Prima facie, this looks like just another hosted web service offering a few applications to companies operating on small to Sermedium scale except that EBS is a full-fledged ERP/CRM suite of applications that is scalable and more importantly extensible as per your own organizational and business needs. This makes it a very attractive proposition on paper, but the reality is that EBS found traction amongst large cap companies only due to a host of reasons – the primary one being the cost of operations and maintenance. There are hardly any Oracle implementations in the world where the customer does not need to maintain its own in-house (or further outsourced) IT team to maintain the application. This would include database administrators and the application maintenance team – a sizeable overhead for most companies wishing to opt for Oracle. These factors tilt the balance in favor of small scale bespoke applications that companies opt for a short term solution till they make it into the bigger league.
So let us look at a few factors where ‘on demand’ should have helped Oracle penetrate the small/mid cap market but has not. Say you open a small retail business of products that you manufacture on your own and are trying to finalize an ERP system to use for the same purpose. You would have figures like the number of products you offer to sell, the number of customers that you have currently, the number of invoices that your business needs to be generateevery month, the number of suppliers for your raw goods and the purchasing transactions per month etc. You hear about Oracle on demand – which is an exciting option for sure, but when you look for options available on Oracle on-demand website, it seems more like what every other outsourcing company offers or something where the pricing model is based on size of the application in GB and the storage space required! There is no co-relation whatsoever between the transaction and the quantity of master data in my ERP system to the space requirements for the same. This leaves end-customers looking for external help in evaluating the merits of Oracle vis. a vis. other ERP systems. And that is where consultants such as myself, step in for an evaluation and recommendation phase – which not only costs $’s but also takes a reasonable amount of time that is certainly not well spent. In essence, if Oracle’s service offerings and pricing models would be clearer and understandable to the end customers rather than being cryptic bits of technical write ups then it would eliminate the need of middle men and Oracle would be able to penetrate the small/mid cap markets that it yearns for.
Let us take a look at the pros and cons of proposing a pricing model that is more readable to the end customers:
- Predictability of returns/profit: In case of committing by database space and modules matrix, the predictability is higher since the commitment is specific and measurable. However, presenting the same matrix in terms of entities and the their counts would mean a bit of ambiguity in terms of returns e.g. Customer A wants to use 10 attributes on the invoice database object provided, whereas Customer B wants to use 30 available attributes because of complexity and tracking needs for his organization/business. So one transaction in Customer A’s ERP may take x bytes of space, whereas the one in Customer B’s ERP may take 2x bytes of space. Irrespective, as an end customer I would rather know the per transaction or per entity cost rather than having to compute the same myself and hire external experts for the same.
- Appeal of offerings options to the end customer: Choose between options A & B –
Option A: Offerings are as below (Currently available on Oracle on Demand):
i) List of modules – Oracle Receivables, Oracle Payables, Oracle Order Management, Oracle Purchasing, Oracle General Ledger
ii) Space – X dollars per GB
Option B: Offerings as below in a format understandable to the eventual customer
i) Business processes support – Quote to Order, Order to Cash, Plan the Supply Chain, Manage the Business (Financials including AR/AP/GL)
ii) Count of master entities – No. of customers, no. of inventory items, no. of orders per month, no. of invoices per month
Needless to say, option B would win hands down.
Oracle’s rigidity in terms of being a product company is easily visible by the above examples. To penetrate the market of on demand customers, the service offering options need to be much more flexible – perhaps Oracle needs to take a leaf out of the Indian IT outsourcing companies!