OpenWorld – MetaSolv buy ‘highlights’ Oracle’s assimilation strategy


Oracle Corp.’s imminent purchase of software vendor MetaSolv Inc. is in line with the strategy of assimilation being pursued by the Redwood Shores, Calif.-based behemoth, says an industry analyst.

Oracle announced its intended purchase of MetaSolv for US$219.2 million on Monday, the second day of Oracle OpenWorld 2006 being held in San Francisco.

MetaSolv develops operations support software for telecommunications service providers. Its software manages the provisioning of VoIP (voice over Internet Protocol), IPTV (IP television), VPNs (virtual private networks) and other voice and data telecommunications services.

Oracle will incorporate MetaSolv into its Communications Global Business Unit, and will retain members of the existing MetaSolv management team to lead that division. The purchase will allow Oracle to help telecommunications operators speed the deployment of services to customers.

The acquisition exemplifies Oracle’s “acquire and assimilate” policy according to Joshua Greenbaum, a principal with analyst firm Enterprise Applications Consulting in Berekeley, Calif.

“It’s an approach Oracle has adopted since it made the big acquisitions of PeopleSoft and Siebel,” he said. “It works like this: find areas where there’s a vertical function that can be promoted, fill in some white space, then take that functionality and try to apply it to that broader customer base.”

The Oracle paradigm, Greenbaum suggested, is one of complete assimilation. “The new capabilities provided by the acquired company won’t be out there in the broad eco-system, it will be embedded in the DNA of the organism.”

The MetaSolv acquisition, he said, will follow this very pattern.

He contrasted this approach with the one taken by Oracle’s chief competitor, Waldorf, Germany-based SAP AG that adds new functionality through partner alliances rather than acquisitions.

“SAP focuses on developing a partner ecosystem that fills in some of the white space in the vertical markets they have.”

The acquisition of MetaSolv will allow Oracle to extend the range of software it offers telecommunications operators. Oracle showed its commitment to the telecommunications industry in April, when it announced plans to take over billing and revenue management software company Portal Software Inc. for US$220 million.

Shortly after, it said it would build a service delivery platform (SDP) to help network operators build services for their business customers. Last month, it announced an important element of that platform, a public branch exchange application called Virtual PBX that operators use to deliver service to businesses of all sizes.

Oracle’s move into the operations support software business came as no surprise to analyst Danny Dicks of Analysys Mason Group Ltd. “We predicted back in May that Oracle would be likely to buy a company in the area that MetaSolv specializes in,” he said. Back then, analysys noted that in addition to operations support software, Oracle will also need tools for revenue assurance and fraud management to complete its offering for telecommunications operators.

MetaSolv, of Plano, Texas, expects the deal to close late this year or early next subject to approval from shareholders and regulators.

Also on Monday, Oracle announced a beta version Oracle 11g – the next release of its flagship database.

Database 11g includes 482 new features, according to Chuck Rozwat, executive vice-president of Oracle server technologies. “You can pick what’s best for your environment, your business.”

The new capabilities respond to a broad range of issues – from information retention to data compression to the handling of parallel upgrades, Rozwat said in his keynote. A “flashback” feature in 11g beta supports recovery of data, and online application upgrades even during a scheduled system outage.

Greenbaum says pushing the 11g database may well be a “two-edged sword” for Oracle, especially at a time when there’s a strong interest in commoditized database products. The database market, he noted, is bifurcating in a way that could potentially give Oracle some grief. “On the one hand, there’s always going to be a very high end database customer who needs all the bells and whistles that 11g has to offer, and who will have an interest in that kind of continuously evolving feature-functionality set.”

However, he said there’s a second market that’s rapidly growing in importance, where the database in much more of a commodity. “That’s where the Open Source database community is starting to make some headway.”

This other market, he said, in one where an SAP customer could potentially fit in. “I’m not sure that an SAP customer needs all the feeds and speeds of 11g. They might do very well with MySQL.”

By focusing on the very high end functionality they can provide in their release cycle (of 11g), Oracle may inadvertently be actually “bringing into sharp relief the fact that for a large number of customers all those bells and whistles are not really needed.”

With files from Peter Sayer, IDG News Service


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