If you went to Collaborate last week, chances are good that you heard an Oracle executive mention some recent management changes within the company’s Applications Group. While the changes were subtle, they could influence the course of JD Edwards applications in ways that are difficult to foresee at this point. That makes the changes important enough for us to watch Oracle closely and see if it behaves differently in the coming months.

So…what management changes did the software giant make? It asked Edward Abbo—a former Siebel executive—to become Senior Vice President in charge of strategy and development for all of Oracle’s existing application lines. That includes Oracle E-Business Suite, PeopleSoft, Siebel, and JD Edwards. As a result of Abbo’s promotion, the general managers of these product lines no longer report to John Wookey, who used to hold Abbo’s title. They now report to Abbo, who reports to Wookey.

ed-abbo-with-caption.jpgIn addition, Oracle asked Lenley Hensarling—the General Manager of EnterpriseOne applications—to serve as Vice President in charge of both EnterpriseOne and World. While John Schiff remains the General Manager of World applications, he now reports to Hensarling.

A Quick Reality Check

At this point, it would be natural for World users to get nervous. After all, their GM used to report directly to John Wookey, but now has two executives between him and his old boss. Does this mean that World is being marginalized? And what about EnterpriseOne and the other applications? Will Oracle pay less attention to them now that there is one more management layer between the top brass in Redwood Shores and their product portfolio?

To answer those questions, let’s start by acknowledging that Oracle would eventually have had to inject more executives into its Applications Group. After acquiring 32 companies in 32 months, the company faces the enormous challenge of enhancing hundreds of existing applications, simultaneously building Fusion Applications, and developing upgrade paths from current product lines to Fusion. It was one thing for Oracle to ask Wookey to oversee all of these tasks two years ago when PeopleSoft was the vendor’s only major acquisition. It is altogether another thing to ask Wookey to shoulder that burden today. That, in my opinion, is the main reason why Abbo is assuming day-to-day management of the existing product lines. Wookey needs someone to relieve him of that growing burden so that he can concentrate on Fusion Applications. Having that help could be vital to delivering the first Fusion Applications in 2008 as planned while sustaining today’s product lines.

As the sheer number of applications in Oracle’s portfolio grows, it is also logical that the number of management layers should grow as well. Because of Oracle’s acquisitive ways, many executives are now saddled with significantly more direct reports than they had two years ago. That makes it increasingly difficult for the company to keep its org chart flat. I believe this is the reason why Schiff now reports to Hensarling, who reports to Abbo. It is not a sign that the World team is being relegated to a less influential position; it is part of a broader effort within Oracle to limit the number of direct reports per executive to something that approaches sanity. It should have no effect on Oracle’s development plans for World, which continue to be well funded and aggressive.

A Sign of Growing Stress?

While these answers may bring comfort to JD Edwards users, they raise an important question. Is Oracle on the road to a management structure that could become too layered and complex to ensure customer satisfaction and sustain rapid change? So far, the company has done an excellent job of absorbing company after company in its drive to become an enterprise application leader. However, trees do not grow to the sky. Oracle may be approaching an inflection point where it must take a break from its acquisition spree and focus more on how it manages those acquisitions. If it were to reach such a point and press forward, it could become bogged down in organizational issues that would make it less competitive and leave its customers less satisfied.

I am not saying that the recent management changes are a portent of such problems. Oracle could continue to manage its growth very well for a long time to come. However, it pays to watch any company closely when it starts adding new layers to its org chart. For all of its heady charms, rapid growth is one of the toughest management challenges that any company faces.