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Oracle's 'All You Can Eat' Software

Oracle Chairman Larry Ellison used the Credit Suisse Global Software Conference to pick on the analyst community's "obsession" with licensing revenue as a measure of company health. "Everytime I read a quarterly report I [see] the all-important license revenue numbers as some sort of leading indicator," he said. "Oracle is a mature software company. The way to look at a mature company is different than an up-and-comer." What matters more is Oracle's subscription renewal business, he stressed. "More and more we are trying to turn our largest customers into all-you-can eat customers." Ellison's chat with software analyst Jason Maynard, which was webcast on the Credit Suisse web site, was part of a two-day discussion about disruptive software models -- on-demand and open source. (Any software vendor not playing in these sandboxes these days looks stale or maybe momentarily insane. Those aren't Larry's words, but I'm pretty sure he'd agree with me).

Ellison said Oracle will bring in more than $7 billion in subscription renewals this fiscal year. "When there's a choice we are heavily biased toward building our recurring revenue stream. I don't think that is widely understood."

Ellison is always good for a few quips about Oracle's competitors. He insisted that Oracle's Java container is better than JBoss, that SAP is taking a big risk in not supporting key standards, and that Salesforce.com's AppExchange is a "wacky" idea. Hmmm. Marc Benioff, are you going to let him get away with that comment?

Ellison did offer up a healthy dose of confidence in the on-demand computing model that Salesforce.com is widely known for. "We've embraced on-demand for a long time. We think it is a key portion of our future." Ellison questioned why a customers need to go out and buy computers, choose operating systems, figure out how to install it all when all they really need to do is, say, accounting. "That's the stupidest thing I've ever heard. They should be buying services over the 'Net." The on-demand model allows companies to access software over the Internet when they need it, rather than maintaining the application on site. Most vendors in this space charge a monthly, per-user subscription price. SAP entered the market for CRM on-demand last week -- better late than never.

So, a talk with Ellison couldn't possibly ignore questions about acquisitions. Has the company digested PeopleSoft, Siebel, and others enough to start consuming more? If so, when? who? "Our acquisition strategy is quite simple... We don't buy anything if we can't be number one. The number one company makes all the money. The number two player is just not terribly interesting." Well, Oracle isn't number one in middleware-- yet. "You'll see us do a variety of things to get to that position [in middleware], including acquisitions," Ellison said. We've heard him say that before and we are still waiting....Who would you like to see Oracle buy next? Who do you want them to stay away from? Come on, share your wish list.

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