Soapbox: IBM and Oracle Partner – But What About Fusion? (RFG)

Lead Analysts: Cal Braunstein, John Van Decker

IBM Corp. and Oracle Corp. held a special analyst teleconference to discuss their partnership initiatives around the System i platform. This initiative is focused on small to mid-size businesses, primarily on the JD Edwards platform that Oracle had acquired previously when it purchased PeopleSoft.

IBM and Oracle discussed their ability to jointly support the mid-market, including cross-selling capabilities. They also discussed their ability to help customers leverage service-oriented architectures (SOAs) and open technologies, including Java. However, the prime thrust of the initiatives are new System i offerings specifically aimed at the JD Edwards market.

IBM announced an i520 solution edition for Oracle's JD Edwards EnterpriseOne, an i520 Collaboration Edition, and flexible, deeply discounted backup editions. Oracle, in turn, committed to deliver an unlimited number of JD Edwards World product releases. Oracle stated that support would be continued beyond 2013 and a direct migration path to Fusion from World would exist. Oracle said it wanted World customers to understand that they would not be required to move to EnterpriseOne or e-Business Suite to get to Fusion.

IBM System i has received much attention in the small to medium size business (SMB) market, as has Oracle's JD Edwards solution. While RFG believes the combined IBM and Oracle solution represents an appropriately-sized solution for the SMB market and Oracle will support it through 2013, we still urge organizations to exercise caution in adopting this platform.

Oracle has received much push-back in the market for its pending migration path for clients to Oracle Fusion. This has been particularly true among enterprises not part of Oracle's Electronic Business Systems (EBS) operation, such as former JD Edwards, PeopleSoft, and Siebel clients. Current customers are concerned about the terse communications from Oracle as to the details of Fusion and projected costs to implement a new platform. In many cases, firms believe these costs will rival those of a new ERP implementation. IBM and Oracle are effectively asking customers to invest in a platform with a road map of functional enhancements that is questionable at best, as Oracle increases its investment in Oracle Fusion.

In addition to the question of future enhancements, there is also uncertainty as to what the price points will be for migration to Fusion. Customers can stay on this platform through 2013. However, it is doubtful the level of support will be robust enough to support a growing and expanding business. Thus firms may be forced to move to Fusion earlier than 2013, which according to ERP trends, may also coincide with looking for a new ERP solution.

RFG believes the IBM-Oracle platform can provide major value to firms that are moving off of legacy ERP platforms that do not meet requirements or existing JD Edwards World customers that are in search of a more efficient operating environment. However, net new customers in search of a new ERP solution must take into consideration the Oracle Fusion-factor and how this will impact support for enhancements and suitability for the projected growth of the business.
At a minimum, the strategy should be sound for a good three to five years. Business and IT executives should not rely on Oracle's good faith but should make sure the commitments they need are locked into their contractual agreements with Oracle. Executives must carefully weight the total package value and the pending migration to yet another future platform (Fusion) against other options before making a decision that will lock them into a path for the next 10-plus years. (See the RFG Research Note "Oracle to Buy Siebel: The End of an Era?" and the RFG Research Brief "Dealing with Oracle's Uncertainty.")