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The “Gentler” Giant’s Value Proposition to Overcome the “Little Guys’” Perception

Written By: Predrag Jakovljevic
Published On: May 23 2008

Software giant Oracle, a long-time provider of enterprise software systems for the largest of corporations worldwide, has now set its sights on the small to medium business (SMB) market, thereby giving Microsoft and other leaders in this segment the kind of competition they have never had to contend with before. The vendor has begun a campaign to attract smaller partners in an effort to show SMBs that its offerings are viable choices for their organizations. For more background, please see part one of this series, A “Gentler” Giant’s Success in Reaching Out to the “Little Guys.”

Strong Product and Capabilities Still Matter

As mentioned in part one of this series, resellers have to work directly with value-added distributors (VADs) that are Oracle Remarketer Authorized to transact orders using Oracle's standard terms, conditions, and pricing for Oracle's 1-Click Ordering Programs, which currently include the following:

  • Oracle Database Standard Edition and Standard Edition One, including Oracle Warehouse Builder, an extract, transform, and load (ETL) tool, and Oracle Application Express, a rapid development tool for Web applications atop the Oracle database.
  • Oracle Application Server Standard Edition and Standard Edition One, and Oracle Application Server Java Edition—application servers that are all part of the Oracle Fusion Middleware family for hosting a company's web site and applications. This middleware suite also provides an instant portal for creating an extranet and content management for managing unstructured information, such as purchase orders, marketing collateral, or presentations. Oracle Business Activity Monitoring (BAM) is an additional tool.
  • Oracle Business Intelligence Standard Edition One—this business intelligence (BI) product provides users with access to dashboards (via Oracle Interactive Dashboards) to format and distribute reports (via Oracle BI Publisher) and to enable ad hoc analysis of data integrated from disparate sources (via Oracle Answers).

Oracle Database is the company's flagship product and the main element of the Oracle VAD Remarketer Program discussed in A “Gentler” Giant’s Success in Reaching Out to the “Little Guys.” . In mid-2007, the vendor launched Oracle Database 11g. This product, which at this stage is not part of this initiative, features new technology to accelerate the adoption of database grids, improve storage, and simplify access to data in online analytical processing (OLAP) cubes.

The previous version of the company's flagship database, Oracle 10g R2, came out in 2005, two years after the original version of Oracle Database 10g. The "g" in 10g and 11g stands for "grid," as in grid (or utility) computing. With 10g, Oracle introduced the feature that it refers to as Real Application Clusters (RACs). These are a way to join servers running Oracle's database together to work on database queries in parallel (see Oracle Further Orchestrates Its SOA Forays). According to Oracle, about half of its database customers have upgraded to 10g, with a fraction using RAC grids.

Among 11g features that Oracle hopes will attract more users to its grid computing systems are Oracle Real Application Testing and Oracle Data Guard. These features allow the splitting of grids to permit the testing of upgrades or system changes before moving them into production, as well as to facilitate backup and disaster recovery. Storage improvements in the latest release include automated data partitioning, better data compression, a feature for backing out of delinquent transactions, and the Oracle Total Recall capability. Oracle Total Recall allows administrators to run queries against the data as it stood at a specified point in the past. Finally, Oracle Database 11g allows native integration with the Microsoft Visual Studio 2005 development tool set, which was done with the hope of attracting Microsoft partners.

Until recently, Oracle’s research and development (R&D) emphasis has been on performance and scalability (i.e., customer satisfaction and product quality) rather than price and ease-of-use for the masses. The company remains the overall database market share leader, and it now insists that, after years of playing and trying, it has finally gotten the ease-of-use (employee productivity) and packaging formula (i.e., a better solution value—more features for lower cost) established, and it is ready to make a renewed push to small businesses. In fact, Oracle touts many recent benchmarks that purport its leadership in database performance and value, such as that Oracle Database 10g is 45 percent faster and 14 percent cheaper than Microsoft SQL Server 2005.

According to the Transaction Processing Performance Council (www.tpc.org), the Oracle database is also the price and performance leader in the TPC-C online transaction processing (OLTP) performance benchmark and the TPC-H data warehouse performance benchmark. Also, Oracle Database 10g Standard Edition One comes cheaper than Microsoft SQL Server 2005 SE, in terms of both the number of users and the number of sockets. Given that the database is also tightly integrated with Microsoft Windows, Oracle also touts a better (i.e., lesser) price and performance figure on that operating system too.

The typical problem with non-Oracle databases is when a small customer calls and asks the resellers for a small server to build a database. The straightforward solution is to sell the customer a two-way server with a standard Microsoft SQL Server database. Six months later, the same customer might call again and ask for a little more horsepower, in which case the reseller will offer a four-way server and more standard SQL Server software. However, some time down the road, when the customer’s business is really booming and it could use even more horsepower, a dead end appears in terms of a more scalable offering.

Conversely, the Oracle alternative is to sell this customer a two-way server from Hewlett-Packard (HP) with Oracle Database 10g Standard Edition One. Several months later, that solution is still working great, but the company could use a little more horsepower. The Oracle reseller now has the following options:

  1. Sell a single node four-way server from HP with Oracle Database 10g SE.
  2. Build a grid by adding on another two-way server from HP, with Oracle Database 10g SE with RACs.

Penetrating the lower end of the market with such entry-level (albeit upward scalable) solutions presents a strong foundation on which Oracle and its partners can offer more solutions to their customers later on. This is especially true in light of Oracle’s portfolio of potential future solutions, with over 10,000 independent software vendors (ISVs) providing and developing their solutions on top of Oracle’s applications.

Program’s Success Update

Oracle’s VAD Remarketer Program’s initial success is notable in terms of VAD and remarketer uptake. In early 2008, only six months since its launch, more than 250 new resellers worldwide are now transacting Oracle business through the 25 VADs that have signed up and been authorized to resell through the program. These VARs see a unique opportunity to extend the Oracle portfolio to their customers without having to make up-front financial investments to build an Oracle practice. These new resellers either have never had a relationship with Oracle, or they are born-again partners that previously strayed because it became too costly and complex to work with Oracle in the past.

In addition to signing up mainstream distributors (such as Tech Data and Ingram Micro) for the programs, Oracle has signed up regional distributors around the world, such as Officer Distribuidora in Brazil and Nexsys de Columbia. Latin America, with 14 distributors, has been a particularly prolific region. Additionally, there have been more than 1,000 orders worldwide for Oracle software through the ORACLE 1-CLICK ORDERING process since the program’s launch.

The Challenges that Remain

Besides fierce competition and the expected counteracting moves from Microsoft (and possibly from IBM too—see IBM Express-es Its Candid Desire For SMEs), Oracle’s main challenge in the SMB segment is the market’s perception of the vendor and the possible negative feelings about its past practices (of “being difficult to partner with” and “coming back to old habits, after initially promising a better conditions for partners,” etc.).

Oracle acknowledges that its inflexible business processes of the past have been a major inhibitor to VARs selling Oracle software. The vendor is also aware it needs to inform customers and re-educate many resellers about its little known price-per-performance advantage. This is, in fact, a crucial move for Oracle to make—to reach out to a partner base that is educated on the Microsoft Windows environment, and educate it about how applicable and good Oracle's products are. For example, it is a little known fact that Oracle Application Express is part of the database. Unlike Microsoft Access, which is on a different code than SQL Server, anything written in Oracle Application Express can be easily migrated to Oracle E-Business Suite, owing to the same data schema and relations.

Additionally, Oracle’s post-sale service and support costs remain an issue at all levels compared to Microsoft’s (see Alternative Software Support and Maintenance Options). Namely, Oracle charges customers 22 percent of the original sale (license) price in its annual fee for maintenance, called Software Update License and Support. To be fair, Oracle is quite transparent about its pricing; the vendor offers many links and online resources, such as the Oracle Technology Global Price List.

User Recommendations

Oracle VAD Remarketer Program is a long-term market-seeding opportunity that should provide an alternative to Microsoft (and possibly IBM) for both prospective customers and resellers. Oracle’s hope is to recruit VARs that now sell Microsoft and IBM products, as well as some that do not sell any database software.

Later this year, Oracle plans to add to the number of products available through the VAD Remarketer Program, but we will have to wait and see what products exactly. Our guess is that some of Oracle's Fusion Middleware software suite’s components could be added, while any consulting-intensive application products are not really conducive to ORACLE 1-CLICK ORDERING process.

Those resellers that have been interested in Oracle technology products, but that have previously been deterred by the financial commitment to its partner program and by Oracle’s rigidity in the past, might now want to take another look. Alternatively, keeping an eye on this program might be an option too, especially given Oracle executives’ promise that more partner-nurturing improvements are coming, including a wider product assortment and additional partner promotions and incentives.

This concludes the two-part series A “Gentler” Giant’s Success in Reaching Out to the “Little Guys.”

 
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