Always on the look out for growth, Oracle believes the SaaS movement will provide it with two revenue opportunities, one from additional database sales and the other from direct income from services.
As far as databases are concerned, president Charles Phillips believes the very nature of SaaS will drive demand for on-premise databases. SaaS is very database intensive. Normally people do not want all their data resident on an on-demand product. So if Salesforce.com is hosting data for a large company, they are forcing them to create a replicated database behind the firewall, which means that companies are creating more and more databases, he said.
The company also hopes its ability to provide databases as a SaaS spin-off will be another tool it can use to undermine SAP in SAP-heavy organizations.
Oracle is a proponent of the hybrid applications model that predicts a mix of on-premise and on-demand applications. According to Phillips, on-demand is seen as a pre-sales tool, which raises questions about how serious Oracle is. Its unusual classification of what constitutes on-demand also raises questions because it embraces both outsourcing and SaaS.
Phillips foresees gradations of on-demand ranging from situations where Oracle handles maintenance on behalf of its customers, to carrying out upgrades, providing full outsourcing, on-demand application services, and SaaS.
We have been doing [on-demand] this way for nine years and this is the way our customers think about it. They can use the software themselves on-premise or they can have it on-demand. We are almost indifferent about that, said Phillips.
Conventionally, SaaS refers to the combination of software and delivery method, where the software is built on a multi tenant architecture, delivered over the Internet, and paid for by subscription. On-demand is a broader term that refers to resources that are consumed and paid for as and when needed and can refer to anything from CPU’s to applications. Hosted software describes a software deployment model where the software is located in one place but accessed from somewhere else and is not necessarily multi tenant.
Oracle uses the terms SaaS, on-demand and outsourcing to mean essentially the same thing. Nevertheless, it believes on-demand will be one its growth markets and according to its classification it already has a strong market presence. Phillips even goes so far as to assert that the combination of its existing on-demand base, coupled with the fast rate of growth of the model, will enable Oracle to become one of the largest on demand players in the market. We have about two million users of on-demand. We have been doing on-demand for about nine years, he said.
He maintains that customers make two decisions when it comes to software, one concerns ownership, the other the delivery mechanism. We have customers who want to own the software, pay for the license and then decide if they wanted to run the software themselves or have us do it for them. They really want those decisions separated. They want to be able to switch, bring it in-house or mix and match. It is multiple choice. The issue is whether they want the running of it [to be] outsourced or not.
We can give customers a choice in that we offer and integrate both on-demand and on-premise and make it look like a single architecture. From a customer point of view they can have CRM on-demand, or on-premise, or both. We can sell to Siebel customers who want to do some things on-demand and keep some things in-house. Whatever decision they want to take, we can accommodate it, he explained.
As for the issue of multi tenancy, which is one of the core tenets of SaaS, he suggests it is irrelevant from the customer perspective. None of us do [SaaS] in exactly the same way, we use different architectures. Multi-tenancy has nothing to do with on-demand. [It is] a convenience for the vendor. Whether they put all customer data onto one database or onto multiple databases is of no value to the customer. In the enterprise it is the opposite. They do not want to put all their data [into the same database] as their competitors. It is illegal in some industries, said Phillips.
We do multi tenant at a different level, he said. We give them a separate database with an administration layer on top and this is where we are multi tenant. It was a design decision to [enable it to] scale better and be more reliable.
Oracle sees outsourcing and SaaS as opposite ends of the same continuum with several stopping points in between. In its world view customers can select any point on the continuum, based on whether they want to own their applications or not, and how much they want to manage themselves. Its perspective is a product of its on-premise background, but that does not invalidate it.
The bottom-up view it represents is highly pragmatic for it and many of its customers. Those organizations that are not ready or able to embrace SaaS in its entirety, and they represent the vast majority, can take baby steps towards it.
The question is not what Oracle is doing but its motivation. Is it really indifferent whether customers opt for on-premise or on-demand? Is it just viewing on-demand as a pre-sales tool? With so much else going on, on-demand may just be a low priority for Oracle at the moment but we will not know the answers for some time yet.