Introduction
I have explained about the different methods of user provisioning in the previous article here. If one were to go with 'Unconditional Provisioning' (automatic provisioning) of new users from OID to FND_USER table, then one has to consider an important restriction on how such users be placed in the Directory Information Tree in OID.
New User entries that are created in OID and have to be automatically provisioned (created) in FND_USER table must be either placed in the default USERS container or any container that is a sub-tree of the USERS container. If the user entries are in a sub-tree that is at the same level as the default USERS container, then such entries will not be automatically created in FND_USER table even if the 'Applications SSO Enable OID Identity Add Event' system profile option is ENABLED.
Conclusion
This restriction should go away in future releases of Oracle Identity Management, but as of now, the latest 10.1.4.2 does have it. One can load all users in OID in the default USERs container, however for better management and administration purposes, it is always recommended to create normal users in a sub-tree container.
