minds of most. In fact, many have come to realise that data security is often improved by moving to the Cloud!

Many customers willing to embark on business transformation projects and adopt best practice business processes are choosing to move to Oracle Cloud Applications. What’s not clear at this point is how Oracle’s recent acquisition of Netsuite will play out and how it will be positioned relative to the Cloud Applications suite.

Choices for Oracle E-Business Customers

Something that is clear to anyone who has any dealings with Oracle is that all the sales and marketing efforts are going into selling their Cloud products; which based on the last set of published results have now grown to account for circa 10% of revenues. At the same time, Oracle has announced that Release 12.3 of Oracle E-Business is likely to be released in 2019, resetting the support clock, and meaning that these systems have an ever-increasing lifespan.

The challenge that our existing Oracle E-Business customers face is the need to get a return on their existing investment in on-premise Oracle E-Business systems. Barring major business changing events (such as acquisitions and mergers), in most cases, it makes sense for them to wait until nearer to the end of their current support horizon before considering a wholesale change.

Given that this isn’t for another 4-6 years, depending on whether a customer is currently on Release 12.1 or 12.2, they have time to consider their next step, and three choices to make when they get there:

Upgrade to Oracle E-Business 12.3 when the time is right for them.
Migrate to Oracle Cloud Applications and take advantage of the maturing functionality.
Consider a competitive product.
The last option is obviously one that Oracle and partners in the Oracle ecosystem want to avoid.

Faced with this situation, whilst a early adopters have moved to Oracle Applications Cloud, I am seeing many organisations take the “do nothing” approach in the short term, as they “sweat their assets”. To ensure a seat “at the table”, some are considering a hybrid approach to Cloud going forward. Many CIOs are looking to deploy some new SaaS “edge” products in the Cloud, or even considering moving the hosting of their existing Oracle E-Business system to realise some of the benefits from Cloud in the medium term.

A year is a long time in politics

It’s become impossible to pick-up a newspaper, listen to the radio or watch the news feeds, and not be hit from all sides by headlines surrounding the current political climate of uncertainty and “false news”, as the repercussions of the Brexit vote and a Donald Trump presidency begin to unfold.

There’s nothing that businesses like less than an era of uncertainty, it makes it hard to make investment decisions with any degree of certainty. Speaking to our clients, the effects of this are being felt in several different ways, both now and potentially in the future, including: The availability of finance, exchange rate movement impact, restrictions to future movement of labour and changes in customer behaviours. It all adds up to some deferred or changed decision making on IT spend.

Better short term outlook for the UK economy?

You’d be right to take any economic forecasts with a large pinch of salt, particularly with the winds of change blowing, but the current consensus shared by the Bank of England and the CBI is that the UK economy is due to steadily grow by around 2% per annum for the next two years.

What does this mean for the Oracle Applications Market? If the forecasts turn out to be true, then the overall macro-economic climate is one of growth. Whilst this is positive, businesses are still challenged by individual factors discussed above.

Falling numbers of skilled UK resources

Many leading companies have Oracle E-Business underpinning critical business processes and I can see problems ahead. The Oracle market is currently operated by an aging workforce, and there is a lack of skilled young professionals coming through. The moves to using offshore providers over the last couple of decades has largely contributed to a dearth of young UK talent coming through the ranks.

Many businesses still prefer a face-to-face, UK based relationship with their specialist Oracle service provider. However, a vicious circle has been created: The aging (and more expensive) UK workforce is placing a premium on UK based services and pushing the price beyond the affordable range of some businesses, thereby breathing more fire into the off-shoring industry.

The need for a focus, as an industry, on getting better at training and developing new UK talent has never been clearer.

Growing need for fast return on IT investment

It has long been the case that circa 80% of all IT expenditure is on the support and maintenance of existing systems, leaving just 20% to spend on the innovation that will drive true business value. As businesses wrestle with how to maximise the opportunities afforded by Cloud, Mobile and IoT, IT spend has been placed under a tougher level of scrutiny than ever before.

Whilst business justifications have typically been required at some level, I am seeing an ever-increasing trend towards more rigorous return on investment calculations to ensure that money is being wisely spent. The timeframes for seeing a return on investment for IT spend are also shortening, driving enterprises down the route of shorter, incremental IT projects.

Of course, a redeployment of on premise systems to the Cloud is a potential opportunity to make some much needed savings in those support and maintenance costs in the medium to long term.

Growing expectations of customer service

In a Gartner survey of business leaders conducted last year, 89% predicted that customer experience would be their primary basis for competitive differentiation by 2017. Great customer service is now expected in every engagement, and in some cases, is now more important than the actual product.

As the Oracle market moves towards Cloud and subscription models, to secure the all-important renewals, both Oracle and its partners face increasing pressure to deliver great service to help to differentiate against the competition.

IT departments are also under pressure themselves to deliver excellent customer service to both their internal and external customers. Working with a service provider with the right service excellence ethos and track record can help them to achieve this.

Bringing it together:

It’s clear from the above topics that the IT market in general, and the Oracle Applications market specifically, are going through some seismic changes.

Oracle Cloud Applications

Speaking at the recent Oracle MBX event, “Dragon’s Den” star, Deborah Meaden, urged businesses struggling to deal with these challenges to “Get match fit. We don’t know what lies ahead.” She is spot on.

The first step to avoid “being on the menu” is to gain an understanding of the factors in play and to formulate a strategy to move your organisation forwards, one that embraces the current changes.

What do you think? I’d be particularly interested to hear thoughts and opinions from IT and Business function heads on how you see the marketplace, and what your plans are for the coming year.