Oracle Corp. this week will extend its outsourcing program to include its Oracle9i database and application server products, a company executive said Friday.
The hosted service will be available worldwide starting Monday. It builds on Oracle's existing E-Business Suite outsourcing service, through which customers can have their Oracle business applications hosted on servers managed and maintained by Oracle staff.
The idea is to help companies reduce the cost of managing and maintaining software by allowing Oracle, in Redwood Shores, California, to take care of maintenance and upgrade tasks. Some early customers have saved as much as 46 percent in database management costs by using the service, according to Oracle.
The company already offers a hosted database service of sorts, because customers who outsource applications to Oracle by default also use a hosted database. The extended program is noteworthy because customers now have the option of outsourcing only their database and application server while keeping their applications in-house, according to Paige O'Neill, senior director of online services marketing.
One analyst agreed.
"There are a lot of companies who would like to offload some of their software infrastructure but feel their own IT people are better equipped, or can offer more of a competitive advantage, by hosting some of their more complex business applications in-house," said Laurie McCabe, a vice president and practice director with Boston-based Summit Strategies Inc.
Like other providers of hosted services, however, Oracle has traveled a rocky road. Its hosted applications service, launched about three years ago, hasn't reached as many customers as Oracle would have liked and it is likely it would have gone "belly up" if it weren't for the fact that Oracle has deep pockets and is committed to the effort, McCabe said.
Concerns among customers about security and the availability of hosted applications remain, but are starting to give way as the model matures, she said. Nevertheless, "Oracle is at heart a developer company, and it remains to be seen if they can be good at giving real, 24x7 customer support and services," she said.
The expanded service is good for customers because it gives them another outsourcing provider to choose from, she said. It's not such great news for other service providers that host e-commerce and other systems based on an Oracle database, because those customers will now compete more directly with Oracle, she noted.
The move is the latest sign that Oracle is determined to make hosting a success. Just last week, at a meeting for financial analysts in New York, executives said they would push hosting services more proactively, in part by calling on customers worldwide to explain the perceived benefits of outsourcing. Revenue growth from Oracle's core database business has slowed in recent quarters, and if hosting services take off they could help bring the company an injection of additional cash, McCabe noted.
Pricing will be handled in the same way it is for Oracle's hosted application service, O'Neill said. Customers pay the license fee for the hosted product plus Oracle's standard support fee, calculated at 22 percent of the license fee. Customers who have their software hosted at an Oracle datacenter then pay an additional 5 percent of the license price per month. Customers who have their software managed by Oracle but run it at their own sites and on their own systems instead pay an extra 3 percent of the list price per month.
Customers also can have their software and servers hosted at one of a handful of third-party datacenters chosen by Oracle, but managed remotely by Oracle staff. To date the list includes Intel Corp.'s Intel Online Services division; BT Ignite, a division of British Telecommunications PLC; Broadwing Inc., and Qwest Cyber Solutions LLC., Oracle said.
The offering will be announced officially on Tuesday and is aimed at businesses of all sizes, O'Neill said. Oracle claims to have signed up 200 hosted database customers already, not including any existing customers of its hosted applications service.