The headline for Oracle last week was that growth had stalled after the enterprise technology provider reported that its third quarter revenues had declined one percent while profits flat lined from a year earlier.  Wall Street was not happy with this surprise, especially after a track record of consistent performance of late. Then again, opinion was mixed with some major equity analysts sticking with their enthusiasm for better results to come. For their part, Oracle investors have driven the stock down over $5 or 15 percent since the earnings announcement.

Oracle Co-CEO Safra Catz attributed this revenue miss squarely on the shoulders of the company’s direct sales team indicating that some of the new sales recruits seemed less motivated to close deals in the latest quarter. At the same time, it was also noted that sales commissions are determined in the upcoming fiscal year end quarter that ends in May. If you establish a bonus plan that delivers all benefits in the final quarter, why wouldn’t a salesperson hedge to assure all the gun powder was loaded to make quota.

We all kinda know that Oracle sales types are not noted for their bashfulness and laid-back style. The fact that Oracle Co-President Mark Hurd is the current corporate cheer leader of the sales team does not add any credence to a laid back style. In our coverage of Oracle’s annual Open World conference in 2012, we pointed out that Hurd hired an additional 3000 sales types and reorganized teams into product specialization vs. selling a collection of various product components. The new commission structure incents sales representatives to sell more cloud-based versions of Oracle offerings. And, if that quota stems from selling cloud, that’s what most sales teams will focus on.

In enterprise software, blaming unanticipated operating results on sales execution is often the way to deflect to other internal issues related to product strategy, pricing, and the most important of all, the buying motivations of customers.  It wasn’t that long ago that SAP had an unanticipated revenue miss which it directly blamed on its North America sales unit. The leader of that unit was relieved, and SAP bounced back with positive financial results.

Business, social media and equity analysts are focused on more important indications, namely is demand for behind the firewall, packaged applications on the decline in favor of other cloud based options. They point to the reported 2 percent decline in Oracle software licenses and subscriptions as evidence. Oracle also incurred a 23 percent decline in hardware revenues from its Sun Microsystems unit, an indication that the messaging for engineered systems, combining hardware, software and infrastructure is not quite resonating at the moment. Enterprise cloud technology providers such as Salesforce.com and NetSuite continue to proclaim how manufacturers have adopted cloud computing options.

From our B2B network and supply chain lens, Supply Chain Matters views Oracle’s current challenges as applications depth, cloud computing roadmap and pricing.  The supply chain focused suite of applications within the Oracle E-Business suite continues to make steady and noteworthy progress, but in the notion of depth of B2B cloud, the options are thin. Progress has also been made on the integration of product management and project-based management initiatives within and across the supply chain suite. However, Oracle lags in its depth of procurement and B2B applications support.  SAP’s previous acquisition of Ariba and IBM’s acquisition of Emptoris have brought this weakness to light.

In October we noted that Fusion SCM, Oracle’s market response to supply chain business process support via the Cloud has lots of fairly interesting future capabilities but with an overall calendar rollout that will not likely gather the interest of technology deployment teams. While current SCM, cloud-based applications support currently exist, it is more focused toward light service industry support, and even then, an admission from Oracle that initial efforts were mainly focused on Fusion ERP integration.  When we viewed presentations on the supply chain cloud computing roadmap, we had the real sense that Oracle SCM development teams have some significant challenges to solve with SCM in the Cloud and the web services platform.  A mushy rollout calendar was in contrast to the customer panel we attended back in April 2012, where select Oracle SCM customers stated their expressed interest in utilizing an SCM Cloud based offering, but were frustrated by Oracle’s rollout timetable.

The other challenge is of course, pricing.  Oracle has a well-deserved reputation for premium pricing, especially when multiple applications and computing infrastructure are bundled in a deal. That is not helping when prospects and customer can currently evaluate more cost-effective options.

In our B2B network and supply chain view, the takeaway for Oracle’s miss was a combination of highly weighted incentives to sell cloud computing when substance was thin. Compelling pricing to attract customer buying interest is a fundamental challenge needing to be addressed.

Oracle teams should internalize this latest miss as a sign that more depth of applications development execution is at hand, along with a rationalized pricing strategy.

Supply Chain Matters has been invited to attend Oracle’s annual briefing for industry analysts that occurs in mid-April where we hope to dig deeper into cloud deployment strategies for B2B networks and supply chain.

Bob Ferrari

Over on the Horses for Sources Blog, Phil Fersht has penned a commentary, Fooled by Forbes’ fantasy fiction?, which Supply Chain Matters would like to also echo.  In his commentary, Phil calls attention to publisher Forbes Magazine and its “BrandVoice” columns to blatantly promote various technology products from technology providers such as Oracle and SAP. Phil notes: “There is no sponsored content indication anywhere on the BrandVoice articles, not even a company logo at the top of the pieces.  Moreover, midway through last year, the column title was changed from AdVoice to BrandVoice, further blurring the lines between reality and fantasy. The list of praiseworthy articles is endless, and (seemingly) very convincing to the general reader, who is being fooled into thinking they are reading real journalism.” Phil provides a couple of specific examples for readers.

The reason that this commentary resonated with us is that we also have noted these fine lines of difference among certain business and supply chain publications which feature articles that pretend to be independent journalism, but smack too much of vendor marketing language without alerting readers to a business arrangement.  In his commentary, Phil notes a source indicating that the cost of entry for Forbes AdVoice is $1 million. Once more, a reference to an AdAge Digital article also questions the effectiveness of this format in generating prospective customer leads. This author was floored by both the scope and implied arrogance of that number.  How many technology vendors have a marketing budget large enough to support a $1 million program with a single business publication? Very few.

Phil further notes: “ No, they (AdVoice) don’t promise to make their content appear independent.  They position it as another marketing channel where editorial and advertorial co-mingle and co-exist.  They are, in fact, quite proud of the hits BrandVoice articles get relative to straight editorial.  They like that blending of content.”

As bloggers, we are required by regulatory guidelines to disclose any prior business relationships that may be associated to the content of a particular blog posting.  Readers of this blog will note that whenever Supply Chain Matters posts a commentary related to a named sponsor or existing client, we include such a disclosure.  The one exception we make is in announcing a blog sponsor, where it should be clear to our readers that sponsors have a relationship to that commentary.

We hold our sponsors and clients to higher standards, meaning that independent thought leadership is far different than the latest marketing brief. Should not top-tier business and supply chain periodicals do the same?  After all, you the reader, need to be aware of what is independent vs. paid or tutored opinion.

We echo that these practices are indeed a slippery slope, one that those with big pockets believe will influence you, the reader and prospective buyer of technology products and services

Cudos to Phil Ferscht for raising such awareness and outrage.

Readers are welcomed to voice their own opinions as well.

Bob Ferrari

Founder and Executive Editor

Once a year, just before the start of the New Year, the Ferrari Consulting and Research Group and the Supply Chain Matters Blog provide a series of predictions for the coming year. We have maintained this tradition since the founding of the blog in 2008.

Readers can view the entire listing by clicking on this web link: 2013 Predictions for Global Supply Chains. 

In our Part One posting, we explored our first two predictions for 2013, the overall economic and business challenges, and our prediction of inbound commodity prices.

Part Two posting explored predictions #3 and #4, which noted a continued renaissance in U.S, based manufacturing and the very important challenge of supply chain skills development and retention.

Part Three posting dived into Prediction #5, our industry specific supply chain challenges prediction.

Our Part Four posting address the critical need for supply chain resiliency and responsiveness in 2013 as well an increased penetration of Chinese companies in other industry supply chains.

Part Five predicted broader umbrella supply chain accountability in 2013.

Part Six predicted higher levels of action required in the control and mitigation of broad theft and counterfeit materials among industry supply chains.

In this final deep-dive posting, we explore our prediction related to cloud computing adoption in 2013.

Prediction #10: Cloud computing and managed services options, enabling supply chain business processes, will continue to gain more traction, provided that vendors resolve current lingering customer concerns.

The momentum for adoption of cloud computing technology in both B2B and supply chain business processes accelerated in 2012.  The reasons were a perfect storm of business forces.  High uncertainty surrounding the global economic climate across multiple industries drove cash preservation strategies and a consequent reluctance to expend high levels of up-front capital. Multiple disruptions and challenges affecting industry supply chains uncovered needs to quickly augment business processes and enhance needs for broader intelligence and quicker decision-making.  Cost control initiatives turned more towards aggressive reduction in IT owned infrastructure and consequent annual operating and applications integration costs.  Small and medium sized businesses were especially attracted to cloud options because of the factors noted above. All of these business and functional forces made cloud computing a more attractive option.

We expect this trend to continue in 2013 along with augmentation of cloud computing with managed supply chain services.  We concur with IDC’s prediction that industry focused Platform-as-a-Service (PaaS) information, collaboration, control and decision-making models, hosted in a cloud environment, will gain more interest and adoption over the coming months and years. The open question remains which cloud model will be preferred, private or public.

Enterprise vendor SAP, in its Sales and Operations Planning, powered by SAP HANA application, is a cloud based offering that manages one of the most critical business decision processes for any firm.  Similarly, Oracle has long-term plans to offer a full supply chain management support capability via private or public cloud platforms. IBM has been building-out a broad offering of cloud-based, B2B support applications that address mission critical processes of customer fulfillment and supply chain resource management.

However, the growth of these options in cloud computing will be dependent on the ability of technology vendors to resolve fundamental and lingering customer concerns surrounding cloud computing. Many vendors have shown a bit of arrogance in constructing legal agreements surrounding cloud computing contracts.  They insert clauses in contracts that absolve the cloud provider from any and all liabilities, and in some cases, state that the client will hold ultimate responsibility for anything that goes wrong, including data loss. Prospective customers are compelled to seek legal advice, only to discover that the customer’s maximum recovery is capped, or would have to initiate an expensive and time-consuming lawsuit to recover any business interruption or data breach damages.  In an article published in December 2012, Legal concerns curb corporate cloud adoption, ComputerWorld magazine quotes prospective customer attorneys as describing certain technology vendor contract terms are “offensive”.  Since cloud computing is a recent phenomenon, legal precedents are lacking relative to liability and recovery.

Up to now, cloud computing options directed at point applications or non-mission-critical processes may have caused procurement and supply chain functional management teams to overlook or dismiss such provisions. But, as cloud computing options involve much broader, mission critical supply chain processes, the need for legal checks and sign-off are evident, and ComputerWorld points to increased discussion and some confrontation among legal counsel, IT and functional executives, which could slowdown cloud adoption.

Another significant and related concern is that of information security. The year 2012 featured more troubling headlines of hackers penetrating critical industry systems.  Some of the world’s most prestigious banks were collectively targeted in attacks by sophisticated and organized hacking groups, as were hydrocarbon production facilities in Saudi Arabia where a virus attack almost took down production of 10 percent of global oil supply. Experts are unsure if latent time-bombs remain in these systems, set to activate a data breach at a certain date.

Higher visibility to interruption of mission critical business services also came to light in 2012.  In late December, Netflix suffered an overnight suspension of all of its video streaming services because of a technical problem at its hosted IT infrastructure provider, Amazon Web Services (AWS). This was the third major reported AWS service interruption in 2012, the others involving customer services for Foursquare, Pinterest and Instagram.

As noted, supply chain planning and customer fulfillment systems often fall into the category of a mission-critical business process, subject to internal control and reporting processes. Many of these increased security developments fuel lingering concerns among executives regarding information that may be stored and accessed in a public or hosted cloud.  Developments such as these motivate senior executives to continue to favor private based cloud options relative to B2B and supply chain needs.

While larger enterprise type vendors have the financial clout and other global resources to address such concerns, smaller vendors may be at a disadvantage.  Vendors often utilize third-party IT infrastructure service providers to host their cloud offerings, which again raises questions as to which parties have ultimate accountability and liability, and how that may relate to the customer’s declared internal control processes.

A continued highly uncertain economic environment and a need for more responsive implementation of automation directed at global supply chain responsiveness and resiliency will continue to fuel cloud computing interest in 2013, provided that vendors respond to security, control and contractual related customer concerns.

This concludes our series of deep dives concerning 2013 Predictions for Global Supply Chains.

We extend a loud shout-out to all global supply chain professionals for their incredible achievements and responsive actions during 2012.  Another challenging year has passed and yet another is forthcoming. Then again, supply chain is never boring.

We trust that our ten 2013 predictions help you and your supply chain teams to think about objectives and resource plans and be adequately prepared in 2013.

The full complete copy of our 2013 Predictions for Global Supply Chains, which includes even more detail, will be shortly made available in a no cost research report available for download in our Research Center. We will advise when the final report is ready.

Throughout 2013, Supply Chain Matters will be providing additional insights related to each of our ten prediction areas, including both an interim and end-of-year report card.

As always, readers are encouraged to comment on these predictions as well as add additional thoughts as to what to expect in 2013.

Bob Ferrari

© 2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.

Supply Chain Matters concludes its series of commentaries from this year’s Oracle Open World held in San Francisco last week with our summary impressions of this large-scale event. We have had the opportunity to both catch-up on rest as well as review our extensive notes. We thank Oracle for providing Supply Chain Matters open access to customers, senior executives and all of the numerous sessions that consumed nearly four days of conference events.

Oracle leveraged this year’s OpenWorld by raising the stakes in both cloud based and database computing.  Oracle is betting big on the fact that both business and IT teams, who remain constantly under pressure for continued innovation and higher productivity with lowered overall costs, will turn to a select few enterprise-level providers for business computing alternatives. Oracle desires to transform its entire collection of IT hardware, database, middleware and business applications into a collection of hosted, pre-configured engineered products under the Fusion umbrella. Oracle has also internalized that, today, businesses desire choice in cloud computing options, and Open World was utilized as a means to communicate a combination of customer computing options ranging from software-as-a-service (SaaS), infrastructure as-a-service (IaaS) to private or hybrid cloud computing options.

Similar to SAP, Oracle now understands that decision-making enabled by in-memory and advanced analytical capabilities are a game changer for businesses, and it is not going to concede market leadership of this capability to any competitor.  We were particularly impressed with Larry Ellison’s stated challenge to enhance Oracle’s data analysis capabilities by transforming data intelligence needs directly to custom silicon chips to scale and speed-up performance.  Ellison also articulated one of the clearest explanations of what really differentiates multi-tenant cloud computing, the method that security is enabled. All of these stated directions could be a market game-changers for Oracle.

How successful Oracle ultimately becomes with this strategy depends on overcoming previous market perceptions for being the most arrogant and perhaps the most expensive technology provider, as well as how collaborative Oracle can work with its ecosystem of partners to enable leading-edge services that attract customer adoption.  Oracle is also savvy enough to figure out that adoption of cloud computing comes from a keener focus on business pain points vs. an overall IT productivity play. Overall, we believe that industries and businesses will benefit as a hyper-competitive chapter begins in cloud-based computing.

The following are some further impressions we walked away with:

• Since joining Oracle in 2010, after his controversial departure as CEO of Hewlett Packard, this year’s Open World provided the opportunity for Mark Hurd to step into a more visible leadership profile.  Hurd anchored two separate keynotes, and was featured in the designated Oracle press conference and the designated executive voice of Oracle with the various high-profile business media attending this year Open World.  A Wall Street Journal article noted that Hurd claimed to have met with more than 600 Oracle customers during the week-long event. During the summer, Hurd was placed in charge of Oracle’s overall sales teams, hired an additional 3000 sales types and has reorganized teams into product specialization vs. selling a collection of various product components. According to the WSJ, a new commission structure incents sales representatives to sell more cloud-based versions of Oracle offerings. In the software industry, incentives are the prime mover of sales momentum, so rest assured your friendly Oracle sales rep will be calling with a compelling argument to transform computing to the cloud.

• As noted in one of our earlier commentaries, we were impressed with some of the capabilities that have been added to Oracle’s E-Business Suite, advanced supply chain planning and execution applications.  We were further impressed with some of the stated concepts and capabilities being discussed for future Oracle Fusion-based SCM capabilities, including a notion of multi-enterprise, B2B clouds. The fuzziness and lack of clarity in development timetables however imply that interested customers will have to entertain co-development or first-mover stances. Overall, Fusion SCM is not going to capture broader customer attention nor motivate them to wait for Oracle at this particular point, given this roadmap fuzziness. We trust that this strategy will change in the coming months.

• We were especially impressed with the penetration that Oracle has made in the high tech and consumer electronics sector, which comes with its own unique global supply chain and B2B fulfillment challenges. In addition to noting two sessions focused on the ongoing technology transformation occurring at Cisco Systems, the current listing of over 50 high tech customers is much more extensive than previous years.

• Oracle has now come to the realization that unstructured and social based data can be just as important as structured data in business analysis and needs for decision-making.  We noticed more mention of the information discovery capabilities brought forward with the previous Oracle acquisition of Endeca, with implications for areas such as customer services, supply chain, product life-cycle management and other areas of B2B fulfillment. Rick Jewell, Oracle Senior Vice President of SCM, articulated the notions of “embedded social” in a variety of supply chain related information capabilities.

• Integration partners such as Infosys and others have played and will continue to play a key role in helping to broaden the overall capabilities and horizontal market adoption of Oracle technology. As an example, Supply Chain Matters had the opportunity to attend a session titled Project Driven Supply Chain that addressed an expensive problem for major equipment manufacturers the synchronization of supply chain and service installation milestones and revenue plans. Today, 30 to 60 percent of total revenues of equipment providers is derived from turn-key bundled products and services that are highly dependent on customer installation scheduling. Infosys and Alcatel Lucent have partnered to develop an integrated capability that links revenue forecasting, S&OP and supply chain planning with project-driven management capabilities that allows an equipment provider to iterate various scenarios of coordinated customer installations. Overall, partners will be instrumental in accelerating the customer go-live adoption of Oracle Fusion and advanced decision-making support based offerings.

While Oracle Open World can sometimes be viewed as a purely sales-driven event designed to prime customer interest, we continue to find this event informative. We were pleased to be designated one of few bloggers and influencers to be invited. Oracle, like other enterprise and supply chain focused software providers continues to adjust to the new reality that market influencers come from independent minded observers that combine both trusted industry analyst, market awareness and social based influence skills.   We also thank our sponsor Infosys for designating this event as one for prime coverage.

Readers can view all previous commentaries by clicking on the below links;

Commentary One

Commentary Two

Commentary Three

Commentary Four

This concludes our series of Supply Chain Matters commentaries from the Oracle Open World 2012.

Bob Ferrari

Appropriate Disclosures: Infosys is one of other designated sponsors of the Supply Chain Matters Blog. 

Oracle is neither a current sponsor of Supply Chain Matters, nor a current client of our research or consulting services.

Supply Chain Matters Attendance at Oracle Open World- Commentary Four

Supply Chain Matters continues with our observations from this year’s Oracle Open World being held in San Francisco. Readers can view previous commentaries by clicking on the below links;

Commentary One

Commentary Two

Commentary Three

As I observe, speak with and listen to supply chain and B2B fulfillment professionals, one clear, consistent message that has resonated of late is the stated and well identified shortage of the key skills required to manage the complex aspects and information-aware decisions required to manage globally extended supply chains.

This week, as we navigated the vast array of Open World sessions that articulated the current and not too distant awesome power of analysis and decision-support tools that emerging technology will deliver, one really gets a sense to the profound implications of these tools.  Make no mistake; these capabilities go far beyond the notions of what was once an MRP, MPS or forecasting view of the supply chain.

In his second keynote, Oracle CEO Larry Ellison conducted his own self-directed demo of analyzing over 5 billion records associated with 27 billion relationships to support a hypothetical decision as to who could be the most influential spokesperson for the Lexus automobile brand.  Think of that, one of the world’s most wealthy executive, surrounded by handlers, took the time to understand and effectively demonstrate the power of the technology that his company advocates.

While readers can logically argue that such a scenario is a bit extreme to today’s every day supply chain decisions, the point is that the implications of this technology are profound to the skills required in the intelligence-driven supply chain.  In an interview with a high level decision support manager for a major corporation, we talked about the current reality of how some individuals readily embrace these newer and more powerful analysis tools while others may resist.  That is not to take away from the inherent skills required in leadership, team building and managing multi-cultural work teams.  It does imply however that advanced analytic tools, leveraged by experienced people, can provide pretty powerful implications for evaluation of all likely alternatives and making the best informed decision.

Each time I attend these technology conferences, I come away with yet another reinforcement of the profound implications on how businesses and their associated supply chains will be managed in the not too distant future.

We depart Oracle Open World tomorrow.  After assimilating our extensive notes and thoughts, our final commentary will outline our summary impressions from this year’s conference.

Bob Ferrari

Supply Chain Matters continues with our observations from Oracle Open World being held in San Francisco this week. Readers can view previous commentaries by clicking on the below links;

Commentary One

Commentary Two

This afternoon there was great anticipation to the keynote presentation from Larry Ellison, the Chairmen of Oracle and god of the Silicon Valley, and the hall was appropriately filled to capacity.  Ellison’s keynote, his second of this Open World, was front-ended by an address from S.D. Shibulal, CEO and Managing Director for Infosys Limited. This was the fifth straight year that Infosys has held the keynote just before Ellison. Just prior to address, there was a lot social chatter on Twitter postulating what it may have cost to have such a coveted spot on the agenda.  Our response is straightforward. Being a valuable partner to Oracle, coupled with being one of the first and largest partners for Oracle Fusion Applications provides some influence. Prioritizing corporate marketing expenditures toward high exposure events like an Ellison keynote is the also the name of the game in the management consulting and systems integration arena. And, before we go any further in this commentary, we also disclose up-front that Infosys has been one of other sponsors for the thought leadership efforts of Supply Chain Matters.

Infosys itself has completed an 18 month transition toward a more client-centric focus of delivery services, which has been termed Infosys 3.0.  According to CEO Shibulal, Infosys is now focused on three broad client objectives:

Business and IT operations, which include cost optimized services for clients

Complex systems integration

Products and platforms

There is also a more aligned industry focus among the three broad service areas. In its Open World Keynote, Infosys elected the theme of Radical Progress. Mention was made of the three events that went on to change the world, namely:

The Wright Brothers first flight in 1903, which was not the very first, but one that had a focus on pilot control.

Alexander Fleming’s invention of the drug penicillin changed the way medicine can lead to prevention of more deadly disease.

The first web site in 1991 was the forerunner to the way all of us conduct our everyday lives today.

The analogy is that these events were examples of Radical Progress that brought forward far different products, new experiences and subsequent innovation. Infosys views its mission as helping clients move toward their versions of Radical Progress. Executives representing the Audi division of Volkswagen AG, and safety science provider UL , and image equipment provider Ricoh were invited to describe industry changing initiatives in their market segments. This was followed with highlights of Infosys recently announced Cloud Ecosystem Hub, an innovative capability that helps enterprises build and manage a unified hybrid cloud environment to support critical internal and externally focused business processes. This capability applied to key business processes has the capability to deploy breakthroughs in customer service, electronic commerce and other business processes.

Stay tuned for ongoing Oracle Open World commentaries.

Bob Ferrari