--Oracle to offer social, marketing, accounting in unified
service
--Launch caps six-year overhaul of software for cloud
--Cloud is "charismatic brand" for next version of computing
Oracle Corp. (ORCL) will launch its first broad cloud service
suite on Wednesday, embracing a strategy Chairman Larry Ellison
once called "complete gibberish" and setting its competitive sights
on Germany's SAP AG (SAP, SAP.XE) and Bay Area rival Salesforce.com
Inc. (CRM).
With its Oracle Public Cloud, the Silicon Valley company will
attempt to outflank competitors with a service that includes
applications to manage tasks such as sales and human resources.
Those will be combined with Oracle's database software and the Java
platform to allow users to write custom applications within the
cloud.
Customers will each have a "virtual machine," which Oracle says
is more secure and allows users to easily move tasks from the
Oracle Public Cloud to an on-premise private cloud.
Oracle's cloud comes after a roughly six-year overhaul of the
Redwood Shores, Calif.-based company's software to get it ready for
the task. During that time, Microsoft Corp. (MSFT), Google Inc.
(GOOG) and Amazon.com Inc. (AMZN) have all launched cloud services.
Oracle hopes its offering, which integrates cloud software to
manage business from customer contact, marketing, transaction and
accounting, will prove to be worth the wait.
"For the first time, you are going to have a full (enterprise
resource planning) suite available in the cloud," Mr. Ellison told
the audience at All Things D last week. "Customers of the Oracle
Public Cloud will be more secure, more in control and have a much
more modern version of the cloud." All Things D is a tech industry
gathering in Palos Verdes, Calif.
The shift toward cloud computing--a broad term for software that
runs online rather than inside a device--began in the late 1990s
with the emergence of companies like Salesforce.com and NetSuite
Inc. (N). The products let companies avoid the cost of installing
and maintaining software on their own computer systems, offering
instead software that employees can tap through a Web browser with
PCs, smartphones or tablets.
Mr. Ellison discounted the cloud then, but he gave a revisionist
view last week, saying: "I thought cloud computing was ridiculously
hyped and promising at the same time." Rather than an invention, he
said cloud computing, "has been a step-by-step progression, moving
complexity off the desktop into the network" and calling cloud a
"charismatic brand for the next version of computing."
Oracle aims to reach $1 billion in cloud revenue this year, a
target it might achieve because of its existing Fusion online
business and recent acquisitions. Human-resources software company
Taleo, which Oracle bought for $1.9 billion, is expected to
generate $379 million in revenue this year, while customer-service
provider RightNow Technologies, a $1.5 billion acquisition, is
expected to add $268 million. Besides competitive technology, the
companies have customers and sales teams that Oracle will leverage
to sell its broader cloud offering.
Oracle expanded its cloud vision last week, buying social
marketing firm Vitrue, which makes technology to publish and
monitor ads across social media. Rival Salesforce matched that move
this week buying Buddy Media, which operates social media ad
campaigns.
Oracle's Chief Financial Officer, Safra Catz, recently told
analysts Oracle's cloud will be "extremely profitable" and
estimated operating margins for the business will exceed 50%.
"Maybe not this year, but we will get there," she said.
It addition to cloud businesses it has acquired, Oracle also has
a big target. "Oracle will very likely take aim at SAP," said
analyst Trip Chowdhry of Global Equities Research.
Like Oracle, SAP has been acquiring companies to rapidly develop
its cloud, last month offering $4.3 billion for supplier network
service Ariba Inc. (ARBA) and earlier buying HR software company
SuccessFactors for $3.4 billion. SAP also has customer-relationship
management software and back-office tools. SAP announced its own
cloud service last month.
"Oracle more or less fills the same markets as SAP, minus the
Ariba procurement network," said analyst Rick Sherlund of Nomura
Securities.
But the cloud holds risks as well. While Oracle and SAP go after
some of the same business, established cloud players like
Salesforce.com will grow as well. And pushing cloud services for
database and financial management risks cannibalizing sales of
enterprise licenses where both Oracle and SAP earn the majority of
their revenue.
Oracle intends to tread a fine line into the cloud, growing the
business at a pace sufficient to offset moderating growth in
enterprise software, with the goal to "retain their wallet share
while they build" said Derrick Wood of Susquehanna Financial
Group.
-Write to Steven D. Jones at steve-d.jones@dowjones.com.