Oracle 2010 Annual Report Download - page 21

Table of Contents
Key competitive factors in each of the segments in which we currently compete and may compete in the future include: total cost of ownership, performance,
scalability, reliability, security, functionality, efficiency, ease of management and quality of technical support. Our product sales (and the relative strength of our
products versus those of our competitors) are also directly and indirectly affected by the following, among other things:
• the broader “platform” competition between our industry standard Java technology platform and the .NET programming environment of Microsoft;
• operating system competition among, primarily, our Oracle Solaris operating system, Microsoft’s Windows Server, UNIX (including HP-UX from
HP and AIX from IBM) and Linux;
• the adoption of SaaS, hosted or cloud software offerings;
• the adoption of commodity servers and microprocessors;
• the adoption of open source alternatives to commercial software by enterprise software customers;
• products, features and functionality developed internally by customers and their IT staff;
• products, features or functionality customized and implemented for customers by consultants, systems integrators or other third parties; and
• attractiveness of offerings from business processing outsourcers.
For more information about the competitive risks we face, refer to Item 1A. “Risk Factors.”
Manufacturing
To produce our hardware systems products, we rely on both our internal manufacturing operations as well as third party manufacturing partners. Our internal
manufacturing operations consist primarily of final assembly, test and quality control of our enterprise and data center servers and storage systems. For all other
manufacturing, we rely on third party manufacturing partners. We distribute most of our hardware systems products either from our facilities or partner facilities.
Our manufacturing processes are based on standardization of components across product types, centralization of assembly and distribution centers and a
“build-to-order” methodology in which products are built only after customers have placed firm orders. Production of our hardware products requires that we
purchase materials, supplies, product subassemblies and full assemblies from a number of vendors. For most of our hardware products, we have existing alternate
sources of supply or such sources are readily available. However, we do rely on sole sources for certain of our hardware products. For example, we have a
long-standing relationship with Fujitsu Limited for the development, manufacturing and marketing of certain of our SPARC server components and products. As
a result, we continue to monitor the situation in Japan caused by the recent earthquake and tsunami and will continue to evaluate the resulting potential risks of
disruption to our supply chain operations. Refer to “Risk Factors” included in Item 1A. of this Annual Report for additional discussion of the challenges we
encounter with respect to the sources and availability of supplies for our products and the related risks to our business.
Research and Development
We develop the substantial majority of our products internally. In addition, we have extended our product offerings and intellectual property through acquisitions
of businesses and technologies. We also purchase or license intellectual property rights in certain circumstances. Internal development allows us to maintain
technical control over the design and development of our products. We have a number of United States and foreign patents and pending applications that relate to
various aspects of our products and technology. While we believe that our patents have value, no single patent is essential to us or to any of our principal
business segments. Research and development expenditures were $4.5 billion, $3.3 billion and $2.8 billion in fiscal 2011, 2010 and 2009, respectively, or 13% of
total revenues in fiscal 2011 and 12% of total revenues in each of fiscal 2010 and 2009. Rapid technological advances in hardware and software development,
evolving standards in computer hardware and software technology, changing customer needs and frequent new product introductions and enhancements
characterize the software and hardware markets in which we compete. We plan to continue to dedicate a significant amount of resources to research and
development efforts to maintain and improve our current product and services offerings.
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Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠