One of the hottest guessing games in the enterprise software industry involves Oracle Corp.'s vertical strategy. The company has promised extensive verticalization of its forthcoming Fusion suite, and has vowed to acquire or partner its way into a competitive position with SAP in a number of key markets.
Nonetheless, it was a little surprising to see where Oracle went to find key industry expertise in that all important super-vertical: government aerospace and defense. The expertise put it over the top against SAP, itself no slouch in this department, and came from a company that has faced down Oracle in mid-market manufacturing for a number of years.
So, who helped put Oracle in the driver's seat for a massive U.S. Air Force contract that will replace 500 legacy systems with a best-of-breed solution to be deployed to over 250,000 desktops worldwide?
Does the name IFS AG ring a bell?
Granted, if you've read Managing Automation for the last few years, you should be familiar with the Swedish ERP vendor. But even those in the know wouldn't necessarily have expected Oracle to tap IFS for the multi-year, $88.5 million Expeditionary Combat Support System (ECSS) project.
There are multiple reasons why this is an unlikely pairing, and why it nonetheless makes sense. The first is that IFS is bringing its maintenance, repair, and overhaul (MRO) software to the table, a product that has been honed for aerospace markets through a partnership between IFS and GE Engine Services. Of course, Oracle has its own commercial MRO product, also targeted directly at aerospace and defense. So why go with IFS?
The answer is that SAP's MRO product looked stronger than Oracle's, and the only way to pull off the deal was to enlist a specialist. Oracle, always interested in beating SAP any way it can, swallowed hard and reached out to IFS -- which also competes with SAP -- in a classic "the enemy of my enemy is my friend" gesture.
The other reason this is an unlikely pairing is the competition between Oracle and IFS. Oracle's mid-market manufacturing solution goes up against IFS in markets worldwide, and, even in North America, Oracle's largest market and IFS's smallest major market, IFS has chalked up its share of wins.
What conclusions can we draw from this deal? The first is that Oracle's partnership strategy is a lot more pragmatic than many thought: Drawing on competitors for large deals shows what Oracle is willing to do to win in the vertical market game -- especially when it comes to beating SAP in the process.
Another conclusion is that Oracle's MRO offering might be in for some maintenance, repair, and overhaul of its own. It's hard to admit in a public procurement that your own solution doesn't cut it. But if Oracle wants to leverage the momentum of this win, it will either have to get closer to IFS or bring its own MRO software up to par.
And maybe we'll be seeing a little more of IFS in the U.S. as this deal begins to unfold. The net effect on the market should be a positive one. The ECSS deal is proof that the more active players there are in enterprise software, the broader the competitive environment becomes. Oracle's MRO may have been humbled, and SAP shut out of a big deal, but in the end the customer was a winner. And, lest we forget, making the customer a winner is what it's really all about.