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Special Report: Oracle splashes out to get Agile

21st May 2007
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By Stuart Lauchlan, news and analysis editor

Oracle has been rummaging in its corporate purse again with the $495 million acquisition of product lifecycle management (PLM) firm Agile. Agile offers a line of products that address product innovation and the introduction process; facilitate the sharing of product specifications and configurations; and support collaboration across the supply chain.

"Profitable product innovation is critical to product-based industries, making PLM one of the fastest growing application segments," says Oracle president Charles Phillips. "The addition of Agile, which will serve as the foundation of our PLM offering, will further Oracle's strategy.”

Oracle will continue to invest in its own Oracle Product Information Management Data Hub, and integrate that with Agile PLM and plans to market Agile in both the Oracle and non-Oracle environments.

Arch rival SAP opted earlier this year to build its own PLM functionality rather than partner or buy it. This is still in development, theoretically giving Oracle a head start in this niche as well as access to high-profile customers such as McDonalds.

"Many Agile customers are also SAP customers. 80 percent of Agile’s customers use either SAP or Oracle for their ERP backbone." Bruce Richardson, AMR Research

“Agile was one of the first stars of the nascent business-to-business e-commerce market,” notes Bruce Richardson of AMR Research. “For its investment, Oracle is picking up a company with more than 800 employees, trailing 12-month revenue of more than $130 million, 1,250 PLM customers, and another 10,000 companies using Cimmetry, Agile’s ‘collaborative visualisation software’. The secret sauce in the deal may be Agile’s fast-growing presence in consumer products (CP), thanks largely to the Prodika acquisition. CP customers include Albertsons, Bayer, Coca-Cola, Heinz, McDonalds, Philip Morris and Tyson Foods.”

It’s also another blow against SAP. “If you follow the software market closely, you know that many Agile customers are also SAP customers,” points out Richardson. “In fact, 80 percent of Agile’s customers use either SAP or Oracle for their ERP backbone, with the split relatively even between the two ERP vendors. The rest are using ERP systems from Infor and other providers.

“Oracle is hoping to use Agile as a wedge into SAP strongholds. This was the same thinking behind the recent acquisition of Hyperion. Between these two purchases and the PeopleSoft and Siebel deals, a lot of CIOs are waking up to find that they are running a multi-vendor shop.”

Software sweat lifecycle

The deal will also impact on the CRM market, reckons Marc Halpern of Gartner Group. “This supports the observation that enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM) applications do not meet business needs without PLM,” he argues. “Oracle recognised that its customers need PLM to streamline product lifecycle activities from concept through retirement. Gartner expects this purchase to further accelerate the transition of PLM from engineering-centric to enterprise-centric across a broad range of industry verticals.

“Joint Agile and Oracle customers will benefit most from this acquisition. Oracle customers now have a PLM option with richer functionality that will deploy faster than Oracle's current offering. Agile customers that were questioning Agile's future as an independent vendor now have a large parent company with longer-term viability. Agile's PLM expertise will make Oracle customers more confident about adopting PLM that delivers value quickly. Oracle will likely win new PLM business fastest among high-tech, life sciences and consumer packaged goods manufacturers. Agile customers are also prospects for other Oracle applications.

"Joint Agile and Oracle customers will benefit most from this acquisition. Oracle customers now have a PLM option with richer functionality and Agile customers now have a large parent company with longer-term viability." Marc Halpern, Gartner Group

“Oracle E-Business Suite customers that adopted Oracle's PLM offering should evaluate Agile's PLM and visualisation applications to complement existing PLM capabilities. Agile's customers that have not yet adopted ERP or other classes of business applications such as CRM, SCM, or supplier relationship management (SRM) should evaluate Oracle's offerings.”

Longer term, the deal is likely to have a significant impact. “The real value is in the long game,” suggests David Mitchell of Ovum. “It offers Oracle the ability to develop into vertical markets where it has not traditionally been strong. It also offers a bridgehead to build a much stronger application business in Asia, and the ASEAN and Greater China blocks in particular. Manufacturing is important in these economies and there is a growing demand for software to support their efficient operation and tighter integration into the global supply network.

"The acquisition of Agile brings a further depth of product capability, a strong reference customer list, and a sector-skilled sales capacity. Agile, along with other pure-play companies like Dassault Systems and UGS, are strong in the PLM market – with Agile behind both of these, in terms of market share. The acquisition of SGS by Siemens earlier this month is a further demonstration of the attractive nature of this market.

“The acquisition of Agile will allow Oracle to begin to take the game to SAP in its heartland. In this respect the gloves are coming off. However, nobody should expect an immediate short-term market shift. Manufacturing and other asset intensive industries do not change software platforms easily; they sweat software assets in the same way that they sweat physical assets. A 10-15 year software sweat lifecycle is not unusual. The adage that, ‘a dog is for life, not just for Christmas’, could have been created for this market."

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