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Is it worthwhile to consolidate applications on one vendor's stack?

The "one throat to choke" versus "vendor lock-in" debate is getting more attention as the recession offers an opportunity for significant software deals.

In many ways, Oracle couldn't ask for a better customer than Zebra Technologies.

The Lincolnshire, Ill.-based maker of asset tracking technologies like RFID and barcode printers is going all-in with Oracle, rolling out the vendor's applications and Application Integration Architecture (AIA) across its global business, unifying customer data with the Oracle Customer Hub and Siebel 8.

Zebra will also implement Oracle's Agile product lifecycle management application for engineering, and the E-Business Suite for finance, human resources, procurement and supply chain.

"We pretty much bought everything they make," said Jeff Hand, director of IT.

As Oracle has extended its footprint in the enterprise beyond databases and into applications with its massive, multi-year acquisition spree, some customers are pushing forward and consolidating on the "Oracle stack." Some customers of the other "mega-vendors" -- IBM, SAP and Microsoft -- are taking similar steps.

"The stack makes a lot of sense because everything's integrated -- you have one throat to choke," said Ray Wang, vice president and principal analyst with Cambridge, Mass.-based Forrester Research. "You just have to balance that with vendor lock-in."

For more on application consolidation and software license negotiation
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The other benefit to consider? There may be no better time to buy.

"It is a buyer's market in software, but it's pretty important for a few companies -- IBM, Oracle and Microsoft," Wang said. "These vendors will probably withstand the recession and grow their environments within their customer base. That being so, you want to make sure you get those deals right the first time."

Zebra Technologies is in its second year of consolidating its application and middleware stack around Oracle products.

Zebra was running Baan as its ERP system for years, and multiple acquisitions left the company managing 140 disconnected systems.

"Executive management determined we were at a dead end with the Baan application," Hand said. "[The legacy systems] were highly customized, really not upgradeable and not really keeping up with the business."

Starting application consolidation with Europe

Zebra began its consolidation efforts in the EMEA region, with HR, financials and CRM, and will roll out its initiative in waves, with North America coming next, Hand said.

"We wanted to cover the complexity of European countries in the first wave," he said. "They have different localizations, multiple countries, so data cleansing is tougher. Our thought process is if it works in EMEA, it will work in North America."

Organizations standardizing on Oracle should let their adoption strategy drive their initial negotiations, according to a recent report by Forrester's Wang. Sophisticated Oracle customers who know their buying patterns often consider enterprise agreements, the report says.

Zebra embarked on its program for strategic reasons, enabling IT to keep up with business, and for cost savings, cutting back on IT staffing.

"We don't want to be in the middleware business or customization business," Hand said. "The president and CEO said no customizations. He agreed that based on our experience with Baan, we don't want to deploy a customized solution."

The economy hasn't kept Zebra from forging on ahead, either, Hand added.
Zebra is using an offshore company to maintain its legacy applications while an internal team of fewer than 50 people is handling the Oracle project. A team of competency leads, who are the project managers for their area, and a business counterpart, plus Todd Naughton, the vice president of finance, meet weekly and are actively engaged on a daily basis, Hand said.

"The transformation is really 90% of that core team's work," he said. "We've outsourced our day-to-day operations. The idea was to freeze the legacy system and free up the talents to work on the new solutions."

Consolidating to one major technology vendor, Oracle or not, is not for everyone, however.

"People are trying to figure out where the value is going to be," Wang said. "It's not right for everybody. If you're on an older version of PeopleSoft or JD Edwards, the right strategy may be to use third-party maintenance as you wait for Fusion applications."

In fact, it's never too early to think about where Fusion applications play a role, Wang said, no matter the confusion surrounding when a full suite will be generally available. Those who are Oracle customers via acquisition should consider how they will integrate all their existing best-of-breed apps and may consider AIA to bring them together, Wang advised. For a traditional Oracle customer, it makes a lot of sense to think about Fusion apps, he said. New customers should think about where applications, middleware and database strategies come into line.

"This is great timing," Wang said. "We're near Oracle's Q4, and that's when you see some of the more aggressive deals and opportunities right now. But you have to have money. You spend to play in this market."

While customers are naturally in the strongest position in negotiations with Oracle with their initial purchase, there are some opportunities for existing customers, Wang said.

Other Oracle software license negotiation tips from the Forrester report:

  • Some Forrester clients have reported facing audit threats from Oracle owing to the economy, as sales reps use over-utilization as a way to drive new license sales, Wang said. Yet Forrester data shows that only 6% of audits show compliance issues, while 21% show significant shelfware, presenting companies with an opportunity to turn the tables and discuss reducing their shelfware.
  • In the wake of Oracle's acquisition of BEA, middleware customers should get assurances from the highest levels at Oracle about which of Oracle's middleware products are "strategic" and which are not and are therefore likely to receive less investment in new features and major releases. With BEA, Oracle now has multiple offerings in application servers, portals and enterprise service buses.
  • Keep in mind future business process mapping while aligning key business drivers with the application strategy. Form follows function, and business drivers must remain paramount.
  • Consider open source. Open source alternatives not only offer low- or no-fee licenses but can be used to extract deeper concessions from Oracle.

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