Vic, Oracle set to announce partnership deal with 7 ASP's on Monday. Noting Ellison's fairly good view of NETP, what are the chances NETP is involved as one of the 7?
Courtesy of Fighterjock on RB:
Friday July 28, 9:15 am Eastern Time
TheStandard.com
Will Larry Ever Learn?
By Jason Krause
Larry Ellison is at it again. As if he didn't have enough troubles already, the mercurial Oracle
CEO is again backing away from a venture after making bold statements his company couldn't make good on.
This time, Oracle is reversing course in the emerging Application Service Provider market, where Oracle set out to be an early leader. But has the company shot itself in the foot?
Oracle's role in the ASP business - the hosting of software applications for a fee, rather than selling big software packages - has been as a service provider rather than as a seller of software to other companies that provide the service. In October, Ellison even told reporters that he would only sell Oracle software to other ASPs ''over my dead body.'' On Monday, the company is expected to announce that it has signed seven partners who will join Oracle in the ASP business, with more to follow.
''Yeah, he used that phrase,'' says Oracle executive VP Gary Bloom, who has inherited the task of cleaning up after Ellison since the departure of former president Ray Lane. ''That was real at the time that statement was made. It was not a bad decision because that's what we needed to do at the time.''
This is hardly the first time Ellison has set out to lead a nascent industry to prominence. First was his well-publicized 1995 pledge to take on Microsoft with the network computer, a struggling business model that was abandoned three years later.
Second, and more recently, Ellison has championed the ASP model, which could (in his mind anyway) end the hegemony of
Microsoft-style shrink-wrapped software in favor of leased, externally hosted software applications.
Oracle's backpedaling from earlier Ellison pronouncements doesn't mean the company is beaten. Bloom, who's in charge of the Oracle ASP business, says the company has 100 customers and that the division is moving forward. But other software companies, such as SAP and PeopleSoft, have as much as a two-year head start in cultivating relations with major-league ASPs such as Corio and US Internetworking.
During the past year, ASP has become one of the most popular bits of jargon among networking companies, software makers and Internet service providers looking for a new business model. The idea is that one ASP can build data centers that host applications for hundreds of other companies. For companies running large database applications, that means lower costs,higher reliability and lower manpower needs.
''There's room for our customers to cut staff and save money, and room for us to make money,'' Bloom explains,
acknowledging that the business still has a few bugs in it. ''Not everyone is wholly satisfied, but as we go forward, we'll figure it all out. And [our customers] are all happy about the cost.''
During the next five years, half of Oracle's customers could get their applications through hosting, either from Oracle or one of its partners. But an ASP shakeout looms on the horizon.
''This industry is less than 2 years old. There's no question that we are headed for consolidation,'' Lee says. ''Probably in the next year, you'll be seeing a big shake-up, but that's only a confirmation that this is a proven business model.''
Oracle terms this week's announcement a natural evolution, not a retreat. Competitors who haven't done their own hosting, Bloom says, will be in trouble. ''PeopleSoft decided to say, 'We won't compete with our customers' and signed Corio to distribute their software,'' says Bloom. ''Lo and behold, they're now running their own hosted services. To be the best, we decided the right thing was to do our own hosting. They finally picked up on that.''
But by joining the rest of the industry in forging partnerships, Oracle essentially has admitted that hosting its own services is not enough.''Welcome to the real world,'' scoffs Deepak Gupta, senior VP with PeopleSoft, a Pleasanton, Calif.-based company that says 150 businesses host its applications. ''You can only learn so much from your own mistakes. We're learning from our partners, too. That's two years of experience [Oracle] doesn't get.''
Oracle's move also might have come too late to attract any leading ASPs. ''Would we take Oracle? Not anymore,'' Corio's Lee says. ''We've got too much on our plate. We couldn't take on Oracle; each time you add another service, it's a major
commitment. You can't just do it half-assed.''
David Weinstein, CEO of BlueMeteor, one of Oracle's first partners, points out that the ASP industry is still young. ''Listen to all the noise ASPs are making and you'd think this industry was all grown up,'' Weinstein says. ''But all together, we've only penetrated less than 1 percent of the potential market.''
Other Oracle partners include ASPs Agilera, Center 7 and HostCentric, and networking company WinStar - significant
regional players but hardly national heavyweights.
Potentially making all this moot is the possibility that today's ASPs are yesterday's online retailers. ''The ASP in two years will be what dot-coms are today - a questionable business model,'' says Robert Holemeier at First Security Van Kasper. ''If I write software, why would I rent it? The business of renting software is low-margin. We're going to get some blowups in the ASP space next year.''
More likely, the ASP model is a viable, if unspectacular, niche. But here, as with almost everything else Oracle is involved in, Ellison's ambition to bring down Microsoft always creeps in. In fact, the ASP model is an end run on reviving network computing, via ''thin client'' computers running hosted software apps.
''Thin client computing is critical to this,'' Bloom says. ''I can still run Microsoft on my desktop, but all you need to run our applications is a Web browser. There's no clunky software on the desktop. You don't need Microsoft.''
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No Straight Answer From This Oracle
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