Oracle 13: Swiss Cheese Integration?

When Oracle finally introduced its Retail 13 integrated suite this week, after three years of acquisition and integration, the teams working for the world's largest enterprise software vendor might have breathed a sigh of relief. They might have hoped that the hardest part was behind them.

But creating a vast integrated suite is not the hard part. Convincing retail IT execs, worried about politics, perception and pragmatism, to turn over their most valuable data to one license-fee-hungry vendor? That's where the real fun starts.

For the moment, let's set aside any industry questioning of whether Oracle's complete and integrated suite is either really complete or truly integrated. Even assuming it operates exactly as billed, outsourcing IT operations is frightening enough. But outsourcing the vast majority of them? And all to one vendor? In the SAT world, that would best be phrased as "boiling is to freezing as Oracle Retail 13 is to IT relaxation."

It's one thing, though, to be nervous and scared about something unorthodox. It's quite another thing if those fears are justified. I think it's safe to declare as fact that those fears exist, and that will cause Oracle no shortage of angst. But are they justified? That's a structured query of another color.

Greg Buzek, president of the IHL Group, said retailers are much more cautious about the validity of information than most large vendors assume.

Those vendors "always forget that it's usually the culture of the retailer and the 'we don't trust the data' attitude that gets in the way of true success," Buzek said, adding that a typical merchant will often take "a year or more before they trust the data."

"It's the merchants that usually don't trust the data. The IT people are not the issue in adoption, but the merchants," Buzek said. "They trust their experience/gut more. It's a tough balance in any retailer. Their competitive differentiation comes from how good their merchants and buyers are, and those people are more right brain dominated."

Buzek said he has been told, "Most of the people that drive our businesses went to class on that side of the college with the sign that says �No math is required'."

Added Buzek: "They trust their sense of style and gut far more than they trust data from a system because they typically do not think in a linear fashion as most in the IT and Operations staff do."

Forrester Research's retail principal analyst, George Lawrie, sees retailers as being even more cautious than the largest suppliers (and no one has recently accused P&G of being a pushover for new enterprise apps).

In other words, for retailers to truly reap the benefits of a software suite that completely covers the supply chain, all supply chain players must be on board. Otherwise, the potential benefits start to quickly shrink.

"Let's say that all of the suppliers have already taken the plunge on this," Lawrie said. "Retailers are the last holdout of best-of-breed. Retailers are notorious for preferring best-of-breed over integrated suites."

There's a Wal-Mart spreadsheet-sized list of reasons why retailers should resist, and each chain only needs one reason. Some see reduced price negotiating leverage if they have centralized too much with any one vendor, while others worry about a cascading-failure threat, which holds that if any small part of the suite suffers some catastrophic glitch, it could bring everything down with it. In clich� speak, it's the battle between one-throat-to-choke and a single-point-of-failure.

But Forrester's Lawrie also points to a more strategic fear. Some CEOs and COOs might argue that IT should be treated as a commodity and mostly outsourced, allowing the chain to differentiate on product mix, quality, customer service and well-informed salespeople. That would devalue IT executives.

Some CIOs, Lawrie said, make a powerful counter, saying that IT must be a differentiator because it's software that enables a more knowledgeable sales force (tied in to CRM), a better product mix and products that are overwhelmingly in-stock. If all retailers were running off of the same outsourced software packages, the ability to differentiate on service might be hampered, compared with leveraging homegrown apps, written and maintained by a retailer's own teams.

Like many IT arguments, it's not quite that black-and-white. Packages such as Oracle's certainly could support proprietary apps sitting atop its package, but there's no knowing what problems that might cause.

Added AMR Research Director Mike Griswold: "If this ends up going horribly wrong, heads are going to roll."

Griswold speaks to yet another hurdle for Oracle: the spending slowdown. (I've given up trying to figure out whether it's supposed to be a recession or not.) That is going to push IT execs to focus on "much smaller IT projects that can deliver ROI very quickly" as opposed to large packages like Oracle's Retail 13, which Griswold projected would likely cost a large retailer something in the $2 million range. "Very few people in the next 12 months or so are going to sign up for all of the functionality."

Gartner Analyst Hung LeHong points out yet another fear: That some smaller retail specialist firm will come up with a better way of performing some function, but a chain that's locked in the Oracle suite may find itself locked out of the new functionality.

"There is some new functionality that comes down the road and you're a retailer and you want access to it. But that new functionality, which is probably being sold by a best of breed, may not work on an Oracle platform," LeHong said. "It needs to be certified (to work with the Oracle suite). If you put all your eggs in one basket and all of a sudden there's a best-of-breed application that you can't access very readily, that's the first real disadvantage that comes up."

"If that basket that you've got all your eggs in goes in the wrong direction from what you want, then that might be a problem. If there's any kind of fundamental shift that the mother ship makes, you're going with it," LeHong said. "But it's the exact reason why people go with Oracle: They're hoping that that mother ship takes them where they want to go and they don't have to figure out all the pieces, so the reverse is true as well."

Oracle seems to have done a very good job at piecing together good—although not necessarily great—components in most (but not all) critical retail areas. Oracle may find that replacing a chain's legacy apps can be a lot easier than replacing legacy attitudes.