Oracle Enterprise Edition Assessing Oracle\'s

Oracle Enterprise Edition

Assessing Oracle's Financial Viability

Oracle Corporation (NASDAQ: ORCL) is a global leader in the development of databases and enterprise applications software. During it latest fiscal year the company recorded $23.2B in Revenues with an Operating Income of $8.3M and Net Income of $5.5M. Its primary competitors are IBM, Microsoft, and German software conglomerate SAP. With operations in the U.S. The UK, Canada, France, Germany, Japan and development centers in China, Oracle's global reach is among the greatest of all enterprise software companies. An analysis of the company's financial statements is shown in the Appendix, Table A: Oracle Corporation Financial Ratio Analysis. Despite the economic slowdown that has harmed the financial performance of many software and technology companies, Oracle continues to deliver strong financial results. Revenue Per Employee, a measure of productivity and also cost containment, has steadily increased from $236K in 2005 to $270K in 2009. The company's EBITDA Margin % has also increased from 37.51% in 2005 to 44.06% in 2009. The company's financial viability is very strong. Oracle's organizational structure is comprised of five operating divisions. These include new software licenses, software license updates and product support and in the services business sector, consulting, education, and On Demand. Of all five divisions, software licenses consistently contribute over 45% of worldwide revenues. With the recent acquisition of Sun Microsystems both for its Java software expertise and hardware business (Ricadela, 127) Oracle is positioned to compete with IBM for enterprise-wide IT implementations. This has been a stated goal of Founder Larry Ellison for the last several years. Based on this analysis, the bottom line is that Oracle is one of the most financially viable enterprise software companies globally today

Customer Service

Oracle on average has a 10:1 ratio of services to software costs in enterprise accounts that have standardized on Enterprise Edition. This means that for every dollar spent on software, an additional $10 is spent on services, customization of the software to customers' needs, and ongoing customer support (Evans, 10). Customer Service and Consulting Services are both major contributors to Oracle's profitability and long-term viability. Yet with maintenance fees in the 22% to 25% range and updates at times being 18 months or longer in terms of delivery, customers are complaining about this being unreasonable and not justified (Evans, 10). As a result Customer Service is often being outsourced to other companies besides Oracle, Including their primary competitors who also have expertise with Oracle systems and applications. When compared to its open source database competitors including MySQL, Oracle is considered to have mediocre, not excellent support (Himmelsbach, 36). Oracle also lags behind PostgreSQL on support. Both MySQL and PostgreSQL are much smaller and less expensive firms to operate. Add to this these two smaller competitors with better customer service have less of a cost structure to pay for and its clear that over the long-term Oracle has to consider changing its approaches to managing this function of their business. Advisory firms who assist enterprises with their software purchases also state that it is best to negotiate with Oracle at the end of a fiscal financial period to get the best deals as the company wants to get as many sales into a given quarter as possible. One advisory firm has also recommended that large-scale Enterprise Edition customers also negotiate for access to the development engineers for the specific modules of Enterprise Edition they are installing. AMR Research is an advisory and consulting firm that also specializes in supply chain management and order management consulting for enterprises installing Oracle as well. Like Forrester Research, Gartner Group and advisory and consulting firms, AMR Research has also been very active with Oracle's installed base of customers, many of which consult with the advisory firm to get better pricing and service options as well. In conclusion, Customer Service from Oracle is a profit center for the company and is also considered the basis of sales leads for its highly profitable Consulting Solutions division as well (Evans, 10).

Customer References

Oracle customer references for Enterprise Edition are from a variety of manufactur8ing and services industries including market intelligence providers for the auto industry, R.L. Polk (Cochrane, 38), accounting services company Accenture, and many high tech manufacturers including Agilent, LG Electronics, Quantum and many others. The expertise in transaction processing and support for a broad range of order capture and order management systems has made Enterprise Edition heavily used in multichannel management-based systems (Alkhatib, Labban, 103). Customers report the scalability of the Oracle Enterprise Edition is sufficient for data analysis and also for advanced business intelligence yet does not have the depth of integration support to third-party Enterprise Resource Planning (ERP) systems however (Mensching, Corbitt, 131). Despite these limitations however customers are adopting Enterprise Edition for its advanced data management and analytics application add-ons from Oracle and other 3rd party companies, and its depth of support for grid-based architectures (Babcock, 124, 125). Companies whose business centers on business intelligence are the majority of the Enterprise Edition customer based. R.L. Polk provides extensive automobile shipment, pricing and service analysis of nearly 50 years of market research data to their clients, the majority of which are automobile manufacturers. The company was able to reduce its hardware costs by over 90% by concentrating on a virtualization-based approach to managing its servers (Babcock, 124, 125). Second, as R.L. Polk have clients located globally they were very concerned with accelerating data delivery regardless of the connection method used. The company's IT staff worked with Oracle's Consulting Services to create a streamlined AJAX-based interface that would make it possible to complete database queries even at the slowest dial-up speeds as well. This also made it possible to better streamline the management of larger, more complex, multi-layered databases that R.L. Polk relies on for more advanced analysis and data modeling. Finally as the massive data sets R.L. Polk has are the results of decades of data gathering, data cleaning and efforts to ensure accuracy, security of these databases are critical. This decision factor also led the company to standardize on Oracle Enterprise Edition as there are role-based and multi-authentication sign-on schema to protect unauthorized use of the databases. Oracle Enterprise Edition also has an audit module that is part of the baseline application that will track by role, login, and several other variables the identity of whom is using the system and attempting to access which records. The continual development of BI and analytics on top of Enterprise Edition is also positioned this specific database against more entrenched competitors in analytics including SAS and SPSS, an IBM subsidiary (McCown, 103). Prior to standardizing on Oracle, R.L. Polk considered using SAS as their analytics application and keeping the data in DB2 from IBM, yet the functionality of this combination of applications would not provide as deep of analysis as they needed. In conclusion R.L. Polk is representative of the companies who have standardized on Oracle Enterprise Edition.

System Functionality

Oracle was originally founded as a database company and as a result today dominates the industry from a technology leadership standpoint (Cochrane, 38). Oracle Enterprise Edition continues to set a pace of thought leadership in enterprise database design and development, as its structure supports advanced analytics called Business Intelligence (BI) (Ricadala, 14), support for Cloud or server virtualization computing (Babcock, 83, 84) and many other advanced application areas as well. Despite the many advances Oracle continues to make in the breadth of its databases, the central focus of database development is transaction management of distributed database systems (Alkhatib, Labban, 102, 103). This aspect of database product development is responsible for Oracle Enterprise Edition databases being extensively used in e-commerce and distributed order management and Supply Chain Management (SCM) enterprise application areas. Figure 1 provides a structural diagram of Oracle Enterprise Edition.

Figure 1: Oracle Enterprise Edition (Source: Oracle.com)

The design objective of Oracle Enterprise Edition is to define role-based views for the user and also support security and authentication of each role through a Semantic Object Layer, as can be seen from Figure 1. A more defined schematic diagram of Oracle Enterprise Edition and its integration to Deliver Server, Business Intelligence and Administrative functions is shown in Figure 2.

Figure 2: Oracle Enterprise Server Schematic Diagram (Source: Oracle.com)

Positive and Negative Points

Oracle has 48% of the worldwide market for relational Database Management Systems (RDBMS) (Evans, 10) and has strong financial viability as can be seen from the analysis completed earlier in this paper. Additional strengths include the following. Oracle has broadened the base of Enterprise Server support to include four warehouse configurations including standalone, certified server and storage, optimized warehouse and database machine configurations. Second, Oracle has also added in transparent SQL access and supports visualization of data sets. Third, Oracle has one of the more portable data warehouses on the market, capable of running on the Linux, Windows or UNIX operating systems. Oracle also has a leadership position in creating state-of-the-art transaction processing system structures within Enterprise Edition as well (Alkhatib, Labban, 97).

For all of these strengths however it is well-known that Oracle databases are high maintenance and often require one full time system administrator to keep them optimized. This is necessary for keeping the audit tools up-to-date and functioning, and also supporting patching of the database when updates arrive. Second, Oracle's pricing and maintenance policies are often considered exceptionally high for the market and are often questioned by customers (Evans, 10).