Ellison: Oracle moving beyond just ERP

Oracle will win the applications battle with rival SAP by "moving up the value chain"; from traditional ERP software to more strategic offerings, its CEO Larry Ellison claims.

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By  Peter Branton Published  June 16, 2007

Oracle will win the applications battle with rival SAP by "moving up the value chain"; moving beyond traditional enterprise resource planning (ERP) software to more strategic offerings, its CEO Larry Ellison claims.

In an exclusive interview with ITP.net, Ellison said that Oracle has developed its acquisition strategy in the applications space, focusing on buying firms that allow it to offer customers applications that are more central to their core business needs.

He cited Portal Software - a comparatively small acquisition for Oracle at just US$220million in April last year - as an example of this approach. Portal Software provides sophisticated billing and customer relationship management (CRM) applications to communications providers; companies that are keen to expand into sectors such as content delivery and need help managing their customer base.

"As they [communications firms] offer these new services, they have to find a way of managing their customers, billing them and keeping track of them," Ellison said. "And that's not what SAP does, what ERP does, but it really is what Portal does."

"So we think that's the way to succeed in the applications business," he stated. "Not just to get bigger, our applications are not just designed to make us bigger. Out applications are designed to differentiate us from SAP, to move up higher in the value chain and become more strategic to our customers."

ERP is still hugely important, Ellison said, but it was no longer a differentiator for firms. "Everyone has a back office, you have to do your accounting, you have to pay your employees. I'm not saying that's not important, but we don't think it's what's crucial to businesses being successful. I've never heard of any CEO telling me ‘You know Larry, the thing that has made all the difference in our company is this general ledger'."

Under Ellison's leadership Oracle has spent more than US$20billion in the past three years alone on buying more than two dozen software firms. Almost all of these acquisitions have been around the applications space; Ellison has been keen to develop this side of the business for Oracle to balance slowing sales in its historical database market, which still accounts for most of the firm's sales.

That strategy has seen Oracle increasingly compete with rival SAP, the firm that still leads the applications market.

"We're growing our applications business a lot faster than SAP," Ellison told ITP.net. "SAP still has the bigger applications business but we're growing a lot faster and that's important."

While Ellison would not be drawn on when he expected Oracle to overtake SAP in the applications market, he said the firm was close to overtaking IBM as the second largest software firm overall. "They're also acquisitive, they buy companies but we're extremely close to passing IBM," he said.

For more on Oracle's software strategy, click here .

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