NetSuite, Oracle end licensing deal

Oracle and hosted ERP (enterprise resource planning) software vendor NetSuite have ended a licensing agreement that allowed NetSuite to use Oracle's name to brand its small-business applications bundle.

NetSuite Chief Executive Officer Zach Nelson cited increased competition between NetSuite and Oracle, along with changing business conditions, as the catalyst for the licensing deal's termination. The arrangement dates back several years, to NetSuite's creation by Oracle CEO Larry Ellison and former Oracle employee Evan Goldberg, now NetSuite's chairman and chief technology officer.

"It was a good deal for both of us at the time," Nelson said. "Oracle got a footprint in the small business market, and it was a rough time for ASPs (application service providers). Certainly the Oracle brand helped us get through that patch."

Now, the Oracle Small Business Suite -- which will be rebranded the NetSuite Small Business Suite in July -- comprises just 5 percent of NetSuite's sales, according to Nelson. The bulk of NetSuite's customers subscribe to its higher-end NetSuite bundle, which is built on the same foundation as the Oracle Small Business Suite but also includes CRM (customer relationship management) and customer service functionality.

Nothing will change about the Small Business Suite except the product's name, Nelson said, and NetSuite and Oracle are likely to maintain their close ties as Ellison remains NetSuite's majority owner.

Still, Oracle has been working to strengthen its own hosted software business. The ASP market has been a high-growth area, thanks to the evangelism of small vendors like Salesforce.com Inc.

As part of an effort to raise its profile as an ASP, Oracle recently upgraded its buzzwords, trading in the name Oracle Outsourcing for Oracle On Demand to identify its applications management business.

Like every other ERP vendor, Oracle hopes to offset slowing growth in the enterprise applications market by winning a larger share of the small and midsize business market. Meanwhile, NetSuite is trying to swim upstream. "As we've begun moving into larger deals, we start to see more of (Oracle)," Nelson said.

Partially because it no longer has to pay royalties to Oracle, NetSuite is cutting the price of its Small Business Suite, from US$120 per month to US$99. It's also changing the suite's licensing structure, allowing customers to purchase add-on modules without doing a full upgrade to its more advanced NetSuite package. That upgrade raises the software's price to US$399 per month.

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