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Larry Ellison's Future View: Oracle's Strategy Versus SAP's

Attention all enterprise apps buyers!! Oracle execs last week discussed their 1Q results, and Larry Ellison took the opportunity to contrast his company's approach to enterprise apps versus SAP's approach. Ellison said the strategies are profoundly different -- and buyers should certainly take note.

Now, of course, this is a one-sided view of the situation, but even taking that into account, Ellison's portrayal of the growth strategies of Oracle and SAP underscores the emerging reality facing CIOs looking at enterprise apps: Ellison makes the case that Oracle is going at the market for large enterprises and the upper end of the mid-market, and that SAP is "to go after small companies."

For the full transcript of the remarks from Ellison, Safra Catz, and Charles Phillips, plus Q&A with financial analysts, check out this transcript provided by SeekingAlpha.com.

Of particular note is Oracle's accelerating move into truly vertical applications for retail, financial services, telco, and more. We'll dig out SAP's own version of its strategies in a coming post, but for now here are Ellison's comments about Oracle versus SAP in enterprise apps:

"That moves us on to apps where we're the number 2 player, but once again we're growing much faster than our primary competitor SAP. The results, again, speak for themselves. We grew 65% this last quarter in apps. SAP grew 18% in their most recent quarter, but it's not about the past, it's all about the future.

"What I'd like to highlight here is the radically different strategies of the two companies for growth. Our strategy for growth is to find a way to add more value to the same customers we already serve, which are the large end of the mid-market and large companies. What we're doing here is moving beyond ERP to industry specific software. So in the telecommunications industry that would be billing systems and network provisioning systems and network inventory systems; core applications to run their business, to run telco. Core applications to run a bank. Core applications to run a retail chain of stores. Core applications to run a utility. That's our focus, and that allows us to leverage the existing relationships that we have because we already sell databases to these companies, we sell middleware to these companies. We sell ERP and CRM to these companies, and now we want to sell this industry-specific software.

"It's very different than SAP's strategy which is to go after small companies; small companies with their new Business ByDesign, formerly known as A1S product. Now, we see the problem in that because we've looked at going down market. We've looked very closely at it, and we think it's very hard to make money because there is no synergy. To go down market you need a new product and new product development teams. You spend a lot of money developing a whole new product for the low end. But you also need an all-new sales force because we don't call on those customers. We don't call on small businesses, and it's very expensive to call on small businesses. It's very expensive to do ERP implementations in small businesses. The cost of sales is high. The cost of implementation is high. There are virtually no synergies in sales, marketing, and product development and support.

"So while we think it's an interesting market -- the small market -- because it's large, we just haven't figured out a way to make a substantial profit in that market. We think it's hard to make money. Our strategy: add more value, go upstream, sell industry-specific software to our existing customers, and we'll watch and see how SAP does going after small companies. Especially with in Software as a Service which we think is very interesting, but so far no one has figured out how to make any money at it."

There you have it, enterprise-apps buyers -- does your view of this market match Ellison's? Let us know.

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