Oracle ended the fourth day of Oracle Open World with a loud and clear message of putting Fusion Applications in the limelight after years of saying little about its heavy investment. However the real story is whether the return on its investment is going to be imminent.
Under our forecast model explained below, the new product line could contribute $360 million, or 10.5% of its applications license sales, to its top line by FY2015.
In a 90-minute keynote, Larry Ellison, its CEO, and his product managment team capably led by Steve Miranda, touted the advanced and flexible capabilities of the new ERP suite, which are designed to be easily implemented as on-premise or on-demand applications.
As a result the product suite, which is likely to be implemented in a modular fashion because of its flexibility and coexistence capabilities with current Oracle applications or any other application for that matter, is primarily positioned against best-of-breed on-demand products such as talent management apps from Taleo and others that have been growing dramatically over the years – sometimes at the expense of traditional ERP vendors like Oracle and SAP.
Throughout the five-day event, the key message is that the new product suite, which will become generally available in first quarter of 2011, offers an intuitive user interface and many tightly integrated features including distributed order orchestration that facilitates enterprise-wide collaboration.
While the expectations have been set fairly low for its early adoptions, Ellison projected only 100 customers would purchase Fusion Applications in its first year.
Under our model that is based on the similar trajectory of on-demand vendors such as Taleo, the impact of Fusion Applications could amount to $10 million in additional product revenues for Oracle in FY 2012, which would be the first full year of its shipment.
Then revenues of Fusion Applications could jump to $80 million in FY2013, using the same growth trajectory of Taleo in its early days. That would amount to 2.8% of Oracle’s applications license revenues, which are likely to grow at 10% a year over the next few years, a rate that is expected to surpass the industry average because of its healthy acquisition appetite that results in considerable cross-sell and upsell opportunities.
In its third year, Fusion Applications could post $240 million in product revenues, again using the same trajectory of Taleo. For Oracle, that would amount to 7.7% of its applications license revenues in FY 2014, which could top $3.1 billion by that time, compared with $2.8 billion in FY 2013 and $2.5 billion in FY 2012 and $2.3 billion in its current fiscal year.
If the same trajectory continues, Fusion Applications could amount to $360 million in product revenues for Oracle in FY2015, or 10.5% of the projected apps license sales of $3.4 billion by that time.
While the projections are fairly modest for a product suite that Oracle has been investing so much over the past five years, the payoff could start having an impact by its fiscal year 2015, 10 years after its purchase of PeopleSoft for $10 billion in December 2004.
Follow me on Twitter @appsruntheworld and tell me what you think of Fusion Applications suite and its revenue potential by emailing at apang@appsruntheworld.com