Beware of Oracle's Fusion Application plans

Businesses are avoiding Oracle’s Fusion strategy according to research from Forrester. CIOs should be wary of the supplier's long-term plans.

Businesses are avoiding Oracle’s Fusion strategy, according to research from Forrester.

With potentially less revenue coming in from certain enterprise products in the future, Forrester analysts said CIOs should be wary of the supplier's long-term plans.

The company is at a crossroads with Fusion, the analyst firm noted in a research paper entitled Oracle's Dilemma: Applications unlimited versus Oracle Fusion Applications.

In a Forrester survey of 139 Oracle clients, 65% said they had no plans to implement Oracle Fusion Applications and another 24% did not know if they would.

Forrester said a lack of incentives from Oracle has resulted in a low level of user adoption of its Fusion Applications, the next-generation enterprise application suite. Oracle’s organic revenue growth has slowed over the past year or so as its existing products age, and it has needed acquisitions of leading software-as-a-service (SaaS) suppliers such as RightNow Technologies and Taleo to bolster its application revenues.

More on Oracle

In its financial results for the second quarter of 2012, Oracle reported a 17% increase in new software licences and cloud software subscriptions revenues to $2.4bn. Software licence updates and product support revenues were up 7% to $4.3bn.

At the time, Oracle president Mark Hurd said: “Our cloud offering of HCM [human capital management], CRM [customer relationship management] and ERP [enterprise resource planning] applications, plus the Oracle database and Java platform services, is the strongest and most complete in the industry. Already approaching a $1bn run rate, our cloud business will become much bigger over time.”

The Forrester report said: “When Oracle still reported application revenues separately, licence revenue growth slowed from around 18% in the first half of 2011 to 7.5% in the third quarter of 2011, then fell by 11% in the fourth quarter of 2011 and 5.5% in the first quarter of 2012, before rising by 11% in the second quarter of 2012. Since then, we estimate that its application licence revenues fell by 5% in the third quarter and rose by 11% in the fourth quarter of 2012.”

The analysts warned that if a supplier’s revenues are flat or declining, there is a risk that it may treat products where licence revenue is not growing as a cash cow. They could milk maintenance revenues and cut back on investment in enhancing and supporting such products, they said.

Read more on IT suppliers