Oracle Eyes Microsoft's Small-Business Server Market

Satisfied with its enterprise application server push, Oracle plans to spread its integration mantra throughout the much-wooed midmarket.

But the company will need to convince smaller VARs and ISVs that its plans to hire additional application server suite sales specialists and its tightening ties with CDW don't represent conflict.

Next month at Oracle World in London, Oracle plans to launch a Standard Edition of Oracle Application Server 10g that includes its application server plus its Web server and portal server, said Thomas Kurian, senior vice president, application server, for Oracle. Although Kurian declined to disclose pricing, he said the offering will be positioned squarely against Microsoft's Small Business Server and focused on small and midsize enterprises.

"Microsoft is the primary competitor we see here," Kurian said during a briefing in New York, downplaying the ability of either of its fierce rivals in this sector, IBM Software and BEA Systems, to reach this market.

Oracle also plans separate editions of its portal, Java development tools, integration technology, business intelligence engine and identity management technology. And it will build out industry-specific functionality for telcos, high-tech manufacturers, health-care providers, financial services firms and retail/consumer packaged-goods companies, Kurian said.

Pricing won't be disclosed until next month but it will be aggressive, as Oracle continues to seek share gains. "No matter which component of the [application server] suite it is, we are substantially cheaper. We are doing this deliberately to seed accounts," Kurian said.

To help facilitate the launch of these products, Oracle intends to work closely with its roughly 2,500 active VARs plus value-added distributors such as Avnet. VARs have said they are wary of having additional licenses to manage, although some said their customers are seeking more modularity.

Oracle also is investing in its relationship with CDW, which Kurian sees not only as a key configuration and logistics partner but also as an important link to ISVs and custom application developers. CDW is also a key volume delivery partner for OEMs including Hewlett-Packard, which is increasingly selling Oracle's application server line on its servers, Kurian said. "CDW is the Dell for HP," he said.

The company further intends to spend $5 million in fiscal-year 2005 to woo application developers, a plan it also intends to detail next month in London.

Indirect channels account for 39 percent to 45 percent of Oracle's sales, depending on the quarter, according to Oracle executives.

Oracle views the moves it will make this fall as key to its strategy to convert its initial forays into the application server market into enterprise license deals for the company during the next 12 months. Kurian said while 68 percent of Oracle's application server suite customers use at least two components, fewer than 5 percent have committed to an enterprise license agreement for the product.

To accomplish this, Chairman Jeff Henley said Oracle plans to double the amount of application server sales specialists it employs to approximately 420, a move that is certain to raise eyebrows in the channel. It's also tapping its consulting experts to help existing customers evaluate their Oracle infrastructure, with the intent to drive additional activity.

Although the channel's role in this consulting was unclear, one close Oracle systems integration partner said the Redwood Shore, Calif.-based vendor's attempts to help customers unify their heterogenous IT architectures are well-intentioned. "There really is a lot of capability that can be unlocked in terms of driving business objectives," said Don Lovett, managing director for BearingPoint, Service Solutions & Global Oracle Alliance. "In our accounts, there are a lot of things they can do with this technology at an incremental cost."

Oracle is keenly aware that most enterprises use more than one application server platform and hopes to displace its rivals with an aggressive total cost of ownership argument and its integrated architecture message. For example, Kurian estimated that 93 of BEA's top 100 customers and 92 of IBM's best accounts also use Oracle application server technology.

Depending on which market-share figures you cite, Oracle is the third-largest revenue contributor to the application server market with approximately 20 percent of the market, behind IBM and BEA, said Oracle Chairman Jeff Henley. Oracle's application server business grew 15 percent in the company's last fiscal year, or about 1,200 new customers per quarter, and the vendor hopes to maintain that rate.

"BEA continues to be the core competitor," Henley said. "We think that we are gaining real significant traction against them."