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9/19/2005
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Phillips To Siebel And PeopleSoft Customers: Oracle Will Offer Lifetime Support

Oracle remains undecided whether to continue using IBM middleware to support Siebel's hosted-application service.

Oracle is reassuring application customers, including those that own or are considering buying Siebel Systems Inc. customer-relationship-management applications, that it will provide "lifetime" support for JD Edwards, PeopleSoft, Siebel, and Oracle applications.

When asked at what price, co-president Charles Phillips said annual pricing hadn't yet been set for continuing application support. But Oracle planners are thinking in terms of "premium" support for applications for five years, then giving customers the option of continued support under a "lifetime" license. Lifetime support would offer fewer upgrades and fewer software patches.

"Customers have told us they don't want a lot of upgrades after five years," Phillips said in a question-and-answer session after his Oracle OpenWorld keynote Monday morning, where he revealed the option of lifetime support.

Lifetime support would provide a mature application with minimal updates and bug fixes to maintain it and keep it up to date with tax laws and accounting rules. Such support would be in keeping with what many customers say they want after they've settled into a pattern of using a 5-year-old application, Phillips said.

Lifetime support would presumably cost less than premium support, which today is typically 22% per year of an application's purchase price. Oracle is studying how to price lifetime support and will reveal its plans shortly, Phillips said.

Oracle will try to minimize the strain of migrating to new versions of its products, and it hopes most of its customers will continue to buy new versions as they become available, Phillips said. But he said the company recognizes there's a minority of customers who reach a stable level of operations with an application and are satisfied to stay with it for years with minimal upgrades.

Oracle's hand, in part, is being forced by third-party vendors such as TomorrowNow Inc., which has said it will support PeopleSoft applications for as long as customers want to use them as a way of capitalizing on customer unease with Oracle's takeover of PeopleSoft earlier this year. In January, TomorrowNow was acquired by SAP, Oracle's chief rival in the enterprise applications market.

Oracle has undertaken nine acquisitions in the last six months--including last week's agreement to acquire Siebel for $5.85 billion--and the buying spree isn't necessarily over yet, Phillips said. When asked what company Oracle would buy next, Phillips turned to an aide and asked, "Do you have the buy list?" Needless to say, no one had the list, and Phillips quipped that he must have left it behind at the office.

Phillips also promised application customers that Oracle apps will run with IBM's WebSphere application server and middleware, a set of products that compete with Oracle Application Server and its related middleware. When asked if middleware interoperability extended to BEA Systems Inc. as well, Phillips responded with a BEA putdown: "We don't see BEA as being a factor out there. WebSphere was a more immediate issue, and we're providing support for where the demand is."

Project Fusion, which will build a new suite of Java applications out of the best features of Oracle, PeopleSoft, JD Edwards, and now Siebel Systems applications, remains on track to provide its first application components in 2007, with a full suite following in 2008, Phillips said. The applications will be architected as services and will be made up of multiple components or modules. Financial applications will be the most complicated to rearchitect, and a full set of modules is unlikely to be available until 2008, he said.

Asked by InformationWeek whether Oracle will keep the IBM middleware and DB2 databases that form the foundation for Siebel's on-demand CRM offerings, Phillips said it was too soon to say. Analysts doubt Oracle will be willing to pay royalties to IBM for use of its middleware and databases. But Siebel has built a thriving online application service with IBM's products. Phillips called Siebel's growing hosted-application service "one of the jewels of the acquisition." Transitioning it off IBM middleware without interrupting service might prove tricky, AMR Research analyst Rob Bois says. And, he warns, any interruptions in service could choke off Siebel's online business growth.

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