Oracle Fusion Gets a New Boss

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If Fusion's a dud, Oracle risks losing ground to SAP and Salesforce.com (CRM), both of which have been quicker to deliver Web-based versions of enterprise software. The Web-based approach has grown in popularity because customers can lower the cost of keeping software up-to-date.

Worse, Oracle could lose customers to rival offerings from SAP, Microsoft (MSFT), and other competitors, a risk software companies face when they overhaul the code underlying their products. "In any technology architecture shift there are winners and losers, and you clearly want to be on the right side of that," says Peter Kuper, a vice-president and research analyst at Morgan Stanley (MS).

Unclear Road Map

It may take years and multiple generations of Fusion before the outcome is known. Murray Beach, president of investment bank Boston Corporate Finance, says he expects Oracle will have a strong offering in several years, by perhaps its fourth version of the software. "You're not going to see the best product the first time around," he says. Recent analyst speculation about a potential Fusion delay has died down, but some think Oracle simply readjusted its target. "Oracle will ship something in 2008 and declare victory that they got it out the door," says Citigroup's Thill.

At Oracle's annual shareholder meeting on Nov. 2, CEO Larry Ellison said some Fusion products will appear in 2008, and more in 2009. Customers will move to them "over a very long period of time," he said. Oracle declined to comment for this story.

But IT executives say Oracle's Fusion road map—the multiyear plans tech vendors publish to show customers what to expect and when—has been fuzzy at best. "Other than a lot of hype and hot air about Fusion, how is it really going to work?" asks Allen Emerick, IT director at Skanska USA Building (SKAB), a construction firm involved in projects such as the new NFL stadium at New Jersey's Meadowlands sports complex. "The timing has been all over the place." Skanska runs applications from J.D. Edwards, which Oracle picked up when it bought PeopleSoft. It remains unclear, Emerick says, how Oracle will get that software and its customized elements working with Fusion products.

The Uncertainty of Transition

Further complicating matters is the chance that Oracle could make another bid for middleware vendor BEA Systems (BEAS) (BusinessWeek.com, 10/30/07), adding another alien product line that would need to be integrated into Fusion at some point.

SAP is trying to exploit the uncertainty, telling customers that Fusion's goal of tying together Oracle's various applications could be a red herring to get them to stay on board. "Maybe they were being a little naive" in thinking they could pull off the integration, and "maybe they were being a little marketing-oriented" in selling the Fusion concept to customers, says Bill McDermott , SAP's president and CEO for the Americas, Asia Pacific, and Japan. In September, SAP introduced an Internet suite of software (BusinessWeek.com, 9/19/07) for small and midsize companies called Business ByDesign.

Oracle could quiet its critics with a strong early version of Fusion, or at least erode their arguments over time. Either way, the company has played its hand deftly while it makes the transition. First off, nearly all Oracle customers have been signed up for multiyear licensing agreements that will hold regardless of whether they choose to upgrade to Fusion. The company also has held onto customers of PeopleSoft, Siebel, and other acquired vendors by offering them lifetime tech support.

Kurian's Ascension

The aftermath of the power struggle between Kurian and Wookey could go a long way toward streamlining Fusion. Kurian's middleware group and Wookey's applications team were working on overlapping Fusion projects, and the two were fighting over pieces of Hyperion Solutions, the data-analysis software vendor Oracle bought in March, analysts say. In addition, Kurian was being recruited by other tech companies and needed a promotion to stay on board, according to sources.

To be sure, marginalizing Wookey, who had a reputation for holding onto key developers and fixing projects that went off track, could set Oracle back. "He was a tremendous asset," says Citigroup's Thill. "He's not someone who's easily replaceable." Wookey is staying on at Oracle to assist with the reorganization, according to an Oct. 15 e-mail Ellison sent to employees. Messages left at Wookey's office weren't returned.

A couple of years ago, Oracle president Charles Phillips introduced Kurian at a customer event in Boston as Oracle's potential next CEO. There's a long list of former highfliers and potential successors who are long since gone from the company, though, including venture capitalist Raymond Lane, former PeopleSoft CEO Craig Conway, and onetime heir-apparent Gary Bloom.

People who know Kurian say he's got the smarts and savvy to get even further ahead in Oracle's rough and tumble world. Shipping a winning version of Fusion would go a long way toward proving them right.

Ricadela is a writer for BusinessWeek.com in Silicon Valley .