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October 5, 1999

Oracle Expands ASP Service; Adds Partners, Integrators

By CBR Staff Writer

Oracle Corp stepped up the pace in the application service provider market yesterday by announcing a series of partnerships to enable the vendor to host third party applications for the first time. In addition, the software vendor detailed a series of alliances with carriers to expand its Business OnLine service oversees as well as signing up a host of systems integrators to help roll out the service to its customers across North America.

Oracle chairman and CEO Larry Ellison first alluded to the ISV partnerships last week at the company’s applications user conference in Florida. And yesterday, as expected, the company detailed alliances with six third party software vendors: Agile, BPA Systems, NetLedger, Portera Systems, Syntra and Vertex. Under the deals, Oracle will market and host those companies’ applications for small and mid-sized businesses. The ISVs won’t be charged a fee for joining BOL, rather Oracle will derive revenues from charging customers a monthly fee – in much the same way as it does for its own applications – to run and manage the software on their behalf. The monthly rental charges are currently being decided on, Oracle said.

Likewise, these are not reselling agreements. Oracle and its partners will simply market each other’s software and services. Customers will have to buy the third party application from the ISV itself. But speaking during a press conference at New York’s world trade center yesterday, Ellison didn’t rule out the possibility of reselling the applications on its web site, although he wouldn’t been drawn as to a timeframe when that might happen. But it certainly makes sense for Oracle to think of doing so. The ability to offer one-stop-shopping is a compelling proposition to small businesses and something that Oracle may well find its customers pushing for anyway.

Jennifer Smetana, director of business development, BOL, said Oracle had at least 30 other partnerships in the wings and that more announcements would be made soon. She said none of the agreements would be on an exclusive basis but added that where Oracle was faced with three ISVs offering a very similar application, then it would chose the best one or two and offer that on a preferred partner basis.

Up to now, BOL has only been available in the US via Oracle’s two datacenters and through a recently announced partnership with Sprint. To expand that reach – both nationally and internationally – Oracle announced partnerships with telecoms carriers and data center companies, who will host Oracle’s BOL service on its behalf. In the UK, the software vendor signed a deal with British Telecommunications Plc to push its services to the mid market, where BT is strong and Oracle says it has little influence. But we think the best market for BOL in Europe is in the UK, said John Repko, global vice president of BOL operations, The US has a comparatively easily-reached mid- market, but it’s not easy for us to cover in the UK. That’s why we partnered with BT, because it has a very good reach into that market for us.

It also signed partnerships in Bell Canada Ltd, to cover North America, and with Exodus Communications Inc, which has a large datacenter in Santa Clara, California. Repko said the aim was for Oracle to stop hosting applications from its own datacenters and to gradually migrate all its offerings to third parties. But Ellison stressed that wouldn’t mean those companies would be allowed to host Oracle’s applications themselves. Not unless the board of directors removes me from my job, he said. In all its partnerships, Oracle will provide the hardware, through partnerships with Sun, Hewlett-Packard and Compaq, as well as Oracle employees to run the services. Repko said that other alliances will be added in due course, including an East Coast facility by the end of the year.

To help with systems integration at the customer end, Oracle announced 10 new partners for the small and medium business market. Braun Consulting, Credence Automations Systems, Grant Thornton LLP, OTP Group, Simplify, Solix Systems, Spectrum Group, Trans-Tech, Ultimedia and Vertex Systems are the first to sign on but Oracle says more partners will be added over time. The SIs will oversee the application implementation, configure specific application requirements and enhancements and provide business services such as consulting, process re-engineering and technical support.

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During his opening remarks yesterday, Ellison – in true evangelical form – said that BOL positions Oracle for the next fundamental change in the internet. The software industry is in the process of tectonic change, every software company is going to have to be an ASP, he said, pointing to the fact that Oracle is, to date, the only software vendor to be an ASP too. I think we’re very early to the party with BOL. Everyone else has got it wrong..we’ve got it right.

Interestingly, given his take on the importance of BOL for Oracle, Ellison referred very little to the actual news announcements during his remarks, even though the company had lined up the CEOs of all the major ISVs to push the service. Likewise, he said very little about integrating those companies’ applications with Oracle’s, other than that it would happen and customers wouldn’t have to concern themselves with the process. But Pierre Mitchell, an analyst with AMR Research in Boston said Ellison shouldn’t underplay the integration issue.

The fact that they’re going this way is encouraging….the vision that software is a service via automating complexity on a server, he said. However, the challenge is that you need to automate that complexity and that is a big application development problem. Mitchell said you only have to look at the delay in Oracle delivering its 11i ERP/CRM suite to realize how difficult those integration issues really are. That’s the real reason for the delay, he said. Mitchell said it was one thing talking about integration, but asked whether Oracle, with no control over the financial destiny of its ISV partners, could ensure that integration going forward. Are they just hoping integration will remain over time? There’s no guarantee that that’s necessarily going to happen.

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