Oracle Claims The Worst Is Over And Turns To KISS For A Boost
1: The News
In June Oracle Corporation (NASDAQ: ORCL), the largest database
provider and one of the largest providers of software applications for
e-business, unveiled a new suite of online services aimed at capturing
the small business market. It also announced changes to appeal to its
larger customers, as well as its quarterly financial results.
is Part One of a three-part article on recent Oracle announcements. This
part contains the details of the announcements; Parts Two and Three will
discuss the Market Impact, with User Recommendations based on this news
in Part Three.
the Small Business Market
On June 26, Oracle unveiled a new suite of online services aimed at capturing
the small business market. This new suite, called the Oracle Small
Business Suite, is powered by the award winning NetLedger
product (which is 55% owned by Oracle's CEO Larry Ellison), and provides
small companies, with typically less than 100 employees, an integrated,
easy-to-use suite of hosted application services that manage key business
processes, including financials, customer relationship management (CRM),
purchasing, and e-commerce.
touts that small companies no longer need to use several disparate applications
to manage their business, since with the Oracle Small Business Suite,
all operations are managed centrally, and are available to users via the
Internet. Further, because the applications are being delivered as an
online service, there is no hardware to procure, no large, up-front license
fees, and no complex set-ups. Customers can be up and running on the Oracle
Small Business Suite in a matter of minutes, according to the company.
Oracle Small Business Suite is available immediately at an introductory
price of $99 per month. The new service is available through Oracle.com,
Oracle's online services business, extending Oracle's online service business
to all market segments. Currently the Oracle Small Business Suite is available
in English, and supports US and Canadian tax requirements. Future versions
are planned to support global users. This is yet another of Oracle's attempts
in its "war on complexity" that surfaced during its user conference in
Oracle's Larger Customers
In addition to expanding its hosting services to smaller enterprises,
and in order to boost demand for its hosted services, Oracle also tried
to appease its larger customers. These will finally be allowed to host
applications on their own servers as a part of Oracle E-Business Suite
Online Any Place program. The new offering is designed to make application
hosting more appealing to users who do not want important business data
to be stored on systems that they do not control, according to Oracle.
Now, customers can either go the traditional ASP route, or buy certified,
pre-configured servers from Sun Microsystems or Compaq
Computer Corporation. Oracle also pledged to work in the
future with a number of new partners (hardware makers, data center providers
and telecommunication companies) to host, manage and distribute services
via the Internet as a part of the Oracle Online Partner
at the beginning of June, Oracle announced its plans to host the e-Procurement
application called Procure-to-Pay. Oracle guarantees the implementation
in 30 days, with the price tag of approximately $235,000 to install and
operate for the first year. Afterwards, Oracle plans to charge a $5 fee
per purchase order line, with a minimum of 5,000 lines per year. The product
will offer pre-sourced catalogs, requisitioning, purchasing, invoicing,
receiving, and will also provide reconciliation/settlement services, and
group buying from WorldCrest. Other similar offerings that were unveiled
earlier in the year and are based on Internet Business Practices or FastForward
Flows with catchy names and possibly attractive benefits are CRM
in 90 Days and Supply Chain Now.
simplify and modernize business, Oracle recommends companies should 1)
consolidate data, globally, 2) automate and integrate all core business
functions, and 3) change processes not software. In other words companies
must "centralize, transform and simplify" their businesses in order to
implement applications in a "plain vanilla" manner.
The latest initiatives came less than two weeks after the company announced
somewhat disappointing results. On June 18, Oracle announced that Q4 2001
income was $855 million, an 8% decline compared to $925.9 million (excluding
investment gains from sale of marketable securities) in Q4 2000, on revenue
of $3.3 billion, which is a 3% decline compared to $3.4 billion a year
ago. For the full fiscal 2001, however, net income (excluding investment
gains from sale of marketable securities) increased 25% to $2.6 billion,
while revenue increased 7% to $11 billion (See Figure 1). Software license
revenue declined 10%, to $1.6 billion, from $1.8 billion in Q4 2000. Particularly
disappointing was an applications software revenue decline of 24% to $338
million from $447 million in Q4 2000 (See Figure 2). Nevertheless, the
annual applications license growth was at a satisfactory 11%, although
significantly less compared to 42% a year ago.
Oracle executives remain cautiously optimistic, saying the worst may be
over. "While the economy slowed our sales growth, we still managed to
increase profits and improve margins to record levels this past year,"
said Oracle CFO, Jeff Henley. "That's a pretty good financial result in
this difficult economic climate."
technical accomplishments this year position us for accelerating sales
next year," said Oracle CEO, Larry Ellison. "We introduced Applications
Release 11i -- the E-Business Suite -- just 12 months ago. In those 12
months more than 400 companies have gone live and are running their businesses
using the E-Business Suite. In one short year the E-Business Suite has
completed the transition from untested idea to proven technology. Our
references are a who's-who of global business. Several General Electric
divisions use the E-Business Suite for Internet procurement, supply chain
automation, manufacturing, accounting, and customer relationship management.
One major GE implementation took less than 6 months and required not a
single modification to Oracle software. Hewlett-Packard implemented sales
force automation for more than 2,000 sales reps in 30 countries. Alcoa,
Boeing and Ford went live with no software modifications. BellSouth automated
10,000 call center agents. Cap Gemini and Westpac and Cathay Pacific went
live globally. And Sony Electronics took just 45 days to implement supply
chain automation. Well, that's 10 of the more than 400 customers running
their businesses on the E-Business Suite. Not bad after just one year
in the market."
concludes Part One of a three-part article on recent Oracle announcements.
Parts Two and Three discuss the Market Impact, with Part Three adding