NEWTON, MASS. — Oracle’s latest plan to target rival SAP’s customers involves moving to a componentized application stack powered by Web services and newly created Fusion middleware. Company president Charles Phillips detailed the new strategy at a recent customer event here, and stuck around afterwards to field reporters’ questions. Here are some excerpts from that session:

Being successful in the applications business is probably the best thing for our database business. Charles Phillips, president, Oracle Corp.

Will there be a process of moving functionality from the applications today into this new superset you’re calling Project Fusion. Will they actually be taking code from applications that exist today or will it be just a complete rewrite?
Charles Phillips: If you embrace Web services and component architectures, you can do it more incrementally. And so, it depends on the functions. What we’ll do is look at best of functionality across all of these groups. [We’ll] look at it functionally. Then, once you identify specific processes or services that need to be componentized, those will be componentized across all of the applications. It will be one component at a time and one process at a time, not only done by business [but by looking at] what is the natural business flow for these particular processes.

Oracle talks about Project Fusion as being an effort to combine the best functionality across its different product lines. Can you give me some examples of what those ‘best’ pieces of functionality are?
Phillips: For instance, in construction and engineering industries, J.D. Edwards was the leader in that market for many years. We were number two, but only recently number two. They just had some functionality for home builders that we didn’t have. So, obviously, we want to leverage that. Other areas include its designer technology. I would say that while we were probably better at scaling and our software had a better user interface, [J.D. Edwards] had a great utility for designer code which we’ll leverage across all of our applications.

You’re going to this process-based set of applications, where people more or less create processes as opposed to just horizontal applications. You also currently have a hierarchy of products, some for the very largest corporations, some for smaller companies and even some for Mom and Pop shops. As you do this Fusion, is there going to be several layers of complexity that would suit the biggest enterprise and then filter down? Will there be some sort of Oracle small business suite that evolves out of this?

Phillips: Well, we have some small business products now. There is the Oracle E-Business Suite Special Edition, which is a preconfigured version. And then, of course, with J.D. Edwards there was a mix of customers. They did have some pretty large customers, but currently they had more of a mid-market focus. If you look at their channel of distribution, they had some channel partners who didn’t have the application where they are. We’ve already gone out to that channel and told them they’ll keep the margin structure that they had with J.D. Edwards, which is higher than what we normally offer because we want to keep those partners. And then in addition to that, they will also be able to add [Oracle E-Business Suite Special Edition] to their suite of products. So if they want to sell either one of them they can do that. Precisely, we want to focus on that market. We’re always going to have a low end strategy, and right now that’s the strategy that we’re taking. Channel distribution is important because we just didn’t have a way of reaching those customers with a direct selling model, and now we do. 

Is everything in the Application Server suite going to be certified to run on Fusion middleware?
Phillips: It’s more than that. It’s everything that’s in the Application Server, [plus] the customer data hubs, and the [Oracle] Collaboration Suite. Anything that is not an application for the grid database is included. Application Server is broader than most other people’s application servers because it includes business intelligence (BI) and ILM (Information Lifecycle Management) and things like that. But there are other things that weren’t in it that are in Fusion middleware. Data hubs are just kind of a new category that wasn’t part of anything, for instance, and the whole Collaboration Suite. We’re including all of that as part of the Fusion middleware platform and applications.

Right now, you’ve got a lot to digest in terms of the acquisitions that you’ve made. Are you looking now to target existing SAP customers and bring them over, or are you primarily focusing on hold what you have and fetching some new business here and there.
Phillips: You know Oracle. We’re always on the attack. [laughs] What we’re seeing is a lot fewer of [SAP’s] customers have upgraded to the current release than people think. They’re not sure what the value is of an upgrade. SAP is kind of drawing a line in the sand and de-supporting some of those products over time. SAP is changing their architecture rather dramatically and promising all of these supported services that will require some major changes. And to have to go through such a hard upgrade, customers might as well look and see what’s out there. We’ve been in the news enough where they know that this is the other major choice they should probably be considering. Most of those customers are already using our database or they have some relationship with us. We have some opportunity, I don’t know how big, to go back in to some of these customers and say, ‘At least evaluate us.’ We’ve just announced internally an SAP battle desk that globally will help us do just that.