Oracle to offer software as a service – again

Software giant Oracle is planning a second attempt at making the application service provider (ASP) model pay. It has announced that it is to offer its products as a rented service from April 2002 in a bid to arrest its decline in sales.

According to chief financial officer Jeff Henley, the move into outsourced applications could generate $1 billion (€1.15bn) in annual revenues.

The company first introduced hosting services more than two years ago as a separate business unit, called Oracle Business Online. Oracle has since re-branded the service a number of times, but demand has been unimpressive. Oracle’s current revenues from outsourcing stand at just $50 million (€56.8m).

Many organisations have been put off the rented model due to low demand and the subsequent collapse of a number of ASPs. These companies emerged in 1999 and 2000 bidding to take advantage of an expected boom in demand for software for rent over the Internet. However, few organisations proved willing to hand over their core systems to a third party.

Henley argues that outsourcing could be beneficial to these organisations in the current economic climate, allowing them to streamline IT costs and ease management, particularly in the small and medium enterprise (SME) sector.

Customers of the service will license Oracle’s software as normal, paying 5% of the cost of the software per month for it to run on Oracle hardware and 3% if they host it on their own servers.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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