- Oracle has announced the July release of an online purchasing product that analysts say spells trouble for struggling business-to-business software competitors.
Called Procure-to-Pay, the Oracle product is designed to cover the buy cycle, from purchases to invoicing to cash reconciliation. It will also cover indirect purchases such as office supplies, temporary staffing and insurance.
According to a recent study conducted by International Data Corporation, Oracle lags well behind other business-to-business procurement vendors such as Ariba and Commerce One in terms of licensing revenue. However, it's still the world's second-largest software company, with a massive installed customer base.
"This is a really good shot across the bow for Oracle," says Karen Peterson, an analyst at Gartner in Stamford, Connecticut. "The other companies in this space have a fight on their hands."
Peterson says that the particular strength of Oracle's latest release is that it fits in with the company's other e-business software offerings, such as supply chain management tools, collaboration systems and application servers.
Originally developed as a private service for customers such as Boeing in Seattle and Ingersoll-Rand in Woodcliff Lake, New Jersey, it doesn't require Oracle on the back end.
"Despite the fact that it's all anyone's talked about for the past 12 months, procurement software is not going to be viable as a stand-alone solution for long," Peterson says. "It's going to be incorporated into larger solutions, and Oracle has the bigger pieces in place."
Scott Wilkerson, a manager at Commerce One, was skeptical about the product's openness. "Oracle always says they'll support third-party efforts, but they haven't been very effective at proving that in the market," he says. "That's why we're ahead of them despite their efforts to get into this space."
Greg Speicher, an analyst at investment firm Stifel, Nicolaus & Co in Denver, says Ariba and Commerce One must migrate into new arenas if they intend to survive.
"As procurement becomes a simple add-on to a suite of products, 'best of breed' is no longer an issue," he says.
Procure-to-Pay is designed for a 30-day implementation. Sean Rollings, Oracle's senior director of product marketing, says it will cost approximately $US235,000 in its first year for a company to implement and operate. After that, Oracle will charge a licensing fee of $US5 per purchase order line, with a minimum of 5000 lines per year. Oracle won't charge transaction fees outside of a 15-cent charge for banking services.
Peterson says that the 30-day implementation and $US235,000 buy-in price were both much lower than the current standards in the industry. She notes that Oracle could touch off a price war for procurement software.
Michael Schmitt, Ariba's chief marketing officer, says Procure-to-Pay wouldn't affect Ariba's price. Schmitt argues that Ariba has a procurement customer base Oracle can't match and that it's generations ahead in terms of technology.
"We can link them to all their suppliers and companies like Oracle can't," he says.