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The engineered systems are a key component of Oracle's strategy and CEO Larry Ellison, president Mark Hurd and other Oracle executives have touted the products' capabilities in earnings calls and at events such as the annual Oracle OpenWorld conference. The products are the cornerstone of Oracle's efforts to leverage the hardware products it acquired in January 2010 when it bought Sun Microsystems.
While customers have expressed interest in the Oracle Database Appliance, the Jeffries report said, "adoption to date has not met expectations. Partners are optimistic on ODA's potential over the next 12-18 months, but near-term the channel is still working to educate customers on the benefits of implementing ODA."
The report said analysts also heard reports that the first ODA systems "had serious bugs, though Oracle appears to have resolved these problems at this point."
Oracle is facing challenges from rival SAP's HANA (high performance analytics appliance) in-memory database appliance, which some customers could adopt as an alternative to Oracle's relational database software. Many organizations that own SAP software (estimates range from 50 percent to two-thirds) run those applications on the Oracle database.
Oracle applications are also facing increased competition from Software-as-a-Service alternatives such as Salesforce and Workday, the report said, while competing open-source products are challenging Oracle's middleware products.