Ever wish you could pass some of your company’s tech headaches on to someone else?
Oracle’s recent announcement that it is broadening its Internet services may provide an impetus for your business to do exactly that. The Dynamic Services Framework, which the software company unveiled this month, is designed to ease the linking of business services and applications across the Web.
Within this framework, Oracle will help businesses offer services like stock quote lookups and currency conversions on the Web. The service also lets businesses use software via the Web from application service providers (ASPs) such as Oracle’s own Business Online.
Bruce Bond, vice president of enterprise and supply chain management with the research firm Gartner Group, tells CFO.com that Oracle is thinking of the Internet as a platform that will eventually supercede today’s Microsoft- ruled desktop.
“Oracle is trying to rule the Internet,” says Bond, and the way to do that is to develop “the technologies and applications that make [Oracle] the heart of what businesses are running.” Oracle’s strategy is to deliver applications across the Internet with the expectation that eventually enterprises will go to one source to obtain all their Internet-based applications, in the same way that they now go to Microsoft to get desktop platform applications.
“That is how [Oracle] plans to rule the world,” Bond says.
Whether Oracle’s CEO Larry Ellison bests his archrival, Microsoft’s Bill Gates, is still to be determined, but the company did have the good timing to announce the Dynamic Services Framework just a few days before it released its results for the second fiscal quarter ended Nov. 30.
During the quarter, Oracle earned $623 million, or $0.11 per share, on sales of $2.7 billion, beating Wall Street forecasts by a penny per share. In the year earlier quarter, Oracle earned $384 million, or $0.06 per share, on sales of $2.3 billion.
Meanwhile, Microsoft, on the same day that Oracle’s results were released, warned investors that its results for its Dec. 31, second fiscal quarter, will be short of Street forecasts.
It wouldn’t make sense to count Microsoft out based upon one poor quarter, but both Mister Softee and Oracle are betting heavily on the Internet. Microsoft’s Net strategy, called .Net, has been slow to take shape, and isn’t expected to be commercially available for another two years. That hasn’t escaped the notice of Oracle’s executives, who made a point of calling their offering .Now.
Oracle’s revenue growth was due in large part to a 66 percent increase in sales of its Web- enabled business management software. Meanwhile, revenue for its flagship database business grew merely 19 percent.
The spike in demand for Oracle’s Web software materialized after the company’s May release of the 11i E-Business integrated set of applications, which includes marketing, sales, procurement, supply chain management, accounting and human resources. On the one hand, the company is emphasizing Web services after the dot com sector has burned out, but this year has also seen traditional Old Economy companies meld the Web into their core business strategies, and this is a trend that Oracle hopes to capitalize upon.
“Companies are absolutely moving away from client-servers toward a Web-based architecture,” says Andrew Roskill, an analyst at UBS Warburg. An application that is “Web- enabled” simply means that the old Windows- based, client-server product is now accessible through a Web browser, allowing access from a variety of devices and locations.
For Oracle the ASP model, is “another way to deliver their products,” says Gartner Group’s Bond.
Warburg’s Roskill says, “An ASP model is something [Oracle] would like to see become successful longer-term, but I think they recognize that it will be a long-time before it becomes a meaningful contributor to its business.”
Last year, the company launched its BusinessOnline ASP site. The site includes a service, SalesOnline, that allows sales forces to track sales and customer information, and analysts expect that future Oracle service offerings will be based on the SalesOnline model. BusinessOnline also includes OracleMobile, which provides Web content over cell phones.
Oracle has a good reason to bet on the ASP model. According to a report from the market research firm, Forrester Research, the E- Business Web hosting market will reach $11.3 billion in 2003. Forrester forecasts that E- Commerce applications, such as Oracle’s 11i E- Business software, will account for 42 percent of Web hosting revenue in 2003.
Although the ASP market has expanded in recent years, large companies remain wary of the hosted model. “I think the majority of applications today are still being bought in the traditional way,” says Roskill. Web hosting, he adds, is particularly appealing to small and medium-sized companies that can’t necessarily afford to maintain an on-site IT infrastructure.
The ASP model may very well mushroom, however, as an increasing percentage of traditional bricks and mortar businesses Web-enable their applications.
Lori Orlav, Research Director of E-Business applications at Forrester Research, stresses that traditional bricks and mortar companies are moving a larger percentage of their operations online, and Oracle does not have much competition in offering a set of integrated business applications.
Orlav says, “This is certainly a strategy that enables Oracle to tackle the whole bricks and mortar company population out there regardless of dotcoms coming and going. In that sense it is a good strategy.”