Lucas van Grinsven
LONDON: US software company Oracle and British Telecommunications Plc said on
Tuesday they will team up to rent out Oracle software to corporate customers
throughout Europe. The two companies did not give financial details, but Oracle
European executive vice president Sergio Giacoletto told Reuters his company
expects to sell the majority of its application software as a "rented
service" in three to five years.
"Over time the majority of our software will be offered as a hosted
service," he said in a telephone interview. Oracle will provide the
software and manage it, while BT's data and Internet unit Ignite will host the
software on computers in its datacentres around Europe and deliver it to
enterprise employees over its European data network.
The two companies expect to have their first customers for the service in
Europe before Christmas. Oracle has trailed renting out software in the United
States, where it has 125 customers for this service. Oracle's sales of software
applications, such as Internet markets and accounting and sales force automation
software, fell by two per cent to $98.8 million year-on-year in the first fiscal
quarter that ended in August.
Applications software generated 31 per cent of Oracle's new software license
revenues in the first quarter. The rest is generated by computer database
software. Customers that decide to use the service will not pay a one-off
purchase price, but will pay a monthly subscription.
Twelve months ago, software application hosting over the Internet was widely
flagged as the next big software revolution.
Although specific operations - such as big Internet Web sites that pull
thousands of visitors an hour - are now often hosted in so-called Internet
hotels, the revolution has failed to take place for smaller applications, such
as accounting packages.
This is because large corporates are reluctant to put their key enterprise
data on someone else's computer in a building many miles away. Organisation and
Technology Research (OTR), a 16-year-old consultancy, said it expected the
Application Service Provision (ASP) market to shrink by 60 percent to less than
one billion euros ($874.1 million) by 2004, rather than grow to eight billion
euros on its most optimistic calculations.
However, rival research group Datamonitor still thinks the market in Europe
alone can grow by 107 per cent a year to $4.88 billion by 2005. Oracle expects
the market to take off eventually because it predicts that smaller companies
need more advanced and diverse software applications that cannot be purchased
and maintained by medium-sized IT departments.
"They want world class software, but with three or four IT staff they
can't afford to," Giacoletto said. Also, a new generation of young
executives used to having their private email on a Web site such as Hotmail and
reviewing their bank details over the Internet, would feel more comfortable with
corporate information on the Web.
(C) Reuters Limited 2001.