Oracle Said to Do About-Face on Working with ASPs

FRAMINGHAM (06/26/2000) - Oracle Corp. is starting to warm up to application service providers (ASPs), seven months after CEO Larry Ellison said he would allow third parties to host the company's business applications "over my dead body."

In keeping with Ellison's vow, Oracle has been trying to route users to its own application hosting unit, called Oracle Business OnLine. But software analysts said they were briefed earlier this month by Oracle on a plan to begin letting independent ASPs host its enterprise resource planning (ERP) and customer relationship management applications for corporate users.

And Eric Murphy, an executive vice president at Inc. in Englewood, Colorado, said his company and other ASPs have started signing hosting agreements with Oracle under a new certification program that hasn't been officially announced yet.

"It's a good thing Larry Ellison has nine lives," joked Amy Mizoras, an analyst at International Data Corp. (IDC) in Framingham, Massachusetts. Never say never is the lesson, Mizoras added. "As soon as (Ellison) made that statement, people were waiting for it to become untrue," she said.

Ellison's willingness to change his adamant stance on application hosting is a sign that Oracle is concerned about losing potential customers to SAP AG and other ERP vendors that already work cooperatively with ASPs, said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, California.

Business OnLine just isn't big enough to meet all the demand for hosting services from users who are potential buyers of Oracle's applications, Greenbaum said. "Business OnLine has not had a healthy beginning," he added.

"Oracle had to do this or risk walking around with egg on its face for a long time."

Oracle officials declined to confirm or deny the company's reported dealings with other ASPs and also chose not to respond to Greenbaum's comments.

Until now, Ellison had said Oracle wanted to do all of its own application hosting so it could avoid being blamed by users if they had problems with an ASP that the software vendor couldn't control. That's in keeping with an approach espoused by Ellison last year after Oracle ran into big difficulties while trying to integrate applications from multiple vendors into a bundle for consumer packaged goods companies.

But Clare Gillan, an IDC analyst, said working with other ASPs "makes a tremendous amount of sense" as a way for Oracle to reach more customers. "When Oracle said they would never do this, the (ASP) market was still ill-defined," Gillan said. "This is a huge decision. It undoubtedly came from the top of the company."

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