Oracle’s buyouts offer a multi-billion promise

HYDERABAD: Oracle Inc has made 32 acquisitions in the last 34 months, including of India’s i-flex solutions.

The second-largest software maker in the world coughed up $20 billion for its efforts.

The disparate nature of these buyouts has thrown up a huge opportunity to Indian software vendors and systems integrators.

Last fortnight, following months of speculation Oracle announced the “Applications Integration Architecture” (AIA), a project to glue various applications or software that came its way through the acquisitions.

The idea is to make them work with one another. Think of AIA as a giant software framework.

Based on this, Indian vendors and systems integrators will now develop ‘process integration packs’ (PIPs) or software patches - ‘middleware’ in geek terminology — that can integrate various business applications such as ERP (enterprise resource planning) and CRM (customer relationship management). The AIA is based on the open Business Process Execution Language (BPEL) platform.

What is interesting, and little known, is that a host of Indian companies have been working with Oracle for months to perfect the AIA.

Understandably, then, Oracle president Charles Philip chose to acknowledge their contribution, particularly Infosys and Sierra Atlantic, while announcing the AIA.

This is only the first part of the story.

The best part is, betting on this co-development model, the $14.6 billion Oracle is also likely to co-market its Indian partners globally.

In other words, Oracle will push Indian companies to fix the middleware its products need across the globe, which throws up a multi-billion dollar business opportunity.

Companies such as the Hyderabad-based Sierra Atlantic already have the experience of working as OEMs (original equipment manufacturer) to some companies that Oracle acquired such as PeopleSoft.

Sierra Atlantic derives 75% of its revenues from the Oracle economy.

For Satyam Computer Services, India’s third-largest software firm, enterprise business services account for 42% of its Rs 6500 crore revenues. And 70% of this 42% comes from Oracle alone.

Oracle has taken considerable inputs from Indian companies and will continue to co-develop the PIPs.

“It makes sense for Oracle too as it is discovering more end customers are seeking an Indian offshoring presence and that it will have to work Indian vendors and systems integrators,” said Feroze Mohammed, senior vice-president, global delivery, at Sierrra Atlantic.

On the other hand, for Indian companies Oracle’s AIA presents a considerable market opportunity, which will open up sometime in late 2008 with a host of new business integration applications expected to flood the market.

That’s when AIA will morph into what will be branded as Oracle Fusion applications. “This is a huge opportunity for ERP implementors like us,” said Sriram Papani, sr vice-president of Oracle Practice at Satyam.

Papani has set up a 50-member start-up team to work on it already. While this is the investment phase, big revenues should roll in from 2009, he said. Both Satyam and Sierra are already in discussion to carry forward the relationship.

An idea of the likely growth can be had from the fact that the middleware business grew from zilch to $1 billion plus in just 14 quarters for Oracle. The possibility of limited licence-fee accruals and substantial service revenues for Indian companies is the icing on the cake.

“More than the direct opportunity, we would like to look at this as the Trojan horse to get into the big deals,” said Sanjay Khendry, vice president, Sierra Atlantic.