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In its acquisition of PeopleSoft in 2005, Oracle was primarily motivated by the opportunity of obtaining all the rights on the company’s product line, as well as the technologies it used. It should be noted that Oracle was planning to release a new product named Oracle Fusion, which has utilized some of the technologies developed by PeopleSoft. Therefore, it is clear that this factor was the major driving force of the acquisition process. In addition, the acquisition of PeopleSoft has resulted in its removal from the market of enterprise resource planning software, thus reducing the competition. Moreover, the company has announced that the current users will able to upgrade PeopleSoft software to Oracle’s Fusion product line. In turn, this announcement may result in an increase in the number of customers of the company, since the support of the PeopleSoft software was discontinued after the acquisition. Therefore, it is possible to say that the desire of controlling a larger share of the enterprise planning software market has also motivated Oracle to acquire PeopleSoft.
Oracle Fusion is a new enterprise planning software developed by Oracle. Its name reflects the principle used during its development. In particular, Oracle Fusion uses the elements of the other similar product lines of the company, namely E-Business Suite, EnterpriseOne, and PeopleSoft. Being developed as a replacement for the products offered by PeopleSoft after the acquisition, it provides an opportunity to upgrade the acquired application to the Fusion version, as well as to convert and transfer almost all data from the old system to a new one. In addition, it offers the feature of automation of documentation tasks and asset of tools for conducting fit/gap analysis, making it a versatile tier I software solution.
The current maintenance costs for Oracle products paid by Big Valley are 260,000 dollars per year. It should be noted that this sum is actually a 20% license fee, meant to fund the development of the new software by Oracle, namely its Fusion product line. By taking into account that the price of the new solution accounts for 1,300,000 dollars, it is possible to calculate that Big Valley will be able to purchase Oracle Fusion in five years. However, this figure will only be true if the license fee remains unchanged.
The primary hurdle that is associated with upgrading the PeopleSoft software to Oracle Fusion is the use of the different data model that is based on Oracle E-Business suite rather than on PeopleSoft solutions. In turn, it results in the lack of compatibility between the two platforms. Thus, the upgrade will be accompanied by the conversion of all the data from the old system to make it compatible with the new one. Such process is associated with the risk of corruption and loss of the important information, which may lead to an error in calculations that may have an adverse effect on the entire city. Another hurdle is the need to possess the latest version of PeopleSoft products (versions 8.8. and 8.9) for the upgrade. Thus, some of the users of PeopleSoft will have to update their software, which will result in the additional maintenance costs, as well as a significant time loss. In addition, the upgrade will require the company to conduct a fit/gap analysis in order to assess its readiness for the implementation of Oracle Fusion. In turn, it will require the use of specific tools, and, therefore, additional funding from the side of the firm. Moreover, the previous PeopleSoft customizations are unlikely to be upgraded i.e. they are not compatible with Oracle Fusion, which increases the risk of errors and malfunctions in the work of the system. Finally, reports, which were an object of large investments of PeopleSoft users, cannot yet be transferred to Oracle Fusion. In turn, it means that the customers will be unable to use this information efficiently after the upgrade due to the inability to transfer it to the new program. The combination of all the above-mentioned hurdles may become a source of the most significant risks for Oracle. In particular, the users that are not satisfied with such product vision are likely to switch their attention to other providers. It is clear that the users will favor the vendors that offer the better conditions and have an adequate price/performance ratio. As a result, the company may lose a significant amount of customers, which will lower its market share, as well as profits.
Among the support services that should be covered by the third-party maintenance, it is possible to distinguish the two following ones:
Freezing the software at a particular level refers to the work with the same version of a program throughout the time without updating it. In the short-term perspective, such an approach is unlikely to pose any significant threats or problems to the user. However, in case the software, namely that which is used for enterprise resource planning, remains frozen for an extended period of time, the consequences for the user may be rather severe. On the one hand, the lack of updates saves both money and time for the user. For example, the upgrade of enterprise resource planning software by PeopleSoft required Big Valley to pay two million dollars and a whole year to finish. However, the negative consequences outweigh the positive ones. First, the non-updated software tends to get old, thus often being unable to satisfy the growing needs of the user. In addition, it usually has more bugs and errors in its program code in comparison to the updated versions. Therefore, its stability is lower, which results in an increased risk of malfunction, and, therefore, data corruption or loss.
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The best type of the third party maintenance support is the so-called cold fusion. It involves partly switching from the services of the official provider to the third-party organizations. The primary advantage of such approach is its flexibility. In particular, the company has a variety support services to choose from offered by different providers. Such diversity makes it possible to analyze the market of such services to define the most feasible solution. In turn, it may lead to the reduced maintenance costs since the conditions offered by third-party organizations may be quite different from those listed in the contract by the official provider. However, at the same time, the agreement with the software vendor remains in power. Thus, in case the third party is unable to address certain problems or issues, the company still has an opportunity to turn to a provider for help or update.
The best of a breed solution is a software that is considered the best in its class. Namely, it possesses the highest stability and performance in its category. However, it is also a niche product, i.e. its functionality is rather limited so it can perform only specific tasks with maximum efficiency. Resorting to such a solution is one of the possible ways of addressing the problem of discontinued product line by PeopleSoft and the need to upgrade it to Oracle Fusion. It should be noted that Big Valley operates on the local level, namely in a single city, i.e. its functions are rather specific. Thus, its work may not require the diversity of options provided by the uniform products, which also increase their price. Moreover, it already uses certain niche products, such as Kronos time tracking and airport management system, which means it has an experience of searching and comparing the offered software solutions. Thus, the product that is more specialized and, therefore, less expensive in terms of both purchase and maintenance, might be the best option for Big Valley. Therefore, it is possible to say that the best of a breed solution can be considered feasible for the company.
Prior to making a decision on the further course of actions, the management of Big Valley should consider the following aspects. First, it is required to assess the readiness of the organization for the change. In particular, Big Valley can perform an upgrade on Oracle Fusion rather easily, since it already has a basis for this procedure, more specifically PeopleSoft products that were recently updated to their latest versions. However, there will be a need to remove any undocumented customizations from PeopleSoft software since there is no guarantee they will also be upgraded. At the same time, resorting to other solutions (SunGuard and GEMS) requires complete reconstruction of the entire Information Systems Department and a major retraining of the staff. In addition, the company is required to conduct a thorough testing of the new software by using both test and real data. This step is especially important in case Big Valley chooses to upgrade to Oracle Fusion, since information transfer may pose a problem due to a completely different data model. In this case, testing will allow avoiding the disastrous combined impact of minor issues (i.e. a snowball effect) as in the case of Hewlett-Packard’s SAP implementation.
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The option of moving to a single-vendor model can be rather attractive for Big Valley. First, it simplifies the process of negotiations with a vendor, making it possible to use all the enterprise resource planning software on equal conditions. In addition, such model also reduces the need for the diversification of the staff, i.e. the involvement of a large number of various specialists, since all of them must be proficient in work and maintenance of only one type of software rather than many solutions by different companies. The local nature of Big Valley operations renders many of the functions offered by these vendors unnecessary, making it possible to move from the tier I software (i.e. the uniform solutions intended for the use on a global scale) to more specialized programs. In fact, currently, Big Valley uses the solutions provided by a variety of vendors, namely Kronos time tracking, HTE utilities, and airport management system, which provide additional functions and support that are not included in the tier I software. In turn, the transfer to a single-vendor model will require major retraining of the staff involved in the work with the abovementioned software. Nevertheless, by taking into account the abovementioned benefits, as well as the reduced maintenance costs, it is possible to assume that it is best for Big Valley to move towards a single-vendor model.