Oracles Take Oracle.com, the successor to the business online brand under which Oracle first sold its managed application services, is a major priority at the companys imposing headquarters in Redwood Shores, Calif. One example: Oracle salespeople are getting a 10 percent bonus over their regular commission for selling software as a service.Oracle wants companies to use its entire applications suite, modifying their processes to fit its software, rather than vice versa. And it expects the integrated world of the services model to encourage companies to conform. "We build all the software, so we dont spend a lot of time integrating the pieces together," Oracles Burton said. "If you use online services, it costs you less money." The trade-off is the lack of user flexibility. "In the hosted world, you cant do everything the customer wants," Burton said. "There have to be constraints, because that is the only way to scale. Youve got to minimize the choices, and companies need to change to more standardized business processes." Will the services suite approach work? Maybe. "Oracle is trying to do what Microsoft did in the productivity market by bundling everything into a suite," Russell said. "Some companies will sacrifice for ease of use and lower cost of ownership, and over time they will make the product better. At the end of the day, people will like having software from a single vendor." But because some companies want to stick with applications from multiple vendors, Oracle is working both sides of the street. Ellison used to say Oracle applications would be sold by third-party ASPs over his dead body. He relented last year. "They display a fairly obvious case of schizophrenia," Gartners Pring said. "Oracle is run by such aggressively commercial people, and at the end of the day, they sell what they can. They will track customer interest and tie in with what works." Oracles change of business has been good for Qwest Cybersolutions, a unit of Qwest Communications International and one of the healthier ASPs. "The software vendors used to call all the shots, but now its different," said QCS CEO John Charters, who has an Oracle engagement that supports 10,000 users at one networking equipment company. "Oracle is bent on allowing us to become a reseller because we built market momentum. Customers arent going to buy all their software from one vendor." Still, Chou said third-party ASPs are merely information technology outsourcers, and that only vendors can deliver the true benefits of managed software. "The intellectual property at a software company is its fundamental infrastructure for delivering business processes," he said. "Thats how you get the enormous benefits on time and cost." No matter which company delivers it, Oracles enterprise software is still priced on a licensed basis, rather than the rental model associated with services. Large companies generally prefer to own software, and Oracle likes to sell big-ticket licenses. And, Oracle argues, the availability of perpetual and limited-term licenses, along with financing options, provides users with the same financial benefits as rental. "Oracle financing is useful as we move into more medium-sized businesses who can afford our applications for the first time because of the lower support costs," Burton said. The story is different at the small-business end of the market, where Oracle is trying to establish a foothold. Burton said that Oracles Sales OnLine has 20,000 customers. The software itself is also changing to be more Web-friendly. "Were making our software easier to use for large and small businesses," Burton said. A hosted procurement and payment service was announced in mid-June, for example, while hosted customer relationship management applications can now be up and running in 90 days. The CRM offering has not yet set the market on fire, Burton admitted. "A number of customers are interested, but we have not begun implementation," he said. Database services could be provided by Oracle or third-party ASPs, or as part of a specialized vertical offering. Oracle would like to do it all, but the market will decide how the services will actually be delivered. Regardless, a major change for Big Software is under way.
The company is changing its culture and mentality to become more services-oriented, Oracles Chou said. "We are moving people from patch-chasers to application managers. The old way is you patch it for each customer, onesy-onesy nothing wholesale about it, and the cost is astronomical."