Oracle faces 'strategic dilemma' with Fusion Applications

IDG News Service - 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% 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.