Company profile: Oracle - its technology, strategy and acquisitions

The changing face of the business software giant
Written by Tim Ferguson, Contributor

The changing face of the business software giant

This is the first in a new series profiling the biggest companies in the enterprise technology market.


Oracle is one of the biggest software companies in the world, with one of the most agenda-setting CEOs around: Larry Ellison.

Driven by Ellison's ambitious and flamboyant style (his pastimes include ocean yacht racing and flying planes) Oracle, based in Redwood Shores, California, now has more than 370,000 customers and its technology is present in the datacentres of all Fortune 100 companies.

Ellison co-founded Oracle with Bob Miner and Ed Oates in 1977 with the aim of commercialising relational database technology.

Larry Ellison CEO Oracle

Oracle CEO Larry Ellison
(Photo credit: Oracle)

While the company is still best known for its database products, it's also branched out into business applications from CRM to ERP aided by its aggressive acquisition programme which has seen it scoop up dozens of companies.

Products you'll almost certainly have heard of from the Oracle stable include its flagship Oracle Database 11g, MySQL, JD Edwards EnterpriseOne, PeopleSoft Enterprise, Primavera, and plenty more.

The technology

Oracle is one of the giants of the business software market where its 11g database tech, one of the most widely used technologies of its type, and its E-Business Suite, which includes applications such as supply chain management, procurement, CRM and ERP, are particularly well-known.

The Fusion middleware is another key technology for the company as it provides a platform to link and support Oracle's various in-house and acquired technologies, and to help them work together more efficiently.

Oracle's software portfolio also encompasses infrastructure management, service oriented architecture, software as a service, and a range of other apps including data management.

And with its recent multibillion-dollar acquisition of Sun Oracle has now added new tech including Java, MySQL, the Solaris OS, servers and storage to its line-up, marking a move into hardware for the software giant.


One of the main reasons for the huge breadth of technology offered by Oracle is the number of acquisitions it has completed since 2005, when it bought enterprise applications company, PeopleSoft - not long after PeopleSoft had itself snapped up ERP vendor JD Edwards for $1.8bn.

Since then, Oracle has...

...acquired more than 60 technology companies, the biggest recent acquisition being the $7.4bn purchase of Sun at the beginning of 2010.

Other big names to have joined the Oracle roster include CRM maker Siebel (January 2006), performance management software company Hyperion (March 2007) and middleware-maker BEA Systems (January 2008) - all of which boosted Oracle's product portfolio significantly.

Current strategy

Oracle is already strong in the enterprise software market but Ellison is hoping to make it as influential a company as IBM was in the 1960s.

The two main priorities for the company at the moment are the integration of the products from Sun Microsystems and to further the development of the Fusion middleware platform.

Oracle's headquarters in Redwood Shores

Oracle's headquarters in Redwood Shores
(Photo credit: Oracle)

The company is also working to create vertical industry technology - something which is likely to fuel further acquisitions.

The integration of Sun Microsystems
With the Sun deal, Oracle has moved firmly into the hardware business. When the deal was confirmed, Ellison said the company would be able to offer customers a full technology stack from chip to application.

The addition of Sun makes Ellison's aim feasible as it will bring Oracle the Sparc processor architecture as well as servers and desktop workstations that can provide the enterprise's infrastructure backbone.

Buying Sun will also allow Oracle to offer the MySQL database technology, Java programming language, Unix-based Solaris operating system on top of its hardware, along with Oracle's own vast array of middleware and apps.

The acquisition of Sun will bring a significant chunk of new business Oracle's way, although Ellison claims to be confident about satisfying this new customer community and has said he will make Sun profitable after just one quarter of owning the company. Stay tuned...

The development of Fusion
The other ongoing area of focus for Oracle is the development of its Fusion technology, which is aimed at bringing together the various software that Oracle has acquired in recent years.

Oracle hopes Fusion will...

...provide a universal way for customers to integrate their different applications and add functionality to them without huge disruption to the business or need for specialist integrators.

There are two elements to Fusion: middleware and applications. The middleware is what Oracle calls an "application infrastructure foundation" on which businesses can run various applications which can then all be linked together via the middleware. Conveniently, Fusion is underpinned by the Java programming language, developed by new acquisition Sun.

The other side of Fusion - Fusion Applications - is about allowing businesses to add functionality to the Oracle apps they already run, as well as developing new applications for the future.

There are some Fusion Applications - finance and sales software for example - that work as extensions to existing Oracle apps, while a next-generation set of Fusion Applications, still in development, will work as more comprehensive, complete apps in themselves.

Fusion Application screenshot

Oracle previewed its Fusion Applications at the OpenWorld customer conference in October last year
(Image credit: Oracle)

While Oracle's aim is to bring the majority of customers onto Fusion, it's also offering Application Unlimited - a programme in which existing, non-Fusion technology continues to be developed - meaning customers will be able to avoid Fusion if they so choose.

What's on Oracle's agenda in the future?

One area of debate around Oracle's future strategy is whether Oracle will develop its services business in the same way other tech stalwarts - just as IBM has done with its Global Services, HP has with the acquisition of EDS in 2008 and even Dell obviously intends to with Perot Systems.

Oracle already has a product support operation, which contributed a not-too-shabby $12.9bn to its 2009 revenues. With the acquisition of Sun, Oracle will now offer hardware support, which will include the use of engineers who will go to businesses to resolve issues.

Philip Carnelly, analyst at TechMarketView, said in a research note that in the near future Oracle will want to develop its services business to compete with its newly services-equipped rivals, suggesting possible acquisitions targets could be CSC or Capgemini.

Rob Addy, research director for outsourcing and IT services at Gartner, added: "Oracle's size and product portfolio are such that whilst they do not need to pursue a services strategy to generate revenue, it is a business that one could see appealing to them particularly as they continue to position themselves as a direct alternative to IBM."

However, the company's move into onsite hardware support raises the question of what the company's ultimate aims are around services, Addy said - for example, it could be a precursor to offering services such as desktop support or other outsourcing services.

For Oracle to really get the maximum return from its assets, it will need to fully exploit its field services capabilities, which could include extending to a broader services strategy, he added.

Other analysts meanwhile are less persuaded that getting deeper into services will appeal to Oracle...

...Ovum's Rob Hailstone for example is convinced the software giant will continue to focus on its technology rather than investing heavily in a services arm.

A greater focus on mid-sized customers
Another area likely to become increasingly important for Oracle is its presence with mid-sized businesses, according to Ovum.

Hailstone said Oracle can't be like IBM and rely on a small number of large accounts for its revenue, so needs to exploit mid-sized organisations.

Part of this means making technology which is more approachable, cheaper to run and doesn't require a huge IT department to support it. According to Ovum analyst Michael Azoff this all points the way to the development of software-as-a-service or - despite Larry Ellison's refusal to acknowledge it - some form of cloud computing.

Cloud computing
Oracle is putting out mixed messages about cloud computing, shuttering one cloud offering while flirting with others.

It announced earlier this year it was to close Sun's cloud service which would have competed with the likes of Amazon Web Services and Microsoft's Azure for data processing and storage.

Oracle HQ

Oracle has been putting out mixed messages around cloud computing
(Photo credit: Oracle)

The reasons for this are clear according to Azoff.

"I think the cloud threatens Oracle. They make a lot of money from selling enterprise applications into on-premise datacentres. For Oracle to support that I think would be cannibalising their own market so in a way it's not surprising they've killed that," he said.

However, in terms of cloud applications - or software as a service - Oracle appears to be more interested. The company has a range of on-demand applications including E-Business Suite and CRM which it hosts itself and actively promotes.

However, according to Azoff, the company may need to look at going beyond the on-demand applications already available if it is to effectively address the mid-market, where gaining the economies of scale that cloud offers is likely to appeal.

What the customers think
According to Ronan Miles, chairman of the Oracle UK user group, the company's track record with acquisitions has been a good one.

"Oracle's record of maintaining installed bases, preserving customer investment... actually is a very solid story and Oracle's proof of continued investment in those products and its leverage of the people it actually acquires, is all a positive story for these communities."

However, as for Ellison's plan to offer customers a full technology stack via its Sun acquisition, Miles said there is unlikely to be a large number of companies making the migration to Oracle hardware.

"I do not believe for one picosecond...

...there will be a mass exodus of HP and IBM customers across into Oracle-Sun hardware. It would be very surprising."

"It would also be rather surprising if Oracle were to go over the top in promoting that given how large the Oracle on HP and Oracle on IBM ecosystems are - those are multibillion-dollar markets," he added.

Fusion Application screenshot

Oracle's CEO Larry Ellison shows off the Exadata Database Machine, one of the first fruits of Oracle's acquisition of Sun
(Photo credit: Oracle)

However, according to Miles, Fusion generated a significant amount of interest when it was demoed at the UK user group conference towards the end of last year.

But he added that Oracle needs to work harder to get Fusion tested more widely among businesses - "that is the other big thing that customers of course are asking about now", he said - which will help to iron out any problems, as well as helping develop better understanding of the benefits within the user community.

Despite wanting a wider testing of Fusion, Miles feels Oracle has been wise in the way it's rolled out the tech, saying a full launch would have put huge additional strain on the company's support resources. As it stands, a few companies are getting up and running with the technology and Oracle is able to effectively support them, he continued.

Miles' stance is echoed by Ovum's Rob Hailstone, who believes Fusion seems to have progressed well so far.

"I think what [Oracle] have done so far is looking pretty good actually.

"It's such a big enterprise to carry out and they keep on adding more and more into the pot - it seems to be an ongoing journey - and it's going to be a development in place for years and years because despite all of the recent acquisitions there's still a lot more you could potentially acquire and add into the pot. I personally think that it's a story that will never finish."

What else do the customers want?

In Miles' view, customers are largely positive about Oracle but are keen to see the company sharing more information with its users.

"People are in the main satisfied with the service that they are getting but, in terms of communicating to the customer base, there is always the opportunity for fresh approaches and more communication and more engagement," he said.

"What we want to see as customers is plenty of information coming out. We want to hear about how the Sun acquisition is being turned profitable, we'll want to hear positive messages about future MySQL developments, we'll want to see these Fusion customer case studies emerge and we won't want a vacuum where we presume that it's all gone haywire if there's something that does actually need to be communicated," Miles added.

Editorial standards