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7/8/2004
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NetSuite, Oracle Sever Licensing Ties

Marking the end of its licensing relationship with the world's second-largest software company, NetSuite now calls its lower end application suite NetSuite Small Business.

Say goodbye to NetSuite's Oracle Small Business Suite. Marking the end of its licensing relationship with the world's second-largest software company, NetSuite now calls its lower end application suite NetSuite Small Business.

Since being co-founded in 1998 by Oracle CEO Larry Ellison -- who remains majority stake-holder of the San Mateo, Calif., ASP -- NetSuite has paid a royalty for the Oracle logo. But while Oracle Small Business Suite was NetSuite's only offering for much of the company's life, times have changed. Over the past two years, the company has turned out the self-named NetSuite, which is aimed at larger organizations than the Oracle-badged software, as well as NetERP, NetCRM and NetCommerce. The company claims 7,500 customers worldwide for all its software.

The time had come, NetSuite CEO Zach Nelson told CRN, to trim its royalty expenses. "[Oracle and NetSuite] had a discussion about three months ago, and we both came to the conclusion that the licensing arrangement no longer made sense for either of us," said Nelson. "Only about 5 percent of our customers were on the Oracle Small Business product, so it wasn't a huge revenue stream for us. Now that we've discontinued paying the royalty, it will help us in our drive toward profitability."

That brings up Oracle's plans for this space. Since the Redwood Shores, Calif., company no longer competes against its own brand, it could potentially offer a version of its E-Business Suite for small- to midsize customers. Its chief competitors already do. SAP, for instance, turns to a growing base of channel partners to sell its BusinessOne and mySAP All-in-One suites to companies with less than $200 million in revenue. PeopleSoft is recruiting IBM's channel partners to sell its EnterpriseOne and World products to companies below the $100 million mark.

So will Oracle come out with an SMB edition of E-Business Suite? Frank Prestipino, vice president of Global Applications Enterprise Strategy at Oracle, told CRN it doesn't have to. "What's unique about us is both the product and the platform scales to any size company, from five to 500 users. We already say just buy what's relevant to you."

Of course, it's important to remember that the word "suite" has taken on loaded connotation during the government's antitrust trial against Oracle. The issue here is whether suites will remain an important product offering for large enterprises -- as DOJ maintains -- or if best-of-breed software will regain prominence, as Oracle claims. Under the circumstances, Oracle would be wise to avoid any mention of a new product that takes suite form, even one aimed well below the large enterprise.

But this doesn't rule out an eventual offering, said Randy Johnston, executive vice president of Network Management Group, an infrastructure VAR that helped with the early development of NetSuite's first software. "I know Oracle has had internal projects that they didn't roll them because of the tight relationships with [NetSuite]," said Johnston from his Hutchinson, Kan. office. "It would not take too doggone much with Oracle developer tools and the Oracle application server to build [an SAP] BusinessOne competitor on top of the Oracle database."

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