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Oracle Comes Out of the ASP Closet

It's taken some time, but Larry Ellison's vision of software being delivered as a service is coming to fruition — all Oracle products are now available in ASP-enabled versions.

Read and React
"One of the things that Oracle needs to do better, and I think we are doing better now, is to make everyone aware of what our strategy is."

— Paige O'Neill
Senior Director
Online Services Marketing
Oracle Corp.


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Oracle's March launch of Oracle E-Business Outsourcing marks the beginning of a long-anticipated corporate-wide shift away from on-site, packaged products to delivering business solutions via an ASP model. To achieve this objective, the software giant has had to reinvent itself from the inside. This type of repositioning is no small feat for a once nimble company grown fat on literally hundreds-of-thousands of customers worldwide.

"It's really a top-down and a bottom-up approach that has taken some time to reach critical mass," Paige O'Neill, Oracle's senior director of Online Services Marketing, told ASPnews. "Oracle's a big company and it takes a long time to change the thinking of the salesforce, the developer organization and our support organization."

Changes in Aptitudes, Changes in Attitudes
From every software developer, help desk representative (there are 5,000 worldwide), department manager and salesperson to the highest levels of the company's management, most of Oracle's energies over the past year have been directed at changing its corporate mentality and retraining its staff. Without this unified message, success as software-as-a-service provider would be dubious at best.

With the addition of its database and application server product as ASP offerings in the first week of April, Oracle considers the transition complete. Or at least it is complete enough to move forward with its initiative. Although, admits O'Neill, there is still work to do.

In Oracle's case, mending partner relationships and communicating better with vendors and customers has been a neglected priority.

"It's fair to say that those companies have not been as happy with Oracle as they could be over the last couple of years; I think it's very fair to say that," she said. "One of the things that Oracle needs to do better, and I think we are doing better now, is to make everyone aware of what our strategy is. That's something we continue to work to improve. Is there still work to be done? Absolutely."

Even so, Oracle does not anticipate any ASP partner backlash due to its reorganization as an ASP vendor. Oracle says that the market is big enough all comers. Also, because they have no set-in-stone relationships, there isn't anyone being compromised. Even its relationship with ASP AppShop, which sells nothing but Oracle applications, is a cooperative, informal arrangement (although AppShop's Web site does prominently display an Oracle Partner Network/Certified Partner logo.)

Timing Right for Oracle, the ASP
The timing of Oracle's launch, although fortuitous in terms of improving economic conditions, has little to do with outside forces or market conditions. Rather it is due to the culmination of the many internal changes over the past year. Its retraining is complete; the last two products —its database and application server #&151; are ready to be delivered via the ASP model; and it has two years of customer metrics in hand to prove to its salesforce and customers alike that the ASP value proposition is real.

To make good on all of this effort, and, in anticipation of this quarter's launch, starting six months ago Oracle chairman and CEO Larry Ellison directed all Oracle's sales representative to include an outsourcing option in their quotes — even if the customer didn't ask for one.

Interestingly, though, not much has changed in the way Oracle will be billing for its services. It will still sell licenses and charge 22-percent annual maintenance fees. But customers now have the option of paying five-percent of the license fee every month for Oracle to host their software.

Customers can also add 3 percent-per-month for remote management services if they want to house their application in non-Oracle data center, but have Oracle maintain it for them. Licenses can be paid up front or over time, leveraging the annuity model.

Oracle's reasoning for this grab bag of options: flexibility. They want to give customers as many ways as possible to buy Oracle solutions. In this way, customers not entirely comfortable with outsourcing can dip a toe in the hosted-application water, picking just those services they want. Ultimately, though, the goal is to move all of its clients into the service provider model. This way, Oracle thinks it can bring to bear all the benefits of the ASP value proposition to its customers while increasing its annual revenues over the next decade by billions.

"There are different flavors that we offer because a lot of customers are not ready to have Oracle take over their entire hardware and software stack," O'Neill said.

Oracle Wants It All
The next step, and one that may take a while, is integrating its enterprise resource planning (ERP) E-Business Suite with Oracle Small Business Online powered by NetLedger. Currently, no major ERP-type system interfaces with less-functional business management offerings from other independent software vendors (ISVs). And, more often than not, these are solutions used by downstream small business partners, vendors and customers to run their businesses. Through integration, Oracle hopes to capture the entire supply chains of major corporate customers like Boeing or General Motors.

As Oracle begins incorporating real-time customer-use metrics into its next generation of solutions, its current software-as-a-service strategy may end up being just the tip of the proverbial ice-berg — most its mass and momentum hidden just under the surface waiting to be discovered.


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