Oracle Under Fire

Archived Published: 17 August 2001 ID: G00100291


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Oracle is rightly under a degree of fire from some of its customers. Although many of Oracle's challenges are not insurmountable, we believe recent actions and events will leave an indelible scar on customers' view of Oracle.

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During the past 12 months, Oracle has been under increasing scrutiny from many of its customers, the business and technology press, investment firms and Gartner. Some of the press attention is because of Oracle's sheer size, its impact on U.S. financial market indicators, and its 60 percent and larger stock price slippage in the past 12 months. Some is because of Oracle's flamboyant and contrarian CEO, Larry Ellison (see Forbes, "The Trouble with Larry," 20 August 2001). Much of the attention, however, is because of real product, marketing and business issues.

We are not suggesting that Oracle, as a company, is failing — quite the opposite. We would rate Oracle positively overall. Despite the slowdown in the U.S. economy, Oracle's total revenue in fiscal 2001, which ended in May, was $10.9 billion (up 7 percent year-over-year) and $2.56 billion in net income. However, we believe that Oracle has made significant missteps that are causing the chinks in its corporate armor to become more visible.

  • In 3Q01 and 4Q01, Oracle's database revenue growth rates were 6 percent and negative 5 percent, respectively, and its applications business growth rates were 25 percent and negative 24 percent year-over-year, respectively.

  • During the past 12 months, Oracle has lost three of its senior executives — Ray Lane, Joe Lockhart and Gary Bloom — leaving Oracle with fewer to serve as foils to Ellison, who has been quoted as claiming, "We have just one show at Oracle. One show, and one leader" (The Wall Street Journal, 6 August 2001).

  • Oracle announced its decision not to support the Oracle Applications Users Group (OAUG), citing its need to invest its efforts in events that deliver its marketing messages (

  • For more than 18 months, Oracle supported a widely unpopular power unit pricing model.

  • The adoption rate for Oracle's 11i enterprise resource planning (ERP) applications has been slow because of product stability issues.

With all these impactful events, the questions that become most important to enterprises are:

  • Are these points of vulnerability significant enough to cause enterprises to question their decisions and open the door to competitors?

  • Are these issues a natural part of being an aggressive, bleeding-edge competitor?

The answers are simultaneously "yes" to both questions. In an effort to give a better understanding of where Oracle's strengths and challenges lie, this issue of Powerhouse Vendors will take a close look at the product lines and business practices that are the root of much of the attention on Oracle.

To assuage the current climate of discontent, we believe Oracle needs to make progress in the following areas:

  • Provide proof points of Oracle9i database management system (DBMS) clustering scalability and Oracle9i DBMS broad adoption

  • Provide references of 1TB or larger data warehousing customers and acknowledge its very large database value

  • Gain customer trust with respect to pricing and reconciling fiscal 2001 contracts

  • Continue a sustained level of commitment to its application server

  • Resolve the quality issue with ERP components (e.g., manufacturing, procurement, order management and supply management)

  • Deliver customer relationship management (CRM) product parity with best-of-breed offerings (e.g., verticalization and a marketing component)

  • Reconcile its services with respect to its service partners

Oracle DBMS

We believe that Oracle9i Database will not reach broad deployment until mid-2002 and that Oracle9i DBMS enhancements will have little impact on Oracle's database revenue this fiscal year. In "A Checkpoint on Oracle9i Real Application Clusters," T-14-0714 , we discuss the DBMS availability merits of this enhancement, as well as the lack of real proof points to support Oracle's DBMS scalability assertions.

We have found few Oracle references for application-neutral data warehouses that are 1TB or larger (see "In Search of Oracle Terabyte Data Warehouses," T-14-1250 ). We discuss a number of real-world case studies using the Oracle DBMS to support very large databases, a majority of which are application-specific data marts. It is critical that enterprises determine what architecture they need to support their business requirements, and to find the right technology to support that architecture.

The tactics Oracle employed to promote its universal power unit pricing have left an indelible perception in its potential and current customers' minds that will continue to leave the door open for IBM and Microsoft. In "Oracle Eliminates Universal Power Units," E-14-0171 , we discuss Oracle's new, much-needed pricing changes. With its new processor-based pricing, Oracle has gone a long way toward addressing its customers' issues; however, customer perceptions have yet to be repaired.

Oracle's Application Server

Oracle9iAS is still a "work in progress," and its embedded integration broker — sold as Oracle9iAS Integration — has seen minimal market penetration. Selling an application server and integration broker as a combination is visionary, but execution slowness and product gaps remain challenges. Once resolved, Oracle's most-receptive audience will be enterprises seeking integration within Oracle's technology stack. Those with minimal ties to Oracle's stack will likely seek more mature offerings. Both should anticipate the evolution of the platform. In "Oracle9iAS Integration: Fleshing Out the Application Server," COM-14-2556 , we consider whether Oracle's position as a Challenger in the latest integration broker Magic Quadrant is sustainable.


Oracle and its application customers are often affected by Oracle’s inflated marketing. Although specific modules within Oracle’s applications have gained broad acceptance, Oracle’s focus on a complete suite of applications sets a high bar for itself which is contrary to most enterprises' experience that one vendor rarely has all of the functionality required to fit an enterprise. Even Oracle's former president, Ray Lane, has made public statements regarding the issues of adopting a suite of applications. In "Oracle ERP Report Card Update — May 2001," COM-14-2781 , we state, that although the financial components of Oracle 11i seem to have stabilized, enterprises upgrading from previous versions report problems with the manufacturing, procurement and order management components caused by poor-quality code that has stalled deployment.

"Oracle APS: A 'Work in Progress,'" P-14-1852 , and "Oracle CRM: Better, but Still Room for Improvement," P-13-9331 , detail Oracle's efforts to strengthen its supply chain management (SCM) and CRM products. These pieces also comment on how these products fall short of Oracle's marketing promises of high-level of functionally in specific areas. Additionally, we point out that the SCM and CRM offerings are primarily applicable to Oracle-specific enterprises or enterprises that are willing to forgo high levels of functionality in favor of broader efficiencies.


Oracle is in the middle of a balancing act with respect to services — one of its key revenue-generating business lines. In "Oracle's Vision for Services," M-14-2718 , we provide details on Oracle's services offerings. Oracle has significantly reevaluated its "services footprint"  with an interesting combination of Oracle consulting, service channel partners and an application service provider (ASP) offering (with an management service provider option). 

Given Oracle's past service performance, there is a renewed level of commitment to ensure that product and service strategies are synergistic and respectful of critical business partners. Oracle will be put to the test in both service arenas:

  • Oracle Consulting must prove its ability to manage channel relationships with service partners

  • (Oracle's ASP offering) must complement the overall "Oracle economy," rather than create confusion

We believe that Oracle’s DBMS scalability, application server adoption and CRM functional depth issues are not insurmountable. These challenges, although important, are in line with what we would expect from a powerhouse vendor. However, Oracle has made some major missteps with its pricing, the stability of 11i and the alienation of the OAUG. These missteps enforce the perception in users' minds that Oracle is difficult to work with and, worse, would take advantage of its customers when it is under pressure to increase revenue. The issue is a loss of credibility. Even if Oracle resolves these issues, this lingering market perception will continue to leave the door open for Oracle's competitors (e.g., SAP, Microsoft, Siebel and IBM). This does not imply that we expect Oracle will falter; however, these issues will continue to damage Oracle's credibility in users' minds, which in turn will impede Oracle's ability to regain its market momentum. Enterprises considering major purchases of Oracle products should contact Gartner to discuss the value and costs associated with a given product or business strategy.

© 2001 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartners research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

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