InformationWeek
Defining The Business Value Of Technology
October 12, 1998
Oracle Bets On The Net
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Oracle president and chief operating officer Ray Lane expects the company's enterprise applications revenue to grow 30% annually-slower than the market average, but an improvement over last quarter's flat sales. And if outsourced apps become popular, Business Online could account for half of Oracle's applications revenue within five years, says Oracle senior marketing VP Mark Jarvis.
But Oracle faces ever-stiffer competition on all fronts, and its outsourcing business has yet to generate a dollar. Ellison admits Oracle has invested "almost nothing" in Business Online. The company may eventually spin off its outsourcing venture as a separate business, but in the meantime, it will use its own IT infrastructure to host the outsourced applications. One systems integrator who specializes in Oracle products isn't optimistic about the app-outsourcing service. "This thing will die quicker than the NC did," he says. "It's so far afield of their core competency that it's not even funny."
Oracle's applications business has been in a state of overhaul for months. Amid flagging sales earlier this year, Ellison took a more hands-on role, putting more emphasis on the company's emerging front-office apps business. In August, Oracle assigned Peter Dunning, former head of SAP's U.S. sales division, to oversee the business. Several top Oracle managers, including executive VP of verticals Robert Shaw, executive VP of Americas Barry Ariko, and senior VP Nimish Mehta, left the company.
There are also rumors that Lane is being courted by other companies. But Lane insists he's not leaving. "I can't imagine a more exciting place to be," he says. "And I don't know where I can make this kind of money anywhere else."
Lane is the architect of an ongoing reorganization of Oracle's sales and consulting staff. Sales and consulting teams now target six vertical markets: consumer packaged goods, industrials, energy, banking, telecommunications, and government. Over the next 12 months, Oracle will create similar teams for the transportation, utilities, retail, media, process manufacturing, and insurance and brokerage industries. Meanwhile, Oracle has created more distance between its apps and database sales teams in an effort to spur apps sales in companies that don't use Oracle databases. Says Lane: "It's an evolving organization plan to get our applications business built around industries and our database business built around critical mass."
The vertical-market approach consists of four application "layers," says Lane. First are Oracle's cross-industry financial, human resources, and manufacturing apps. Second are industry-specific apps, such as flow manufacturing and supply-chain management. Third are E-commerce and business intelligence programs tailored to specific markets. Third-party products fill in the gaps.
With that sales strategy and its Internet computing emphasis, Oracle intends to push into the fast-growing market for front-office applications such as sales-force automation and customer management. "There's no clear leader in front office right now," says Ellison. But Oracle's major ERP rivals-SAP, PeopleSoft, and Baan-are all moving in the same direction.
Right Direction
Some customers think Oracle's apps strategy is on the right track. Rockwell International Corp.
is installing version 10.7 of Oracle's financial and manufacturing applications, but it's only a
matter of time before the company moves to the Web-based 11.0 version, says Jacquelyn Simoni,
business systems implementation manager at Rockwell Electronic Commerce. "We'll go to
release 11 because of the Web-enablement," she says. "This is the way people are starting to buy
and sell products."
So what's missing? For one thing, Oracle's applications aren't well integrated with its partners' applications. "Customers have signed for pieces of the solution, and not the whole solution, because integration isn't there," says a former Oracle executive who now works for a competing ERP vendor. "The hardest part of the sales cycle at Oracle was trying to prove integration." Oracle's new head of apps admits as much: "At this stage, the pieces don't fit together like Legos," says Dunning.
In databases, Oracle is gearing up for another run-in with archrival Microsoft. Both companies
will release upgrades to their database- management systems by year's end. Analysts expect
Microsoft's Windows NT-based SQL Server 7.0, which features across-the-board improvements,
to be an immediate hit with users. Microsoft's low-price approach will keep pressure on Oracle's
own database prices. "Out of the box, it will certainly engage Oracle across much of its base,"
says Giga's Adrian. 
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