Oracle boasts about European outsourcing successes

Oracle Corp. on Wednesday said its outsourcing business is gaining steam in Europe, the Middle East and Africa (EMEA) with 110 current customers. That is up from only ten outsourcing clients in the region two years ago.

Of the 110 customers, 88 asked Oracle to manage their database software on site. The remaining 22 handed over management of one or more Oracle applications in an ASP (application service provider) model. In the EMEA region, about 3,500 companies use Oracle applications and about 85,000 companies use Oracle databases, according to Oracle.

Oracle distinguishes between three models of outsourcing: At Customer, At Oracle and At Partner. The software, either database or application software, is managed by Oracle in all models, but the difference is where the software is installed or hosted, which can be either at the customer's site, in Oracle's data center or in a data center operated by an Oracle partner.

The Redwood Shores, California, software maker expects rapid growth in its outsourcing business.

"We think that roundabout 25 percent of applications customers will be outsourced in 2006," said Robert Fleming, a senior marketing director at Oracle.

Oracle has 200 outsourcing customers worldwide, 110 of which are in the EMEA region, Fleming said.

Charles Homs, a senior analyst with Forrester Research BV in Amsterdam, said Oracle is taking the lead among its competitors.

"Oracle is aggressive on the outsourcing market and they are ahead of the competition. SAP (AG) isn't moving as fast and PeopleSoft (Inc.) is keeping quiet as well," he said, noting that IBM Corp. is also active in the outsourcing space.

Oracle rival Siebel Systems Inc. earlier this week announced its first European ASP customer win. A division of Italy's Pirelli SpA is using Siebel's eBusiness Applications software on an ASP platform deployed by service provider Aspective Ltd.

Oracle's offering -- combined with its high profile -- made British American Group decide to become one of Oracle's first ASP customers. The investment holdings group with about 3,000 employees in locations around the world now has Oracle financials hosted by Oracle in use at its U.K. locations and is rolling use of the application out across its businesses.

"We used a range of financial applications throughout the company. It took 40 days to consolidate results from all of our holdings. The aim is to reduce that to 5 days," said David Connoley, program manager group financials at British American Group. "We decided to standardize and chose Oracle financials. Oracle has a great name and a reputation to live up to."

The dealings with Oracle have been simple and the application, hosted by Oracle in California, works well, said Connoley.

"The Oracle contract for the service is only two pages, it is easy and simple for both sides. If the service is unacceptable, we don't have to pay, but we have not yet had to use that clause," said Connoley, noting that performance of the system is helped by the fact that the volume of data that British American Group transfers is small.

Oracle has been pushing its outsourcing offering, with various announcements and events over the past weeks. Jeff Henley, Oracle's chief financial officer, last month said outsourcing will be a multibillion dollar business for Oracle. The target to get 25 percent of the applications customers to outsource by 2006 is realistic, but the real question is how many customers Oracle will have then, said Forrester's Homs"Oracle has not been doing well the past quarters and I don't know if 25 percent of its customer base will be a large number. The number of customers will decrease," Homs said.

The current Forrester forecast is for the European IT outsourcing market to grow from €11 billion (US$9.67 billion) in 2001 to €36 billion in 2006, a 21 percent compound growth rate. The European ASP market is expected to show 34 percent compound growth and go from €2 billion last year to €8 billion in 2006, Homs said.

Customers who opt to have Oracle host and manage the applications pay 5 percent per month of the list license price in addition to base license, product support, update and other standard costs. Those who choose to have applications managed by Oracle, but run at their own site on their own systems, pay 3 percent per month of the list license price in addition to the other costs.

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