Oracle's Ellison Knocks (not Softly) the SaaS Model

Ann All

We aren't quite sure what to make of comments made by Oracle CEO Larry Ellison during its recent earnings call.


The company made moves earlier this year to woo resellers to sell its products to SMBs, including reducing the cost and complexity involved and allowing resellers to get their products from authorized distributors rather than from Oracle itself, thus downplaying the possibility that Oracle might raid its resellers' client rolls.


But will resellers have a suitable product to sell? Despite the popularity of software-as-a-service solutions among SMBs, Ellison nixes the idea that Oracle will introduce such a product. Too expensive to develop, says Ellison, and tweaking sales and marketing models is a real hassle.

The cost of sales is high. The cost of implementation is high. There are virtually no synergies in sales, marketing, and product development and support. So, while we think it's an interesting market, the small market, because it's large, we just haven't figured out a way to make a substantial profit in that market, so, we think it's hard to make money.

So was Ellison playing it fiscally responsible for investors and financial analysts? Assuring resellers that Oracle doesn't want to play on their turf? Or taking a potshot at rival SAP, which is bending over backward to appeal to SMBs with its much-anticipated on-demand software?


eWEEK is betting on the latter. But it points out that Ellison hasn't always been so dismissive of SaaS. He paid big bucks for Siebel, which was known mostly for its on-demand software. And he has a 41 percent stake in NetSuite, an on-demand darling that is readying for an IPO.


Analyst firm Technology Business Research, writing in eChannelLine, opines that Ellison is simply making clear his company's preference for entering new markets by acquisition, a strategy the firm says could put it far behind competitors like Microsoft and SAP when it inevitably decides to get serious about pursuing SMBs.

Add Comment      Leave a comment on this blog post
Sep 26, 2007 4:08 AM Haywood Jablowme Haywood Jablowme  says:
Not sure where these "facts" are from: Larry Ellison actually owns 74%+ of NetSuite, and still owns a small % of also. Reply
Sep 27, 2007 10:58 AM Scott Scott  says:
Also incorrect is the statement that Siebel was "mostly known for its on-demand software." Siebel was known for leading the CRM space in enterprise software. It was trying to get its On Demand offering moving, but Salesforce beat it to the punch. Reply

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