InformationWeek
Defining The Business Value Of Technology
February 7, 2000
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The company's applications strategy almost faltered, but its message is now getting through
By Jeff Sweat
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arry Ellison loves to talk--about software, about the Internet, and, of course, about Oracle, the company he founded in 1977. His messages haven't always resonated with customers, but today when he talks about E-business, integrated applications, and turning the software industry--and, by extension, every company's IT organization--on its collective head, more and more people are listening.The Oracle CEO has strong ideas. "This crazy structure we have now will not stand," he says. That "crazy structure" is discrete, distributed, client-server applications. By comparison, Ellison's vision--and Oracle's product strategy as exemplified by the upcoming version of its application suite, Oracle Applications Release 11i--is of integrated, centralized, Web-oriented, thin-clientýfat-server applications.
What's more, says Ellison, businesses shouldn't try to fit their new applications to existing apps. Instead, they should rip out their implementations and buy software as integrated suites--which, incidentally, Oracle sells. "We're the only company that automates your front office and your back office," says Ellison.
Analysts scoff at Ellison's Oracle-centric view of IT, but some customers find the strategy compelling. "We bought the dream," says Lisa Harris, senior VP and CIO of Staff Leasing Inc., a Bradenton, Fla., human-resources, payroll, and benefits administrator for small businesses. Harris convinced her company's board to go with Oracle based on the functionality in Oracle 11i; she's seen the beta and is impressed. "Am I glad they've delivered," she says.
Whether Oracle will deliver on all its claims for the new application suite, due in the second quarter, remains to be seen. But the company's integrated product strategy does have its advocates. "They've got the right strategy and vision from an E-business perspective," says Steve Bonadio, an analyst at Meta Group. The vendor claims to have an answer for every aspect of E-commerce--not only online shopping, but also sales-force automation, customer service, back-end fulfillment, and supplier-relationship management, along with databases, online exchanges, procurement applications, front-office tools, and enterprise resource planning applications.
Ellison's technology savvy and timing have positioned Oracle as an E-bus- iness leader. Ellison's favorite theme--Internet good, client-server bad--isn't new. Neither is his touting the need for businesses to integrate their front- and back-office systems so all essential business data is stored in one place. The Web talk, for instance, began almost when the Web did, with Ellison's over-hyped network computer, the diskless $500 device that was supposed to run applications over the Internet and revolutionize IT. It didn't, but Oracle forged ahead, betting its business on E-commerce. "If the Internet turns out not to be the future of computing, we're toast," Ellison said last year. "But if it is, we're golden."
In fact, the company is shining. The application market that had favored complex client-server programs from vendors such as PeopleSoft and SAP is shifting to the thin-client model made possible by the Web. Oracle had success with its client-server apps, but by its own admission never really got the hang of them. "If the market had gone a different direction and we'd had to continue to sell client-server, I'm not sure where we'd be today," says Ray Lane, Oracle's president and chief operating officer.
As it is, Oracle is the leading E-business database vendor and the applications vendor to watch: Database sales grew by 17% to $651 million in Oracle's fiscal second quarter 2000, while applications sales grew 31% to $168 million. Its database business, fueled by E-business and the hefty servers it requires, is booming. Oracle says that all of the top 10 E-commerce sites, rated by revenue, use its database products, as do nine of the top 10 business-to-business E-commerce sites. The lone exception is IBM, one of Oracle's chief database competitors. Last week, Oracle's stock was above $50 a share following a recent stock split; the pre-split price was roughly three times higher than a year earlier.
continued...page 2, 3
Photo of Harris by R. Scott Martin
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