Standard Life blazes savings trail with Oracle Fusion

Standard Life has generated £8m in cash savings on a £12m investment in Oracle Fusion applications but wider market take-up has been slow, says Forrester

A 2013 study by the Centre for Economic Business Research (CEBR) predicted that demand for enterprise cloud applications would generate £2.6bn in revenue in Europe by 2018, an increase of 206%. Figures like this epitomise the cloud computing in the enterprise gold rush and go some way to explaining why Oracle launched its range of Fusion applications as a cloud service in 2011.

But on the ground the decision to adopt Fusion for enterprise applications is not so clear cut. From its headquarters in Scotland, savings and investment firm Standard Life was an early adopter of Fusion to support its HR function – it employs some 9,000 people around the world. But its main reason for adoption was not because Fusion was in the cloud.

Primarily, Standard Life made the move to Fusion Talent Management Cloud as an opportunity to standardise its business processes. Sandy Begbie, group operations officer, says the company adopted the software globally without any customisation.

“There is a reality check, which is to do with corporate systems generally: does customising them really add any value to shareholders or customers? Probably not,” he says.

Standard Life had had its fingers burned with a highly customised PeopleSoft project that cost millions of pounds and was not fit to go live. 

To fill the gap left by the project, Begbie opted for on-premise Oracle E-Business payroll as the first step. Fusion Talent Management was adopted for phase two of the HR application roll-out (see case study below). Payroll will be upgraded to Fusion in due course, he says.

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At its release in 2011, Fusion Applications, which had taken six years to develop, consisted of Oracle's JD Edwards, E-Business Suite, PeopleSoft and Siebel systems, including functions such as enterprise resource planning (ERP), customer relationship management (CRM), and human resource systems, all developed in Java as standard.

But organisations have been slow to embrace the platform.

Forrester Research, in a 2013 report, found that 65% of Oracle applications customers surveyed had no plans to implement Fusion. Another 24% were unsure if they would.

Paul Hamerman, vice president and principal analyst for business applications at Forrester Research, says: “We found that customers were not flocking to Fusion applications. The predecessor applications such as PeopleSoft, Oracle E-Business Suite and JD Edwards are still meeting clients’ needs effectively. 

“The second reason is there have been concerns about the completeness and maturity of the Fusion applications. A lot of customers are inclined to hold off on new software until it has been proven. In these applications the proof points are not yet compelling.” 

Standard Life’s Begbie says that some aspects of his company’s Fusion roll-out confirmed these suspicions. “The issue with the cloud is that, even with companies like Oracle, the ongoing support services are not what you would ideally want,” he says. “But it is improving all the time and better this year than last year.” 

It was these factors rather than moving to the cloud that put business off investing in Fusion applications, Hamerman says. “In our research, what customers are looking for is ease of use, speed of implementation, and the ability to change the applications once implemented. 

“Increasingly they are looking to get that from a SaaS delivery model, which is the cloud. One of the big drivers is that cloud software is kept up to date by the vendor; it has been very difficult to keep on-premise apps up to date, including Oracle and SAP. It is all moving towards cloud delivery.”  

The predecessor applications such as PeopleSoft, Oracle E-Business Suite and JD Edwards are still meeting clients’ needs effectively

Sandy Begbie

While Forrester research suggested Oracle was not pulling customers towards its Fusion applications, there may be forces pushing users away from the existing, on-premise E-Business Suite, licensed under its Applications Unlimited programme. 

With licence revenue growth slowing from these applications, there is a temptation to treat such installations as a cash cow, ramping up fees for support while adding little in terms of new features or supporting products, the research firm says.

Oracle denies this. Vice president of application development Rajan Krishnan says: “We have not put an end date on [Oracle Unlimited]. If you are a PeopleSoft customer and like to move forward on PeopleSoft, that is perfectly fine – we continue to invest in and support those products. At the same time we will be putting out a new release of Fusion.”

However, Hamerman points out that while support is indefinite, there are different levels of support. According to Oracle’s own documents, this tapers off. 

For Oracle PeopleSoft CRM 9.2, premier support ends in 2018 while extended support ends in 2021. Beyond that, Oracle is committed to sustaining support indefinitely including “major product and technology releases” but not new updates, fixes, security alerts, data fixes, critical patches or certification with new Oracle and third-party products and versions.

While Oracle promises “indefinite” support for on-premise applications, Fusion has proved popular with customers, Krishnan says. Many businesses are upgrading E-Business Suite applications and using Fusion modules where it suits them. “The bulk of Fusion customers are also customers for non-Fusion apps,” he says.

Oracle’s revenue from its cloud business as a whole is growing at 60% while Fusion is experiencing “triple-digit growth”, according to Krishnan. “Fusion uptake has been rapid. It has turned out to be a huge success for us,” he says.

While Forrester has cast doubt on Oracle’s claims, the shift of business applications to the cloud could benefit users in other ways. 

Since users face a big jump to Fusion both in application delivery and architecture, they are also apt to consider other options, explains Hamerman. And the advent of cloud has attracted new vendors to the enterprise application market.

“The market is continuing to grow in terms of supply. There are more and more software as a service alternatives and that means more choice,” he says. 

But there could be limits. First, there are not many vendors capable of supporting ERP, say, across the globe, Hamerman points out. 

Second, Oracle in particular has significant cash reserves and could buy up competing cloud applications. “They can fund acquisitions and I think they will in the software as a service market,” he says.

While the cloud will open up the enterprise application market, it is too soon to sound the death knell for the Oracle-SAP duopoly that many see in the market. At the same time, users are finding business reasons to move to Fusion, rather than the delivery model alone.

Case study: Standard Life saves through slashing customisation

Through a ruthless standardisation of processes, international investment firm Standard Life has saved £8m over two and a half years of a £15m project to roll out Oracle Fusion and E-Business Suite in its HR function. The company is continuing to standardise back-office functionality including procurement and finance on the Fusion set of cloud-based applications.

The financial services firm first rolled out Oracle Payroll, part of E-Business Suite for human capital management, when its PeopleSoft project hit the buffers. The degree of customisation made PeopleSoft difficult to implement, leading to millions wasted in IT spending and the business saddled with an aging Unipay payroll system, itself highly customised and struggling to meet business needs, says Sandy Begbie, Standard Life group operations officer.

The switch to Oracle was accompanied by a drive to see it installed without customisation, Begbie says. “We had multiple systems held together with more than 100 interfaces. It had not been properly upgraded for nine years. 

You are looking for the best solution, not the perfect one. Sometimes you have to annoy people

Sandy Begbie

“I wanted a proven core mature stable platform with payroll, with an eye for the future and creating a single global HR platform.”

After going live with E-Business Payroll in the UK, Standard Life rolled out the Talent Management component of Oracle Fusion Human Capital Management in the cloud for the UK, and then globally, all without customisation, Begbie says.Improvements in technology and the way in which Oracle has captured best practice from its user base has facilitated standardisation, he says. But he still had to challenge people who wanted to customise the product.

“You are looking for the best solution, not the perfect one. Sometimes you have to annoy people to a certain extent.

“As executive sponsor of the programme you need to be quite clear that you are responsible for all change requests. 

“There are three questions I ask people who want a customisation: what financial value will shareholders receive? what value will customers receive? and, operationally, how can we not survive without the customisation? Once you ask those questions, it is very hard to provide the answers to make a decision to customise.”

Standard Life saw a proof of concept that Fusion could be integrated with the new payroll system by its IT service partner IBM before it agreed to be an early adopter.

The total investment in technology and business has been £12m, generating an internal rate of return of 32% to date. It has allowed the business to reduce its HR headcount by 30% in two and a half years, generating £8m in cash savings. By decommissioning older technologies and reducing the number of interfaces, the IT function has also saved £800,000.

One of the themes in the Standard Life IT strategy is currently to create an Oracle Fusion back-office platform, Begbie says. 

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