Oracle will tailor the next release of its business applications to specific industries and double the size of its sales force in an effort to increase revenue from the server software market.
In a meeting with financial analysts this week, Oracle also reaffirmed its earnings forecast for the current quarter, saying it has yet to see the slowdown in spending that is affecting other software vendors. CEO Larry Ellison said he was also on the prowl for acquisitions.
The next release of Oracle's E-Business Suite, version 11.5.10, will be released later this year with dozens of new functions for specific industries such as manufacturing, health care, aerospace and utilities. "We've had an intense focus on industry-specific functions for this release," said Ron Wohl, head of Oracle's applications business.
Manufacturers, for example, will see the suite will include new functions for transportation planning, international drop shipments and transactions based on RFID. Oracle is also targeting health care, one of its weaker areas, and recently hired a former surgeon general of the US Navy to build up its expertise. It also plans a "major functional and user interface upgrade" for its CRM applications, which will provide more up-to-the-minute information about interactions with customers.
Oracle's applications revenue grew two percent in its 2004 fiscal year, although it declined six percent in the final quarter. Its battle to acquire PeopleSoft appeared to have slowed sales at both companies, said David Cooke of IT services company Capgemini, but he predicted an upturn for the rest of this year.
On the application server side, Oracle is doubling its field sales force to work on what it sees as strong interest in the product. At the same time, however, some customers apparently have baulked at its strategy of shipping the application server, portal server and integration server preintegrated on a single CD.
Although customers only have to pay for the software they use, some felt they were being forced to buy all of the products. As a result, Oracle will ship a new version of the product over the next 60 days that makes it easier for customers to install only the parts they want.
Ellison portrayed recent warnings earnings warnings from PeopleSoft, Veritas and Siebel as an omen of further consolidation in the software industry, something he has been predicting for some time. Customers don't want to buy their products from numerous vendors and stitch them all together, he said. "This is no different from any other industry; it will consolidate like the railroad industry," he said.
Oracle will speed that along by snapping up more companies, including some of its neighbors in Silicon Valley, Ellison said. "I think well have an opportunity to buy several companies that are right next to us - some of them run by Oracle people," he said during a question and answer period with analysts. Siebel and Veritas are among the local companies run by former Oracle employees, although Ellison said he's unlikely to attempt another big merger while Oracle is still battling for PeopleSoft - also run by a former Oracle executive.
"Our strategy is to get bigger, which allows us to invest more in engineering and lower our prices. That's how Microsoft does it and that's how we should do it," he said.