Forbes.com
Oracle Will Be Next
By Lisa DiCarlo
New Orleans - As a database powerhouse, Oracle is described as one of the four pillars of
the Internet economy. The other three--EMC, Cisco Systems and Sun Microsystems-- are
cracking, their shares hammered after rare slow growth and profit warnings. Despite the
company's proclamations to the contrary, there is nothing insulating Oracle from cracking
too.
Part of it will result from a slowing economy, in addition to competitive pressures. The Redwood Shores, Calif.-based company
is counting on enterprise applications, specifically its nine-month-old 11i suite, as a major growth driver, along with database
licenses. At roughly 10% of sales today, executives say annual applications revenue will grow 50% to 75%.
They're optimisitc partly because they say the suite is simple to deploy.. But using the application suite in large corporate
environments won't be nearly as easy as Oracle (Nasdaq: ORCL - news) makes it sound, which could throw a wrench into its
growth plans. Despite claims that the 11i suite requires little or no customization or integration, some say that's not in step with
the realities of how large companies implement software.
``Companies always have to integrate with [older] systems. That's a reality,'' says Mark Shainman of the Meta Group. ``Most
companies have millions of hours worth of [software] code. You can't just throw out what you've already done. And when a
new application comes out that's not in the Oracle suite, you either have to integrate it or wait for Oracle to come out with
something similar.''
He also says there is not much room in 11i for customization. Large companies typically want to modify enterprise applications
to fit their business needs. Indeed, Oracle's chairman and CEO, Larry Ellison, spent the bulk of his keynote speech here
imploring customers to refrain from modifying its software because Oracle consultants can't support it once it's been customized.
But this appears to be IBM's (NYSE: IBM - news) gain. IBM, Oracle's archrival in databases, had a booth here at the
conference to promote its services. IBM's Global Services division has an Oracle practice staffed by 300 consultants who
install, integrate and customize Oracle applications. IBM representatives say they are looking to double the size of its Oracle
consulting staff and, in turn, double its business.
Growing applications sales won't be the only challenge for Oracle. Its database licenses are a mainstay of its business, but it will
face new competitive pressures. It still holds about 60% market share in Unix databases, but Meta's Shainman believes that
cheaper systems running Microsoft (Nasdaq: MSFT - news) software will take market share away from Oracle in the next two
years.
And then there's IBM and its DB2 database, which is gaining more traction with independent software vendors, or ISVs, who
write their applications to work with a particular database. They also use databases as a development platform for their
applications. ISVs like Siebel Systems (Nasdaq: SEBL - news) and PeopleSoft (Nasdaq: PSFT - news) are getting cozier with
IBM since Oracle starting competing with them in applications. This could erode Oracle's support among the ISVs, which is
one of its greatest advantages today.
On top of that, Oracle may be forced to lower its database prices. Shainman says Oracle databases costs three to five times as
much as IBM's in similar configurations, and they're more costly than Microsoft's. Price pressure can eat into profit margin.
Oracle will report its fiscal third quarter next month, and it hasn't given any indication that sales are slowing or profits are
shrinking. But as the fourth pillar, Oracle is supporting a structure that's cracking under the weight of forces beyond its control.
It won't be able to hold it up much longer.
biz.yahoo.com
Saturday February 24, 9:02 am Eastern Time
SAP, Commerce One 'Cautiously Optimistic' on U.S.
By James Mackenzie and Markus Wacket
BERLIN (Reuters) - Europe's largest software company SAP AG and its U.S. partner
Commerce One said this week they were ''cautiously optimistic'' that sales in 2001 would
resist a slowdown in U.S. economic growth.
SAP co-Chief Executive Hasso Plattner and Commerce One CEO Mark Hoffman told Reuters in an interview that order
pipelines appeared to be holding up despite gathering signs of faltering growth in the world's largest economy.
``We're really watching the pipeline and from what we see out there, I would say we are cautiously optimistic on that side of the
equation,'' Hoffmann said on Tuesday.
``We're seeing that where IT spenders are cutting down on their rate of growth, they're still growing their IT budgets and they
say they're going to spend money in three areas: Marketplaces, Supply Chain Management and CRM (Customer Relationship
Management), two of which are good for me and three that are good for Hasso.''
SAP and Commerce One, which in June set up a partnership to develop software to allow companies to buy and sell goods
over the Internet, currently run 15 Internet marketplaces, of which 10 are in Europe.
Plattner, whose company has battled to establish itself in the fiercely competitive U.S. market, said the outlook for sales
remained strong even with the prospect of slower economic growth.
``There is still a huge volume there,'' he said. ``I believe that more contracts will go to larger and well established companies,
companies that are profitable.''
``I think our share of this market volume can be increased and so far I don't think the slight downturn in growth rate will hit us,''
he said.
SAP and Commerce One both announced better-than-expected fourth quarter results last month and both have stood apart
from much of the battered tech sector, giving relatively positive forecasts for the current year.
Other software companies, including industry giant Microsoft Corp, have warned of flagging revenues as companies slow
purchases of some types of information technology and computer hardware.
SAP last month announced a 51 percent rise in fourth quarter operating profit on the back of a strong performance from its
mySAP.com e-business suite and said it expected sales to grow by at least 23 percent in the first half of the year.
INTERNET GROWTH
The business-to-business (B2B) marketplace concept, once expected to see mushrooming growth as companies joined forces
to cut purchasing costs on everything from pencils to car parts has faced increasing skepticism, with many analysts suggesting
that just a few big marketplaces will survive.
But Plattner brushed off such concerns, saying companies would find ways to work together online.
``One thing is for sure and that is in the future companies will work together using the Internet,'' Plattner said.
He said SAP might seek further partnerships or acquisitions, but he played down the prospects of a major deal.
``We do partnerships from time to time, we buy companies but we don't go for big mergers,'' he said, adding that SAP would
continue to look for opportunities where they arise.
``It's more that the technology is interesting. The company has to match and that's with regard to location, with regard to the
people, to their vision. That's not that easy.''
But Plattner stressed that the relationship with Commerce One was for the long term.
``We started with the premise that we wanted to work together for the long term and not just for one or two seasons,'' he said.
biz.yahoo.com |
