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ComputerWire: IT Industry Intelligence

Oracle Corp is planning a major offensive into the application outsourcing market, which it hopes will generate $1bn in additional sales over the next five years,

John O'Brien writes

.

Speaking at an analyst conference, chief financial officer Jeff Henley said: "There is a multibillion-dollar growth opportunity for Oracle in managing, administering and servicing our software for customers."

Redwood Shores, California-based Oracle said it would focus on getting 25% of its 12,000 customers to move to the ASP model, which it calls Oracle E-Business Outsourcing, where clients will rent remotely hosted Oracle applications for a flat monthly fee direct from the vendor. The company said it currently provides hosting and remote application services to 200 of its customers, which generates approximately $50m in sales.

However, it said that based on calculations, increasing this share to 25% of all customers over the next five years should enable it to generate $1bn in annual sales. Henley said Oracle has been making investments in new data centers and expansion overseas, and is providing incentives for its sales force to meet these targets.

Until now Oracle has focused its application outsourcing services on the small to medium enterprise market, through its Small Business Suite division, which partners with ASP Netledger, a company in which Oracle CEO Larry Ellison holds a stake. Small Business Suite provides a hosted version of Oracle's e-business applications and includes CRM, orders, purchases, inventory and payroll tools.

Oracle claims that its outsourced services have saved clients including Nuance, Paradigm Wireless and Benchmark between 44% and 66% in IT management costs.

The move is a big leap of faith for Oracle into a market that has so far spectacularly failed to deliver. ASP pioneers like USinternetworking Inc and FutureLink have already gone bankrupt, but despite this Henley said he is confident that the software-as-a-service model will be the future method of software delivery.

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