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Oracle Fuses Middleware, Talks Of "Crushing" Salesforce.com

After four years in the middleware business, Oracle came to New York today to tell everyone that they're in the middleware business. Sound confusing? No more confusing than re-branding their middleware products under the banner "Fusion Middleware," which is not the same thing as "Project Fusion." Clever wordplay aside, Oracle is looking for a new growth engine and has locked in on middleware that can integrate all of the applications it offers as well as the one or two it hasn't yet bought. Oracle executives also had some interesting things to say about open source and Salesforce.com. And there is absolutely no truth to the rumor that Oracle is buying IBM and Microsoft ... yet.

Oracle's Fusion Middleware, which the company introduced a few months ago, includes a number of components critical to helping businesses create service-oriented architectures. An SOA is a fancy way of saying that a company can dynamically make changes to its underlying information technology to better support changes in how it does business. Fusion Middleware encompasses Oracle's application server, portal, developer's tools, identity management, business intelligence, and grid computing software.

The fact that Oracle offers all of these different technologies shouldn't come as a surprise: the company reported $853 million in middleware revenue in fiscal 2005 and claims to have more than 26,000 middleware customers. Apparently, some of you haven't gotten the memo, and that's why Oracle is on its current road show. The company's first-quarter software revenue increased 23% to $2.13 billion, but new license sales of database and middleware software grew just 1% to $492 million. Oracle now has its sights set on middleware market leader IBM.

During today's event, there was a bit of confusion as to how Fusion Middleware related to Project Fusion. Let me clear that up. Oracle in January introduced Project Fusion as a blueprint for merging Oracle and PeopleSoft (and J.D. Edwards) technologies. Since Oracle recently hasn't met a company that it wouldn't like to buy, Project Fusion now represents Oracle's roadmap for integrating the technology it's inherited by acquiring PeopleSoft, J.D. Edwards, Retek, Siebel, and the planet Mars (just joking about that last one). Fusion Middleware speaks to Oracle's strategy for growing Oracle's middleware business, allowing users to integrate applications regardless of vendor.

What's next for Oracle? Company president Charles Phillips had some interesting things to say during Friday's press Q&A. Open source has grown to become a force in the software market that the big vendors can't deny. One reason is because open source's inexpensive starting costs encourage companies to introduce software into places where it was previously too expensive to try, for example a departmental database running MySQL or an extra development server running Linux. From these humble beginnings, companies like Oracle and IBM can then sell more sophisticated offerings. This was part of the reason IBM snatched up Gluecode earlier this year, providing smaller businesses with an application server they could use until they grow into WebSphere.

Oracle already contributes code to a number of open-source projects, including Linux, the Apache Web server, and the Glassfish application server, and Phillips says he hasn't ruled out buying an open-source vendor. He said that some open-source projects have come to Oracle looking for Oracle to through the full weight of its resources behind the project. "Oracle wants to let the open-source market develop itself, but we're willing to consider exceptions to this," Phillips said.

When asked who else was on Oracle's acquisition wish list, Phillips seemed slightly disappointed when he noted that there weren't a lot of large software companies left to buy. Salesforce.com was brought up, but Phillips said he was impressed with the on-demand CRM software he'd seen from Siebel, which Oracle plans to buy for about $5.9 billion. "We may want to give Salesforce.com something to think about," he added. "In this case, it may be more fun to crush them." He might not want to say that too loudly since his boss, Oracle CEO Larry Ellison, invested in Salesforce.com. Of course Ellison probably appreciates that sort of swagger. His company's on a roll.

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