First, dial back to May, when Oracle announced its product information management (PIM) data hub. PIM has been a hot corner of the retail market, and a hot corner of the M&A market too. (see my columns on IBM's acquisition of Trigo and SAP's acquisition of A2i.
PIM's role in the resurgence of the retail market cannot be underestimated -- without PIM, complex, multi-channel retail sales efforts cannot be effectively linked with equally complex and cost-efficient supply chains. In other words, PIM sits at the center of a retail market that is building more efficient supply chains and more effective retail sales strategies.
In this context, Oracle's acquisitions of Retek and ProfitLogic make a lot of sense. With Retek responsible for making the supply chain more efficient, and ProfitLogic responsible for making the demand side of retail make more sense, and Oracle's PIM data hub holding up the middle, Oracle's retail strategy is looking quite comprehensive.
So what does this tell us about future vertical strategies at Oracle? The build-it-yourself PIM data hub is an important clue.
IBM, despite its prowess in databases and middleware, bought a PIM hub and used it to expand into the general category of master data management (MDM). SAP, feeling that its general-purpose MDM strategy was lacking vertical-specific functionality, bought A2i to fill in the blanks.
A Strategic Nexus
Only Oracle felt that PIM was part of a core MDM competency, and used that competency to build not only a technology hub but a strategic nexus for its retail vertical push.
As a model for Oracle's vertical industry acquisitions, it's relatively straightforward: Shore up the supply side and the demand side with vertical-specific acquisitions, and drive the data side using internally developed products.
One final detail: It helps that the acquired company has significant customer and product overlap with Oracle. This was the case with Retek, and, in an interesting way, with ProfitLogic as well. A common implementation scenario for ProfitLogic, its founder told me two years ago, included PeopleSoft and Retek.
Now, on to Oracle's most recent quarter. Oracle managed to beat everyone's estimates (including my own) for their applications business in what was only the second quarter following the closing of the PeopleSoft acquisition. This means that, fundamentally, Oracle is not seeing the deal erosion that could have doomed the acquisition.
The company still has one more proof point before it can really pat itself on the back: a quarter in which total Oracle sales beat pro forma sales of Oracle and PeopleSoft from pre-merger days.
According to Charles Di Bona of Sanford Bernstein, this last quarter fell short of pre-merger combined revenues by three percent. Still, it was a pretty decent quarter, considering the incredibly complex and chaotic atmosphere in which a merger of this size takes place.
This quasi-redemption of Oracle's acquisition strategy starts to look even more interesting in light of the vertical up-sell opportunity that is now unfolding at Oracle. For the Retek/Oracle customer, Oracle can up-sell ProfitLogic and the PIM data hub. For the ProfitLogic/PeopleSoft customer, the up-sell includes Retek (if it's not there already), Fusion (eventually), and PIM. And for the new-to-Oracle retail customer, Oracle can provide a comprehensive suite that provides full-blown supply and demand capability unlike anything currently available from SAP, which has no ProfitLogic equivalent.
If Oracle can execute this strategy in retail and a few other verticals, it's total redemption time.
My only beef with the strategy is that it was hard to discern in the melee that ensued during the hostile acquisition and its aftermath. This left customers (and analysts) trying to scratch out a raison-d'etre for the Fusion product line. Now that there's evidence of a good strategy and some good sales execution, any bets that Oracle was going to fall on its face should now be officially off.
The only question right now is, after retail, what's next?