Oracle Focuses On Keeping App Users Within The Fold

Plans outlined for lifetime application support and backing for competing databases.
It may not be a kinder, gentler Oracle, but it's beginning to look like a more ecumenical one.

Oracle executives at last week's Oracle OpenWorld conference promised lifetime support for PeopleSoft and JD Edwards software--even for customers who never upgrade to Oracle apps--and said Oracle may allow its future applications to run on IBM and Microsoft databases. It's more evidence that CEO Larry Ellison and company understand that they must think outside of the Oracle box to succeed in the applications market.

Oracle already has committed to continuing support for IBM's DB2 database and WebSphere middleware as platforms for banking applications from I-flex Solutions Ltd. and retail-management software from Retek Inc., two companies it acquired. DB2 and WebSphere have a large presence in the banking and retail industries, vertical markets that Oracle covets.

Last week, the prospect of Oracle-IBM interoperability even extended to Fusion, a major upgrade of Oracle's applications due in 2007 and 2008 that will incorporate elements of PeopleSoft and JD Edwards applications that Oracle acquired in January. Oracle said that the Fusion project would incorporate customer-relationship-management applications from Siebel Systems Inc., which Oracle is in the process of acquiring for $5.9 billion, and vowed the addition won't delay Fusion.

"We have yet to make a decision on whether the Fusion application suite will run on other databases," Ellison said in a keynote speech. But he added afterward in a press briefing: "We're going to cooperate with IBM as much as we can. They're very strong in a number of industries that are important to us." And he said support for Microsoft's SQL Server database might also be in the cards.

The ecumenical approach might even extend to Siebel's hosted CRM application service. In addition to packaged applications, Siebel sells subscriptions to applications as a service running on an IBM WebSphere/DB2 infrastructure. Oracle president Charles Phillips, speaking at the conference, said the online service was Siebel's fastest-growing line of business and was "one of the hidden jewels" of the deal. But Phillips wouldn't commit Oracle to continue using IBM software after the acquisition is complete.

Nevertheless, it's clear Oracle sees its future in increased applications sales, not in a brutal smackdown with IBM over database leadership. It has completed or announced 10 application acquisitions in the last year, including G-Log, a logistics and transportation-management software supplier Oracle bought last week. One return from those deals comes from retaining customers for many years of maintenance fees. If customers already are DB2 users, should Oracle risk alienating them by pressing for a switch to Oracle databases?

"It would be absurdly shortsighted of us to try to coerce those customers. They don't like to be forced to do something," Ellison said, quelling speculation that Oracle is acquiring application customers to convert them to its database. Ellison set a goal of maintaining 40% profit margins on all product lines, especially applications, while more than doubling sales to become a $30 billion-a-year company within a few years.

Phillips outlined a plan to provide lifetime support to owners of Oracle applications--both its own and those of its acquisitions. While details aren't set, customers could buy five years of "premium" support, which typically costs 22% of the application purchase price, followed by lifetime support consisting of bug fixes and other necessary application updates.

That's quite a change from when Ellison, during the bid to acquire PeopleSoft, vowed to quickly kill off PeopleSoft's applications once the deal was done. Nothing like a $30 billion goal to set a kinder, gentler course.

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