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Follow UsSiobhan Kennedy
NEW YORK: Oracle Corp. on Monday sought to boost its stake in the hotly
contested e-procurement market with the announcement of a new software package
which it says will get customers up and running in 30 days.
Oracle, the No. 2 software maker, said the move was aimed at increasing its
share of the growing market for procurement software, which lets companies
purchase so called indirect, or basic, goods and services over the Internet. The
market for procurement software is set to grow to $16 billion by 2005 from $5
billion in 2000, according to industry research firm International Data Corp.
Right now, the procurement sector is dominated by leading software firms
Ariba Inc. and Commerce One Inc. But as the slowdown in the US economy
continues, Oracle is hoping the opportunity for companies like Ariba will start
to shrink as users look to more established firms, like Oracle, for an all round
e-commerce package.
"Our belief is that Ariba and Commerce One are features that became
companies," Jeremy Burton, Oracle's vice president of global product and
services marketing told Reuters. "But they only really solved a very small
part of the procurement problem."
Burton said Oracle's new Procure-to-Pay offering goes beyond just allowing a
company to place an order over the Web, which is all that Ariba and Commerce One
do, he said. "Buying goods is not just creating a requisition, it's also
getting a purchase order number, sending that to the supplier and being able to
receive the invoice, and ultimately pay," Burton said.
By contrast, Burton said the other e-procurement vendors only do the creation
and approval of requisitions. "But any piece of the process that you want
to do from there on in is extremely manual," he said.
Analyst reactions mixed
Analysts were mixed in their reaction to the announcement. "It's a great
marketing tactic, but whenever companies make these claims, you're never sure
whether they can deliver the software in the timeframe they're saying,"
said Brendan Barnicle, an analyst with Pacific Crest Securities.
Barnicle said that Oracle's message about integrating front and back office
processes, which link orders from the Web to back end financial systems, would
certainly score points over competitors such as Ariba or Commerce One.
Jon Ekoniak, an analyst with US Bancorp Piper Jaffray, said he thought Oracle
had a good chance of becoming a big name in the e-procurement space, especially
given the recent misfortunes of firms like Ariba. In recent months, Ariba has
been forced to cut a third of its workforce and report earnings well below Wall
Street estimates amid a flagging US economy.
"Ariba has stumbled in the market which will certainly give Oracle an
opportunity to step in, but I don't think it's going to be a huge standalone
product like CRM," Ekoniak said, referring to Oracle's customer
relationship management software.
Oracle's Procure to Pay is the second in a series of new software packages
the company is offering in order to get companies up and running and saving
money on their software investments as soon as possible. Already Oracle offers a
fast install version of its front office, customer relationship management
software, and Burton said others, in the financial, human resources and supply
chain management software sectors, were to follow.
Procure to Pay costs around $235,000 for the software, which includes all the
necessary procurement, financial and payment applications, Burton said.
Oracle will host and manage the software on its premises and will take an
additional $5 fee for every transaction made using the software. Those charges
could mean that only larger clients will go for the offering, said Pierre
Mitchell, an analyst with industry research firm AMR Research in Boston.
"Some of the larger clients running Ariba are processing over 100,000
purchase orders a year," Mitchell said. "So at five bucks a pop,
that's an extra half a million a year."
(C) Reuters Limited 2001.