Outsourcing is increasingly appealing to companies struggling to contain costs and make meager budget resources more effective. Initially focused on well-defined application domains such as payroll, the outsourcing model is extending its reach to more ambitious targets, including ERP (enterprise resource planning), CRM, and SCM (supply-chain management).
The benefits of outsourcing, such as lower and more predictable costs, are undeniable. Add to those advantages the ability to concentrate energy on business rather than technical issues, and it's easy to understand why outsourcing is so popular. Companies increasingly prefer to acquire solutions patterned after the Web services model, such as Salesforce.com, Upshot, and Salesnet, rather than face the headaches and cost of in-house installations.
Just when we thought we had seen them all, a new twist to outsourcing comes along, labeled with much fanfare from Oracle Corp. as TO (Technology Outsourcing). The company proposes nothing less than taking over the administration of your company's Oracle9i database or Oracle9i AS (Application Server).
Oracle is actively expanding its ASP and traditionally delivered software presence on many fronts, competing with the likes of Electronic Data Systems Corp. and IBM Corp. for global business services, and positioning its E-Business Suite as an alternative to rival solutions from companies such as SAP AG, Siebel Systems Inc., and PeopleSoft Inc. In addition, the battle for applications servers and database dominance sees Oracle9i AS and Oracle9i opposing IBM's DB2 and WebSphere.
In this tangled scenario, it would be easy to dismiss Oracle's TO offering as a marketing device designed to attract customers to 9i and 9i AS. However, the service has some enticing characteristics.
Under the terms of TO, customers can choose to have the software (database or AS) hosted on their premises or at Oracle's. As one might expect, a customer-hosted solution is less expensive (3 percent of the software license vs. 5 percent for Oracle hosting), and the option can be interesting for companies that have abundant hardware or prefer to keep their solutions under the same roof.
Customers can store their database or AS on a certified hardware configuration that includes 26GB of storage, a separate environment for test and production, and a VPN connection for remote monitoring. Predictably, additional environments, storage space, or VPN connections will increase the cost of the service.
Regardless of the software's location, Oracle provides essentially the same range of services, including administration of the hardware, database, AS, and the OS -- with the only difference being that for local deployments, hardware administration is up to the customer.
Interestingly, customers can also off-load the management of custom-or third-party application to Oracle, provided that updates are submitted in a standard format.
With its TO offering, Oracle is pursuing companies that are not satisfied with prepackaged apps such as Oracle E-Business Suite, and those that want to pursue their own development or custom integration on Oracle's database and application server.
For companies engaged in demanding development projects, removing the hefty database and application-server management chores from their agenda is a welcome relief.
Early adopters of TO report varied but significant savings, ranging from 20 percent to 46 percent of their internal cost.
Is there any cloud that could partially obscure this apparently serene scenario? The network or the connection to the service provider is the usual vulnerability of any outsourced service, and Oracle's is no exception. In fact, although the service package includes network monitoring, Oracle understandably declines responsibility for failures in that area.
The TO offering targets a potentially large number of companies that did not buy into the one-size-fits-all as well as the do-not-code messages that Oracle was loudly delivering only one year ago when promoting the outsourced version of the E-Business Suite.
TO addresses issues of solving technical problems and of realizing cost benefits. More importantly, it does not brush off legitimate business requirements that motivate companies to write their own applications and integration code. Asking customers to outsource their databases is a tough sell, but they might listen nevertheless.
THE BOTTOM LINE
Oracle Technology Outsourcing
Executive Summary: Removing the significant burden of Oracle database and application management from IT's responsibility can allow companies to concentrate on business tasks and potentially reduce operating costs.
Test Center Perspective: IT should choose the outsourcing options that best accommodate their applications and technical infrastructure.