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Quocirca's changing channels Oracle’s move into the applications market over the last few years has left it with conflicting strategies for driving its two main areas of business; IT infrastructure software and applications software. This conflict is at its most acute in the small and medium business (SMB) market. Oracle would like better traction in the SMB market, but what must it do to achieve this and is Oracle an attractive proposition for resellers who hold the key to the door?

Oracle’s infrastructure business is based around two key products, the Oracle Database and its Application Server with associated middleware components.

The Database is Oracle’s heritage and it dominates the database market, especially for enterprise and mid-market businesses. It is also widely used by independent software vendors (ISVs) who use the Oracle database at the core of their products and influence sales of the Database to businesses of all sizes.

The Java-based Oracle Application Server is a more recent introduction, and contends for market share with similar products from IBM, BEA and JBoss. The Oracle Application Server, just like its database stable-mate, has had the most success with enterprises and the mid-market businesses. ISVs, though, have been slower in coming forth.

Oracle’s real challenge with selling its infrastructure products is at the high volume lower end of the SMB market which is dominated by Microsoft. Around two thirds of SMBs use Microsoft Windows as their main server operating system, and as SMBs move to the latest version, Windows Server 2003, it has Microsoft’s own application server, .NET embedded in.

On top of this the Premiere edition of Microsoft’s increasingly popular Small Business Server has Microsoft’s own database SQL Server included. The challenge is therefore not that SMBs don’t like Oracle’s infrastructure products, which can run on Windows; it’s simply that in many cases, they just don’t need them.

Looking at applications, Oracle’s business is built around three main product groups - Oracle’s own e-Business Suite which it launched a few years ago, the PeopleSoft applications it finally acquired late last year and the JD Edwards products that PeopleSoft itself had purchased 18 months before that. All this gives Oracle a strong position in the enterprise applications market where it is now number two to SAP.

Oracle has said that these different products will be supported for many years on their current platforms, but long term it is planning to pull them altogether into a single code line. The process of doing this has been dubbed project “Fusion” (not be confused with the Fusion Middleware platform – a new name for the Oracle Application Server and associated middleware components). And it seems project Fusion will all be based around Oracle’s Application Server.

This might be OK for enterprises and mid-market companies that accept heterogeneous platform environments as a way of life, but in the SMB market it will be a blocker for Oracle.

For Oracle to succeed as a supplier of applications software to SMBs it is going to have to divorce its applications business from its infrastructure business and recognise the hegemony of the Microsoft platform in the SMB market. To achieve this it either needs to commit to a port of its SMB focussed applications to .NET as part of project “Fusion” or look at further acquisitions of applications vendors who already have a strong position in that market – there are plenty of them around.

Microsoft itself fancies its chances in the SMB applications market but at present only has a small market share. If Oracle were to provide a strong suite of applications for SMBs based on .NET it would be in a position to give Microsoft a run for its money. If it does not, it might end up surrendering the SMB applications market to Microsoft as well as the infrastructure one. Resellers who are considering Oracle’s applications as part of their SMB portfolio should make sure Oracle has made its future strategy clear before making any decision.

© Quocirca

Bob Tarzey is a service director at Quocirca focussed on the route to market for IT products and services in Europe. Quocirca (www.quocirca.com) is a UK based perceptional research and analysis firm with a focus on the European market.

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