Oracle cloud: Generating value with AI

Gateway to GenAI

Certainly, Oracle continues to post strong financials – it finished 2023 strongly, with Fusion Cloud ERP revenue up 21% to $0.8bn for Q2 – while it was also named a leader in Gartner’s Magic Quadrant for Cloud ERP for Service-Centric Enterprises.

Maintaining growth through 2024, during a project go-slow (most consultancy firms will no doubt support this notion) will demand more reasons to invest and GenAI is one of those new must-haves for enterprise that could tip the balance when it comes to decision-making time.

For Mickey North Rizza, group vice-president, enterprise software at IDC, Oracle’s GenAI strategy makes a lot of sense. She said that she finds using “simpler lower level intelligence and automation to enhance current offerings, at no charge, behind the scenes, [is] a great pathway for Oracle to pursue immediately.” If anything, it removes the need for enterprise customers to look elsewhere when it comes to GenAI functionality.

“Secondarily, they can then create a premium tier of GenAI add-ons modules and capabilities that they can charge for,” adds North Rizza. “Our data has shown the business would be willing to pay 10-25% more for these capabilities.”

As Deloitte predicted in a recent report, for most enterprises, the ‘gateway to GenAI’ will likely be through broad enterprise productivity software suites, enterprise software tools or engineering, design, and software development tools, where “GenAI features are embedded in existing software, often going unnoticed by users”.

From this perspective, as well as that of North Rizza, Oracle’s GenAI drive makes sense, but will it be enough to attract stubborn on-premise users to Fusion or indeed stave off competition from IaaS vendors?

Under pressure

It’s not as if Fusion has had a smooth ride. Although it can boast an impressive list of customers – the Home Office, Heathrow Airport and ITV, for example – it has had its problems. The thorn in its reputation is Birmingham City Council, which last year revealed its struggles with an Oracle ERP upgrade project, which towards the end of the year was cited as a key factor in the council’s well-publicised financial problems. It doesn’t help the Oracle cause much, although public sector ERP project woes are not confined to Oracle. 

Herbert at Forrester said that while Oracle has been “seriously pushing to cloud since about 2011, for those who have not yet modernised, they are not facing any particular pressure to do so now”. It’s a different feel to SAP on that score, but – as Herbert adds – for many organisations, cloud is not necessarily a key purchasing factor.

“Customers shifting to modern SaaS ERP aim to get better user experience, more agility and greater innovation, including AI,” she said. “In several cases, there is no choice or very limited choice of the underlying cloud. While multicloud is a prominent theme in IT architectures, it is not generally a theme for an ERP purchase specifically.

“We usually see customers deploying ERP on a single cloud – or the default SaaS infrastructure offered by the vendor, as there is sometimes no choice at all. Cost matters, but the bigger factor is ROI [return on investment] to the business rather than just IT and systems costs.”

That ROI is key here, especially when you consider Oracle’s inclusion of GenAI capabilities. But is it enough? Iain Saunderson, CTO at Spinnaker Support is not so sure.

“GenAI is a great addition, but the general feedback we are getting on Fusion is that it is still not ready for prime time, and lacks the functionality and flexibility most customers need in an ERP,” said Saunderson. “So, while the bells and whistles – like GenAI – are great to add on, if the engine isn’t performant, the bells and whistles have little value.”

It could be a case of horses for courses but Oracle’s recent wins (The State of North Carolina, Riyadh Air and London Stock Exchange Group) are perhaps an illustration of Fusion’s broad appeal.