Q&A: Peter Fuzes

Over at the day job – a.k.a. the Budapest Business Journal – we recently scored an interview with Oracle Hungary CEO Peter Fuzes. An edited version of the piece in which Fuzes discusses Oracle’s European status as no. 2, acquisitions in the region, and ERP programs, runs below. Thanks to reporter Robert Higginson and the generally fabulous BBJ editorial team.

BBJ: What expectations does Oracle have for Hungary given that it is a small market with SAP far out in front?

Fuzes: We are experiencing a very strong consolidation wave not only in Hungary but also on the overall world IT market. Customers are looking for solutions from IT vendors that will keep them up with new innovations. They are looking for stability and vendors who will follow the technical improvements and can offer a visionary approach in terms of new IT architecture and IT solutions. We can see that small companies are struggling with providing customers a complete vision for the future and the capability to execute it. Oracle is one of the market leaders that’s acquiring and also growing through its own development, providing customers with the features and functionality that they need. This is the same in Hungary, where the market is becoming consolidated around a few larger companies.

BBJ: How many larger companies do you think the market has room for?

Fuzes: Globally, there are four major companies playing a strong role in IT: ourselves, SAP, Microsoft and IBM. In Hungary we see the same trend whereby local systems integrators are acquiring smaller ones. Companies like Freesoft and KFKI have played this role in Hungary.

BBJ: Oracle has bought many firms, especially in the US, but how can you make your solutions take account of European- and Hungarian-specific issues?

Fuzes: If it’s a very special solution for one particular, we rather work with a local partner company to tailor the solution to the requirements. The acquisitions we’ve made have focused on technology or customer-oriented solutions but not only for one country. When Oracle makes an acquisition it’s not for one specific feature but rather a solution that can be used by many companies. We’ve acquired more than 30 companies in the past two years and it’s required a very effective internal machine to integrate those companies into Oracle.

BBJ: Local ERP firms see their niche in providing locally specific solutions that could be added onto a big company’s system. Do you intend to cooperate with them or fight them and offer all solutions yourself?

Fuzes: What we’re doing with a number of local companies is to offer them our core solution and if they have a module that’s specific to the Hungarian market we then work with our partner who offers it to the customer as a total solution.

BBJ: Would you work with companies that are direct competitors in that they offer their own full ERP suite?

Fuzes: Yes, we see the opportunity in working with such companies. The customer needs infrastructure, the operating system, database, ERP and other solutions. It’s quite possible a company would provide the ERP solution to the customer and we put a reporting structure on top of it that provides the customer with business intelligence and other reports. There are many cases of this in Hungary already and it is very common in IT these days. It would be great for us if the customer only bought wall-to-wall Oracle, but when the customer already has a preference for existing systems the question is how we can work together. We’ve done a lot of work on standardization and interoperability to ensure that our business intelligence or our middleware, for example, works with other ERP solutions.

BBJ: Are you eyeing up any acquisitions in this part of the world?

Fuzes: We acquire firms that complement our portfolio. While we’re growing our portfolio through our own internal developments, we know we can grow faster through acquisitions. If we see a special feature that doesn’t exist within our portfolio, it could happen that the company’s in this part of the world.

BBJ: You said a couple of years ago that the PeopleSoft/JD Edwards would help you gain ground on SAP. Where do you stand now?

Fuzes: Globally Oracle is growing much faster than SAP, even without taking our acquisitions into account. With the newly acquired companies we’re growing around ten times the speed of SAP. In Hungary, with PeopleSoft/JD Edwards and our eBusiness suite, we have closed the gap between the new sales of SAP and the new sales of Oracle. SAP still sells more than we do but not much more these days.

BBJ: Is it true that a lot of ERP installations made in the 1990s could be ready to be replaced? Does this represent an opportunity for Oracle or do customers tend to upgrade with the existing provider?

Fuzes: On a worldwide scale there are quite a number of cases when a customer decides to swap from SAP to Oracle, or vice-versa. In Hungary for whatever reason we haven’t really seen switching by customers who have large systems installed. Probably the reason is that Hungarian customers are eager to customize within their own systems, which costs a lot. Customization is a good short-term solution [but] by doing this the customers lock themselves in, since it then becomes horribly expensive to replace the system.

BBJ: Do you put Oracle at number two on the local ERP market or is Microsoft claiming that spot?

Fuzes: We put ourselves in the number two position, although we’ve seen that Microsoft has had some success. However, when there’s a competition for a large system installation it’s usually between SAP and us. Microsoft is more of a threat in the SME market.

BBJ: Who is winning the battle for the SMEs: Local smaller firms or the big international providers?

Fuzes: If you talk to a small firm that has its own ERP solution, they will tell you that the small firms are winning, but my view is that there is a major consolidation wave going on and that the big firms are winning it. Even a lot of smaller firms who have their own ERP system are considering selling a large firm’s ERP system. They put their own specialized modules on top of it to resolve the one problem that can’t be solved by the large company’s ERP system, rather than competing for the ERP system.

BBJ: Is it in the SME segment in which the action is, or is that the industrial segment?

Fuzes: The SME is certainly one of the most dynamic. In the industrial segment, the tax increases of the austerity package have seen firms hold back on new investments. The financial services segment comprising banks and insurance companies is booming, though. People are taking more loans from the banks and signing more insurance contracts, and this is driving the need for ERP, CRM. data warehouses and Business Intelligence. Also, over the last six months, we’ve had large governmental projects related to EU accession, such as biometric passports and Schengen border agreements, and governmental reforms.

BBJ: Given that companies have had to pay part of the development costs themselves, what kind of take-up of EU funds has there been for ERP development on the part of Hungarian SMEs?

Fuzes: On a regional comparison the take-up in Hungary has been reasonably big and in terms of the money available compared to the money consumed, Hungary has exceeded several of its regional peers. It started slowly with the government set-up unable to distribute the money faster in the initial phase.

BBJ: Does the Hungarian language pose problems for localization of software?

Fuzes: It hasn’t been a big issue for us, but it is more difficult to follow the regulatory changes that are more frequent than in other countries. The regulatory environment is less predictable than in Western European countries.

BBJ: How quickly can you react to these changes?

Fuzes: There are two solutions: one is to update the system on the spot to solve the problem, maybe spending one or two days on the customer side, and the other way is to change something within the system and then distribute it to the customer. It normally takes a few days or a few weeks as there are legal deadlines, and we have to give the software to the customer in time to keep to their deadlines.