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Oracle applications: how high can they go?

Oracle is battling with SAP and others for the business software market. The outcome will determine the future of application delivery as a service on the Web.

LONDON -- Companies may want short IT projects that deliver an obvious financial return, but Oracle's approach to selling pre-integrated e-business software applications doesn't appear to be working for all customers.

So far, its strategy appears better suited to organizations like governments, which are less concerned with competitive differentiation, than large corporate customers Oracle needs to sustain its credibility in the software markets it addresses.

Oracle is one of several major companies -- along with IBM, Microsoft, SAP and PeopleSoft -- battling for the most significant piece of the enterprise software market in order to determine the future of application delivery as a service over the Web.

The database and software giant has been building a mass -- around 120 so far -- of enterprise software applications, which are tied to its core database products. Oracle CEO Larry Ellison said in February that customers and systems integrators should never alter Oracle software code, even when looking for a competitive advantage. Instead, Ellison thinks system integrators -- like rival IBM -- should concentrate on re-engineering customers' business practice.

But while a hands-off approach from its customers might save Oracle time and money, its applications business has so far grown in fits and starts. Ellison's pre-integrated vision runs against the grain for companies that have been defining their own software requirements for years. Many have yet to be convinced of Oracle's approach, which means the company has relied heavily on its database business for profit during the downturn.

"In many peoples' eyes, a database vendor is what we still are," said Chris Baker, VP and UK director of e-business at Oracle. "But as the technology moves forward, database and application come closer together. Nobody else has a suite of applications that work over the Internet from a single data model."

Oracle's portfolio includes financial, business-to-business, business intelligence, human resource and other industry-specific applications. But Baker cites customer relationship management as the most important area for Oracle -- one it has been trying to conquer on and off for four years. Because CRM implementations typically require heavy investment, some analysts say it's possible there will only be two or three big CRM suite vendors in three years' time. Naturally, Oracle aims to be one of them.

But the decision by mobile operator Hutchison 3G --an Oracle customer cited by Baker -- to use software from Chordiant to manage interaction with its customers, rather than Oracle's own CRM offering, demonstrates the importance many companies attach to building their own business processes into CRM systems.

According to Baker, "IT has got to be seen as a utility that is useful to companies." But the restrictions Oracle applies to its products makes them a utility limited to those that either don't need a competitive differentiator or are satisfied with supplying it themselves -- without altering Oracle's applications. Unilever is Oracle's biggest contract for CRM applications. The remainder are mainly SMEs and government departments, such as the UK Criminal Records Office.

Selling to these smaller companies may still be profitable for Oracle, but its sights are set on winning big corporate deals in order for its applications business to gain leadership in those markets. Telling systems integrators they should concentrate on differentiating their customers' business processes while letting Oracle sell all the software is likely to add to concerns about IT costs.


More on Oracle's business strategies are available at this Best SAP Web Links site

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