Oracle takes on Microsoft with online small business service

The Associated Press
Wednesday June 27, 2001

REDWOOD SHORES — Oracle Corp. Tuesday unveiled a new online service that will lease its software to small businesses in a move designed to bolster the company’s Internet business and challenge archrival Microsoft Corp. 

Oracle, the second largest software company behind Microsoft, will charge $99 per month for online access to a suite of business software applications that will handle a variety of accounting, marketing and administrative chores. 

The service is aimed at companies with fewer than 100 employees — a market that has been largely ignored by Oracle because of the difficulty of making money selling its software to such small accounts. With the expansion, Oracle will be trespassing on territory already staked out by Microsoft, which is trying to sell a similar online package through a site called bCentral.com. BCentral.com has about 100,000 subscribers that pay an average subscription of $30 per month, said Nigel Burton, bCentral’s general manager of sales and marketing. 

Oracle CEO Larry Ellison described his latest foray as a “direct assault” on Microsoft and predicted his service would quickly establish itself as the industry leader. “BCentral is so bad that our biggest fear is that people will think online services won’t work,” Ellison said. 

Burton predicted Oracle’s online service won’t win many converts unless the company pours more research and development into the concept. “We are pleased to see them join us, but we think they are just kind of putting a foot in the water here. We don’t see them as much of a threat,” Burton said. Neither Oracle nor Microsoft is particularly well-equipped to sell software to small businesses, said industry analyst Lora Cecere of Gartner, a research firm. But Cecere thinks Microsoft put itself in a better position by buying the expertise of Great Plains Software for $1.1 billion in April. 

Fargo, N.D.-based Great Plains specializes in selling accounting software to small and medium-sized businesses. Oracle is relying on an Internet start-up called NetLedger to market its online service to small businesses. Ellison owns a majority stake in the privately held NetLedger and is the company’s primary “intellectual investor,” said NetLedger CEO Evan Goldberg. 

Oracle’s “message sounds appealing, but Oracle says a lot of things that the company doesn’t deliver on,” Cecere said. “They will find that this (small business) market doesn’t have a lot of patience if something doesn’t work right.” 

Oracle’s software applications have received mixed reviews from analysts, who say many big business customers are having trouble making the package work properly. Ellison insists Oracle’s e-business applications are running smoothly at major corporations such as Ford Motor, General Electric and Alcoa. 

The mini-showdown between the world’s two largest software companies comes at a time when Oracle and Microsoft are moving in opposite directions. 

Oracle is trying to reverse a recent sales slump that has contributed to a 37 percent decline in its stock so far this year. The company’s shares added 67 cents Tuesday to close at $18.44. 

Meanwhile, Microsoft is rebounding from an antitrust case that culminated last year in a court decision ordering the company’s break up. Investors appear more optimistic that the breakup order will be reversed in appeals court. Microsoft’s shares climbed $1.29 Tuesday to close at $70.14, leaving the stock with a 62 percent gain so far this year. 


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