As the third largest software company in the world, Oracle is many things to many people. Their technologies, applications and cloud provide solutions to a wide range of business and technology challenges.
Oracle Cloud applications – such as enterprise resource planning (ERP), human capital management (HCM), supply chain execution and enterprise performance management (EPM) – are designed for a wide range of industries, ensuring standard functionality can be adopted widely and enabling Oracle’s significant research and development efforts to satisfy a larger number of customers. Oracle solutions deliver the vast majority of business requirements, but this has sometimes led to Oracle being perceived as useful only for these generalised, universal requirements.
A new direction for Oracle
At the turn of Oracle’s financial year in June, they restructured a large number of their sales teams to be more industry-focussed. This could be because Oracle is already experiencing more success in settings where vertical expertise is important – they are listed at #6 in the Cloud Wars ranking but have reached #3 in Industry Cloud rankings.
Before this move, I could be talking to an Oracle area vice president who was working with oil and gas customers, retail customers, professional services customers and manufacturing customers. Whilst the capability of the Oracle solutions remained the same, it could be difficult for Oracle to meaningfully engage with such a broad cross section of industries while articulating the value of Oracle for each vertical.
Today, Oracle sales solutions teams are aligned by vertical industry. This has implications for Oracle, for partners and for customers. Customers come first in all things, so let’s start with them.
Imagine you are the CFO of a major contractor starting a software selection. As you engage with a horizontally-focussed sales rep, they may not fully understand your requirements document. Do they realise you need to capture costs in a specific manner to support your joint ventures? You may tell the sales rep about their requirement to capture project cost across labour, materials, parts, equipment rental and subcontractor invoices. A sales rep with no vertical depth may just assume their product will do it, not understanding that this may be hard. This also applies to a professional services company that must accurately predict and manage utilisation of their billable resources. Both professional services and construction use the power of Oracle Cloud Projects, just in different ways as appropriate for the use case.
If a sales representative does not understand these requirements, both Oracle and the prospect can suffer through misunderstandings, difficulty clarifying requirements, and roadblocks to unlocking the value of Oracle’s solutions. The result can be blown timelines and budgets and often a suboptimal solution that requires later rework. Lacking vertical insight, a sales rep may just say yes to every request, while one with vertical expertise may dig down to a solution fit which benefits the customer, or maybe walk away from the deal if they cannot meet the requirements.
Even assuming the sales rep does have the deep background in your industry and can create a proposed solution and scope that meets your needs, does the solutions team have the same deep understanding? If not, the sales cycle may get even more difficult during use case proof points. This is why Oracle is structuring both their sales and solutions teams around their customers’ and prospective customers’ vertical industries.
This is designed to improve Oracle’s win rate and competitiveness. But it also means the customer can spend more time evaluating the software as it applies to their business and less time being told about features and messaging points that may not be relevant or in the correct industry context. And once the project is handed over to a services partner, vertical focus benefits the customer again because of fewer gaps in the scope, fewer unpleasant surprises and a better end-to-end experience across the sales cycle, project lifecycle and customer lifecycle.
Oracle has long relied on partners to augment them in vertical industries.
Due to these changes, Oracle and its partners must prioritise industry depth and specialisation in hiring of customer-facing consulting staff. Schooling up and educating Oracle’s existing staff on verticals they are assigned to will be another challenge and, in this regard, partners with deep vertical skill sets can make themselves even stronger resources for Oracle. A systems integrator or services partner may need to redouble its efforts to develop deep vertical content to help educate their Oracle counterparts and by extension help Oracle sales reps communicate a vertical message to the market.
Vertical industry specialisation must also come in the form of products. Partners will increasingly benefit from offering not just services but independent software vendor (ISV) products that extend Oracle Cloud Applications into processes too specialised for Oracle to include in the core functionality. As a global, horizontal product, Oracle does not include, for instance, pay-when paid functionality to help construction contractors pass payments on to subcontractors or functionality for Her Majesty’s Revenue and Customers (HMRC) Construction Industry Scheme (CIS). CIS requires contractors in the United Kingdom to submit information on subcontractors, calculate deductions from subcontractor payments, validate records against HMRC data and submit mandated reports. A systems integrator with deep industry experience might develop an ISV solution to meet these vertical/regional needs.
How far will Oracle ultimately go in its vertical approach? I cannot say, but their approach yields a broad solution applicable across multiple diverse divisions of a company while partner extensions can satisfy specialised vertical requirements not addressable by their highly agile and configurable standard functionality.
It is interesting that some Oracle competitors are pursuing different approaches to verticalisation.
Infor is touting vertical clouds – apparently verticalised solutions built around Infor’s numerous acquired enterprise resource planning (ERP) products that each have their own vertical niches. Does Infor’s approach really serve as a marketing device for its diverse assortment of ERP applications? And if a customer has divisions in more than one vertical industry, will they be forced to license multiple code lines when a single core ERP with partner extensions would be more elegant?
Microsoft Dynamics 365 takes a different approach to verticalisation, specifically encouraging ISVs to develop vertical solutions with Microsoft Power Platform. Microsoft has been in the habit of rolling some of these extensions into the core offering.
I don’t see Oracle going the direction of Microsoft or Infor, but the Oracle Platform (Oracle Cloud Infrastructure, Visual Builder and APEX) give services partners an excellent platform for building vertical extensions for Oracle Cloud Applications.
With a vertical approach, Oracle will be able to win more customers, including those that otherwise may have opted for a vertical software solution that would ultimately constrain their growth. Oracle has made the right move with this restructuring of their sales and solutions teams, and partners now need to focus on how they can sweeten the vertical industry proposition.