Oracle revs up battle for mid-market applications customers

Warren Wilson, Research Director

Putting the pedal to the metal in its mid-market campaign, Oracle is expanding its Accelerate program by enlisting partners to deliver industry-tailored, fixed-price/fixed-time solutions for small and medium-sized businesses (SMBs) based on Oracle's applications and implementation tools. Warren Wilson discusses whether the Accelerate program will succeed in increasing Oracle's visibility in the SMB market, and prove to be effective enough to compete with the likes of SAP and Microsoft.

The applications include Oracle's E-Business Suite, PeopleSoft Enterprise, JD Edwards EnterpriseOne and Siebel. The implementation tools, which Oracle calls Accelerators, are frameworks that incorporate industry-specific best practices and business-process 'flows' to make deployment faster and easier, while reducing cost and risk.

Oracle is aggressively recruiting partners that have expertise in specific industries and markets, and will work with them to define standard solution bundles, prices and implementation times that reflect SMBs' typical resource constraints, and lower risk tolerance compared to large enterprises. Oracle will validate these solutions and add them to its solutions catalog. It believes new partners will be drawn by the chance to offer solutions that are complete, integrated and scalable; that are tailored for specific industries, incorporating best practices for that industry; that are easy to implement, use and maintain; and that are attractively priced.

As is typical of the vendor, Oracle is aggressively discounting its software. In addition, Oracle has established a referral program that pays a cash incentive of 5% of net license revenues (up to $50,000) for any lead that closes within six months - an offer open to all, including non-partner companies. Oracle has also set up a new loyalty program that rewards top-performing partners with resources such as training, event funding and, in certain cases, co-branded marketing campaigns - a first for Oracle. These new programs, Oracle says, are 'absolutely fundamental' to its success with SMBs.

Not that Oracle isn't already succeeding with SMBs. The vendor claims to already have 19,000 applications customers in the SMB segment (companies with $500 million or less in annual revenues, with some exceptions). Also, contrary to charges by archrival SAP, Oracle says its penetration of the SMB applications market isn't solely the result of its acquisitions over the past few years. Of its 19,000 SMB applications customers, roughly 60% use E-Business Suite, while PeopleSoft, JD Edwards and Siebel customers together account for the other 40%.

Oracle and SAP have recently been bickering more heatedly than usual, using each earnings release or acquisition announcement to challenge one another. Much of their rhetoric reflects the importance each places on SMBs to fuel growth as the large enterprise market becomes saturated. This mid-market competition between SAP and Oracle is among the fiercest in the industry, although both vendors increasingly have to look over their shoulders to make sure Microsoft isn't gaining on them too quickly.

SAP is pursuing its own multi-faceted SMB strategy, developing new products that are less expensive and easier to deploy, realigning its field teams, and continually incorporating partners' and customers' expertise into its software through a program called 'collaborative innovation'.

Microsoft remains a relative newcomer to the business applications market. However, it is committing more and more resources to its Dynamics solutions, and its ability to integrate Dynamics with its ubiquitous Windows applications - especially Office - makes Microsoft a threat that neither SAP nor Oracle can afford to take lightly.

All three companies recognize that the concept of a defined 'SMB market' is misleading - SMBs differ so greatly in size, geographic focus and industry expertise that they actually constitute a vast collection of sub-markets. One result of this fragmentation is that all three vendors are increasingly seeking to tailor their offerings for specific industries and niches.

In Oracle's Accelerate program, this tailoring process starts with careful partner selection. Oracle first identifies its strategic targets, then assesses whether it needs more partners in that segment, and then identifies potential partners based on four criteria. The partner must:

• be Oracle certified
• demonstrate industry solution experience in the country or segment for which they're being considered
• commit to the program's fixed-price/fixed-time requirement
• have the resources (such as training guides) to make sure the solution will be properly implemented, within the fixed-price/fixed-time commitment.

Oracle does not require exclusivity; its Accelerate partners are free to partner with other vendors.

However, what about that fixed-price/fixed-time commitment? Actually, it's a lot more flexible - and less 'fixed' - than it first appears. Partners define the fixed-price/fixed-time solution bundles based on their experience, incorporating the application modules and accelerators that constitute a complete but 'plain vanilla' solution for the market segment they plan to address. However, they have free rein to adjust those components as needed, as well as prices and implementation times, based on discussions with the customer. In practice, Oracle believes that customers will choose the plain vanilla bundle only two or three times out of ten; most implementations will involve some further tailoring that affects the ultimate price and implementation time.

Oracle acknowledges that the fixed-price/fixed-time component is primarily a promotional tool - a way for partners to get in the door, demonstrate their expertise, and provide price and implementation time estimates that are fairly close to final, because the solution bundles are already tailored for the customer's market segment. In practice, some partners will inevitably do a better job than others in keeping final prices and implementation times close to their estimates. Oracle will no doubt have to police the process to make sure solution bundles are properly targeted and clearly defined to minimize instances where customers feel baited and switched.

Although the program is new, partners are already running with it. Oracle points with glee to a group of five partners that, on their own, have formed the Oracle Partner Results Accelerator Alliance to pool their expertise to define and deliver Accelerator-based solutions in their common geographic territory. Oracle plans to promote the idea globally and to act as a kind of 'dating service' that helps partners in each region find each other.

Only time will tell if the Accelerate program succeeds in expanding Oracle's share of the SMB applications market relative to SAP and Microsoft. However, if nothing else, it's another indication that the competition in this increasingly crucial sector will only - pardon the pun - accelerate.

Warren Wilson is Research Director with Ovum Summit, covering a topic of increasing importance for enterprise software vendors: the success of their partner ecosystems.