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Oracle cloud strategy is to coexist with on-premises

Oracle updates its on-premises applications while it is investing in cloud services. Despite market concern, Oracle says coexistence is its strategy.

While Oracle has invested a substantial amount of time and money in its line of Fusion Applications -- with no apparent end in sight -- much of its focus has turned to its cloud services. At the same time, Oracle continues to update its Applications Unlimited products and make good on its promise of lifetime support. This attempt to balance both worlds might leave some customers uncertain about Oracle's commitment to either one. But Oracle doesn't see it that way, and insists the two worlds can be bridged through a single strategy: coexistence.

Oracle released the first round of Fusion Applications in 2011 after investing billions of dollars and acquiring key technologies. The applications were built from the ground up based on open standards and industry best practices, and were designed to take full advantage of Fusion Middleware technologies.

Since releasing Fusion Applications, Oracle has continued to enhance the Fusion ecosystem, not only by improving the products and services, but also by providing tools to more easily and quickly adopt Fusion components. For example, Oracle has made available several Accelerate software bundles to help midsize organizations more easily and quickly deploy Fusion Applications.

Oracle also created the Fusion Applications Developer Relations website to provide resources for developers working on solutions that incorporate Fusion technologies. In addition to supporting a blog, the site provides videos, white papers and a forum to address questions regarding customization, extension and integration.

The Fusion Applications platform supports two delivery models: on-premises applications and cloud-based services. Currently, the cloud offerings seem to be generating the most interest, with a clear majority of enlistees opting for the services model, rather than embracing the on-premises applications.

Oracle is also focusing more on the cloud side of the equation. Between October 2013 and February 2014, Oracle acquired three cloud services: Compendium, a content marketing provider; Responsys, a business-to-consumer marketing provider; and BlueKai, the industry's leading big data platform.

In September, Oracle announced that its software-as-a-service (SaaS) and platform-as-a-service (PaaS) revenues shot up 32% to $337 million for the first fiscal quarter of 2014. Oracle further reported that, in the same quarter, the overall cloud services business grew more than 30% to $475 million in revenue. Unfortunately, Oracle no longer breaks out the SaaS component from those figures. Still, there's no denying that Oracle is pushing into the cloud services territory big time.

The world of Applications Unlimited

Clearly, Oracle is serious about the cloud. But there's another side of the story. Tens of thousands of customers are still running Oracle's core application offerings, including Siebel, JD Edwards, PeopleSoft and the E-Business Suite.

The core products fall under the Applications Unlimited promise, made to Oracle customers in 2006. That promise, according to Oracle, represents a commitment to its customers to continuously innovate in current applications while delivering the next generation of cloud applications.

This past summer, for example, Oracle released E-Business 12.2.4, which includes enhancements to a number of functional areas, including Financials, Projects, Purchasing, Procurement, iProcurement, Procurement Contracts and Channel Revenue Management. The E-Business update also includes improvements in supply chain and human capital management.

Oracle vows it will continue to enhance products and provide ongoing support for its core apps without forcing customers to migrate to Fusion services. Oracle has been consistent in its message that Applications Unlimited customers should adopt Fusion at their own pace while continuing to take advantage of the Applications Unlimited promise of lifetime support and industry-specific innovations.

Oracle's attempt to straddle the worlds of Fusion Applications and Applications Unlimited has led some observers to suggest Applications Unlimited is holding customers back from adopting Fusion technologies. According to the conclusions of a 2013 Forrester report, this coexistence strategy is a losing proposition. The report suggests Applications Unlimited customers have little incentive for jumping ship, a supposition that many observers continue to share.

Coexisting in the real world

Not surprisingly, Oracle takes exception to such thinking, saying it misrepresents the company's business application strategy. The logical conclusion implies that customers have to choose between the core apps and Fusion apps. This is not the case.

Oracle has been steadily advocating a strategy of coexistence, where Applications Unlimited customers can adopt Fusion modules incrementally and at their own pace. The technology inherent in the Fusion platform makes it possible for its modules to be integrated with existing systems. Fusion Applications can extend the capabilities of the core apps and augment existing product lines, allowing companies to modernize their investments as they see fit.

By taking an incremental approach, organizations also minimize the risks associated with updating an entire system. This way, they can take advantage of new key functionalities without having to incur many of the disruptions that come with full-scale deployments. In the meantime, their core systems continue to be updated and supported, while the Fusion offerings are steadily improved and expanded.

Even with Oracle's coexistence strategy, customers might be slow to jump on board the Fusion train if their old applications are continuing to do the job. At the same time, some have expressed concern that the Fusion Applications are not complete and mature enough to make the switch, although an incremental approach might mitigate some of that concern. Plus, over time, Fusion Applications are likely to improve and grow more robust, especially the cloud services.

In addition, there's the question of what Oracle means by lifetime support for its legacy applications. For PeopleSoft HCM 9.2, premier support ends March 2018 and extended support ends March 2021. Only sustaining support is indefinite. Same goes for all versions of all Oracle applications.

Another uncertainty is the extent to which Oracle will continue to invest in upgrading its core applications. As the cloud takes center stage, interest in maintaining the old applications could steadily wane. Customers might also start wanting more of the features that Fusion offers, such as built-in business intelligence and social networking capabilities. They might even decide to jump ship and sign on with other providers.

Whatever happens down the road, Oracle's coexistence strategy seems a good place to be for current Unlimited Applications customers. They get to pick what and when, according to their own needs; at least that's the case for now. In the ever-changing world of technology, anything is possible.

This was last published in November 2014

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It's an interesting approach, because running legacy application on-premises (e.g. virtualized) and running modern applications in the cloud (e.g. microservices, API-driven infrastructure, etc.) is very different. They promise interoperability of HW/SW, but the operational models are very different. 

Also, will be interesting to see how they can migrate customers from existing HCM, ERP, CRM systems on-premises to SaaS equivalents. 
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