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Oracle may put a price on business processes

Oracle's not-too-distant future includes a greater focus on business processes, and new software pricing policies are likely to follow suit, according to one analyst firm.

Oracle, SAP and other large software vendors will spend the next few years working to create more dynamic applications with a strong focus on cross-functional business processes -- and that is likely to mean new business process-based software pricing options, according to a new analyst report.

Cambridge, Mass.-based Forrester Research Inc. interviewed major enterprise software vendors and found that several factors -- consolidation of the software market, globalization and the rise of service-oriented architectures (SOAs), to name a few -- have turned the desire for more agile and usable applications into a business imperative. According to Forrester, this means the vendors will need to deliver more dynamic applications or risk becoming obsolete.

Business applications have traditionally focused on automating specific processes, such as the process of hiring and paying an employee within a human resources management system, or the process of preparing and tracking financial information in order to generate quarterly reports, said Andrew Bartels, a Forrester research analyst who helped write the new report.

"What we think is going to happen in the future is that there will be a growing value in linking and connecting processes," Bartels said. "What we're suggesting here is that many processes within a company connect with and link with other processes, so helping companies to manage that is a key future step."

In addition to possible new pricing scenarios, Forrester believes the trend toward process-centric business applications will lead vendors to dump three-letter acronyms in favor of process-focused product names. Rigid software modules of the past will no longer cut it, Forrester says, and IT professionals can expect large applications vendors to start pitching process offerings such as procure-to-pay or order-to-cash.

Meanwhile, user groups will drive business process innovation. With more flexible architectures and tools available, Forrester expects end users to take a more active role in IP development, particularly as it relates to business-level process standards.

New pricing possibilities

While vendors like Oracle may introduce new pricing policies as demand for cross-functional applications grows and SOAs begin to take root in more organizations, they may resist doing so at first, according to Bartels.

Companies that have SOA in place will soon realize that they don't need to buy entire product suites from the likes of Oracle when only one or two specific pieces of functionality are needed. For example, an Oracle customer may not want to purchase Oracle's entire CRM Suite but would be interested in purchasing the CRM Suite's pricing module.

"Right now, [Oracle gets] a lot of [its] revenues from selling the whole suite, and so they probably would not be happy to move to a la carte pricing," Bartels said. "But they may be pushed in that direction by clients who say, 'We just want these particular modules, and your SOA architecture supports it, so why can't we get that?' "

Tony Iams, a vice president and senior analyst with Ideas International in Port Chester, N.Y., says the growing tension between end users, who want a la carte pricing, and major vendors, who want to sell big software suites, is nothing new.

"It's always going to be in the vendors' interest to try and package things in a way that's favorable to their bottom line, and this tension has always existed," Iams said. "[But today], trends like SOA, Web services, Software as a Service (SaaS) and things like virtualization are just introducing new points of pressure that are exposing end users' needs for flexibility."

According to the report, another likely pricing scenario involves process-based pricing designed to compete with subscription-based pricing.

"Once the app vendors figure out how to package these new process 'applications,' expect their pricing structures to follow suit," the report read. "Most likely, they will take a page out of the BPM vendors' playbooks and offer per-process pricing, and they may also tier pricing based on desired level of flexibility. These new pricing structures will compete with more simplistic pay-as-you-go subscription models that continue to gain enthusiasm among SaaS adopters."

Smaller vendors likely to get a head-start on Oracle

Smaller vendors, which have historically been more agile than larger vendors in terms of unveiling new functionality, will probably lead the charge toward more dynamic business applications, according to Forrester.

Larger vendors like Oracle and SAP have to focus on re-architecting their offerings and building SOA platforms to meet the demand for cross-functional, process-centric applications.

"That's what Oracle Fusion is all about," Bartels said, "but it's also one reason why you've seen Oracle come out with its Applications Unlimited strategy, which says they're still going to support all of the other apps out there because they realize how hard it is to build Fusion, and they're trying to create a more voluntary roadmap."

Smaller vendors, which typically offer highly targeted or vertical applications, have fewer legacy architectures and code bases with which to contend. As a result, Forrester says, they'll be able to quickly offer targeted, cross-functional offerings that fit nicely into larger ecosystems.

Forrester says IT professionals can expect smaller players to deliver products aimed at optimizing specific business results. For example, the report says, vendors like I-many, which offers pharmaceutical contract management software, and Accruent, which sells real-estate planning software, will combine best-practice processes with business insights to deliver dynamic applications well before the likes of Oracle.

"Over time, I think that Oracle and SAP will move in that direction," Bartels said. "But they've got a lot of baggage to get lined up before they can do that effectively."

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