On-demand software will be vital for the future, Oracle head Larry Ellison stressed at his keynote speech at the company's OpenWorld conference.

His comments were in part a response to Oracle's $5.85 billion purchase of Siebel earlier this month. Siebel's hosted, subscription CRM OnDemand service will play a big role in Oracle's product future, Ellison said.

"You'll see us redoubling our efforts in the on-demand area," Ellison went on. Asked to predict what the applications market will look like in five years, he said he expects on-demand vendors like Salesforce.com and NetSuite (of which Ellison is the majority owner) to be "very serious players".

Ellison's remarks came after competitors, most notably Salesforce.com, loudly proclaimed that Oracle's Siebel buy would mark the end of Siebel's hosted CRM service, which runs in IBM data centres. Ellison shot that idea down and saying he expects the on-demand business model to be an increasingly influential one.

Oracle has its own On Demand business unit offering hosted, managed services for its applications. That division's executive vice president, Jurgen Rottler, said it has been one of Oracle's fastest-growing businesses for the past four years. But Oracle's hosted software pricing strategy differs significantly from Siebel and Salesforce.com's.

While they offer hosted software on a monthly subscription basis, Oracle charges the full list price for its applications and then sells management services on top.

Oracle will consider different pricing strategies for hosted software as it learns more about customers' needs, Ellison said. "We're gradually figuring it out. We think it's a huge and import part of our future."