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Oracle, BT team up in software rentals

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CIOL Bureau
New Update

Lucas van Grinsven

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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.

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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.

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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.

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