“It’s impressive how far they’ve come.”  This is what I said to my colleague Steve Banker at the Oracle SCM Analyst Day several weeks ago in Boston.  We had just listened to several presentations from various Oracle executives about their SCM solutions, product roadmap, and strategy.  I was comparing what we had just seen and heard to the briefings they used to give us several years ago, before they started acquiring best-of-breed vendors like G-Log (transportation management) and Demantra (demand forecasting).  Back then, it was like Keanu Reeves reciting Shakespeare.  The lines were right, but they didn’t seem comfortable delivering them.  What we heard and saw in Boston, however, was much different.  They presented a compelling vision and roadmap, with both confidence and authority.  Simply put, they sounded more like a best-of-breed software company than an ERP vendor.  Oracle acquired more than just products when it went on a buying spree; the people that came along with these acquisitions have clearly elevated the company’s supply chain management IQ, and this may be its greatest asset moving forward.

The best presentation of the day, in my opinion, came from Andrew Zoldan, Group Vice President, Oracle Manufacturing and High Technology Business Unit.   Zoldan underscored the fact that most companies spend 80 percent of their IT budget on supporting “commodity business processes” like accounting and only 20 percent on innovative and differentiated business processes like demand sensing and shaping.  This problem is well known, but what causes it, and how do you solve it?  

Part of the reason companies can’t invest more on innovation is that it takes a lot of time, money, and resources to maintain a heterogeneous IT environment-the famous “spaghetti chart” showing the integration between the hundreds of systems and databases companies typically use to power their business.  After numerous acquisitions, Oracle now faces the same challenges that its customers and prospects face; it has its own diverse application landscape to deal with.  Gone is the traditional story and value proposition of ERP (get rid of your legacy systems and standardize on a monolithic application and common user interface); the message to customers now is, “I understand your challenge, because I’m faced with it too”, and we’re going to solve it.

For Oracle, the solution is based partly on its Oracle Fusion Middleware and Application Integration Architecture (AIA).  I’m not an expert in these areas, so I can’t dive into the details.  But my colleague Bob Mick, who is our expert on infrastructure technologies, is positive about the approach Oracle is taking.  AIA can be described as packaged best practices for integration and SOA.  Using AIA, Oracle has been building and delivering direct integrations for their ERP, CRM, PLM, etc. for a couple of years and many more are on the way.

Okay, back to SCM.  The event in Boston was a sneak peak at some of the content the company was going to present at Oracle OpenWorld, their annual user conference held in late September in San Francisco.  The event is so large, you really have to decide upfront which sessions you want to attend and stick with it.  I focused my time on sessions and presentations related to Oracle Transportation Management, Logistics Service Providers, and Global Trade Management.

As highlighted in our recently published Transportation Management Systems Worldwide Outlook study, customers continue to view Oracle as a best-of-breed solution, instead of an “ERP provider with TMS capabilities.”  Although many of Oracle’s TMS deals are with existing Oracle customers, the company competes successfully in non-Oracle accounts for standalone TMS opportunities.  This is particularly true in the Logistics Service Provider sector, where Oracle’s customer list continues to grow.  Oracle’s most significant win last year in the LSP space was with Schneider National.  As highlighted in the press release, Schneider is not only implementing Oracle Transportation Management, but also Oracle E-Business Suite.  The relationship with Schneider is helping Oracle extend its OTM capabilities to serve the needs of asset-based logistics service providers.

Over the past 18 months, Oracle has rolled out three new releases of OTM, which include over 70 new features.  The company introduced a new business intelligence product for OTM, namely Fusion Transportation Intelligence.  Other areas of enhancement include: integration with JD Edwards EnterpriseOne, dock scheduling, transportation sourcing, user interface configurability, and system diagnostics.

The most significant items on Oracle’s development roadmap are its plans for Fleet and Asset Management (F&AM) and Global Trade Management.  For F&AM, Oracle plans to create a shipment- and asset-centric solution, focusing not only on cost and service, but also asset utilization.  Planned capabilities include asset lifecycle management, driver and contractor management, order management incorporating fleet/asset capabilities, and financial settlement (buy and sell side).

The “sweet spot” for Oracle Transportation Management is companies with complex transportation operations that span across multiple business units, geographies, and modes of transportation.  If you’re just looking for a TMS to manage truckload shipments in the US, OTM can handle it too, but you’d be buying a Ferrari when you only need a Corrola.  Oracle also doesn’t offer a true software-as-a-service version of OTM (they rely on hosting partners).  Integrating with carriers and other trading partners is a time-consuming and costly part of implementing any TMS in-house, and it’s an ongoing challenge.  One of the key benefits of the SaaS model is the built-in connectivity network.  Customers make a single connection to the network and they gain access to thousands of carriers and other trading partners.  In short, connectivity is a gap in Oracle’s OTM strategy, and they’re aware of it.  How they address it vis-à-vis the competition remains to be seen.

Another area where Oracle lags the competition is in the Global Trade Management segment of the market.  The company’s GTM development kicked off in July 2007, and is scheduled for release in calendar year 2009.  The first release is planned to include trade compliance capabilities, including a next-generation restricted party screening engine, trade item master, trade party master, and control determination for cross-border transactions.  GTM is being developed on the OTM platform, but it will be a separate product, deployed either as a standalone solution or orchestrated with other Oracle or third-party applications as a callable service.  GTM will be on an independent release cycle than the ERP solutions.  Oracle is taking a phased development approach, adding more complex and differentiated functionality over time.  The company has also formed a strategic council that includes potential customers who are providing input for development.  Because of its installed base, ARC expects Oracle to become a significant player in the GTM market down the road.

In summary, yes, I’m impressed with how far Oracle has come in the world of supply chain management.  But the past is already history, and it’s what the company accomplishes in the months and years ahead that counts.  Unlike in the past, however, the company now has the people and the domain expertise to lead in SCM instead of just following the competition.